The Internal Revenue Service (IRS) has issued guidance stating that health coverage for an employee’s children under age 27 is tax-free.  Employers with “cafeteria plans,” which allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits, can allow employees to immediately make pre-tax contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate the change. The tax benefit applies to various workplace and retiree health plans, and to individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

The guidance can be viewed at http://www.irs.gov/pub/irs-drop/n-10-38.pdf.

According to a report published by the Government Accountability Office (GAO), the transition to Medicare administrative contractors (MACs) has resulted in payment delays. This is partly due to the other Medicare initiatives that have affected claims processing and because of inaccurate workload estimates for the new MACs. Under the Medicare Modernization Act’s contracting reform requirements, the Centers for Medicare & Medicaid Services (CMS) must transition claims administration for Medicare’s fee-for-service program to 19 MACs by October 2011.

The GAO report is available at http://www.gao.gov/products/GAO-10-71

On April 19, the Centers for Medicare & Medicaid Services (CMS) issued both the hospital inpatient prospective payment system (IPPS) and the long-term care prospective payment system (LTCH) proposed rules for fiscal year (FY) 2011. CMS is proposing to update acute care hospital rates to include a market basket update of 2.4% for those hospital that submit data on quality measures; hospitals not submitting data would receive a 0.4% update. The rule also proposed an adjustment of -2.9 percentage points to eliminate the effect of coding or classification changes that did not reflect increases in patient’s severity of illness. CMS estimates that payment to general acute care hospitals under the proposed rule for operating expenses in FY 2011 will decline by 0.1%. This estimate does not include the 0.25% mandated market basket cut that was included in the Patient Protection and Affordable Care Act (PPACA).

The proposed rule can be found at http://www.federalregister.gov/OFRUpload/OFRData/2010-09163_PI.pdf

President Obama has nominated Dr. Donald Berwick to be Administrator of the Centers for Medicare & Medicaid Services (CMS). Dr. Donald Berwick is President and Chief Executive Officer of the Institute for Healthcare Improvement, Clinical Professor of Pediatrics and Health Care Policy at the Harvard Medical School, and Professor of Health Policy and Management at the Harvard School of Public Health. He is also a pediatrician, adjunct staff in the Department of Medicine at Boston’s Children’s Hospital and a consultant in pediatrics at Massachusetts General Hospital.

He has served as Chair of the National Advisory Council of the Agency for Healthcare Research and Quality, and as an elected member of the Institute of Medicine (IOM). Dr. Berwick served on the IOM’s governing Council from 2002 to 2007. In 1997 and 1998, he was appointed by President Clinton to serve on the Advisory Commission on Consumer Protection and Quality in the Healthcare Industry. Dr. Berwick is the recipient of numerous awards and honors for his work, including the 1999 Ernest A. Codman Award, the 2001 Alfred I. DuPont Award for excellence in children’s health care, the 2002 American Hospital Association’s Award of Honor, the 2006 John M. Eisenberg Patient Safety and Quality Award for Individual Achievement from the National Quality Forum and the Joint Commission, the 2007 William B. Graham Prize for Health Services Research, and the 2007 Heinz Award for Public Policy from the Heinz Family Foundation.

A summa cum laude graduate of Harvard College, Dr. Berwick holds a Master in Public Policy degree from the John F. Kennedy School of Government. He received his medical degree from Harvard Medical School, where he graduated cum laude.

For more information about Dr. Berwick, visit http://www.whitehouse.gov/the-press-office/president-obama-nominates-dr-donald-berwick-administrator-centers-medicare-and-medi

On April 15, President Obama signed into law the “Continuing Extension Act of 2010.” This law extends through May 31, the zero percent update to the MPFS that was in effect for claims with dates of service of January 1 through March 31, 2010.  The law is retroactive to April 1.  Effective immediately, claims with dates of service April 1st and later, which were being held by Medicare contractors, are being released for processing and payment.  The statutory payment floors still apply and, therefore, clean electronic claims cannot be paid before 14 calendar days after the date they are received by Medicare contractors (29 calendar days for clean paper claims).

More information can be viewed at http://waysandmeans.house.gov/press/PRArticle.aspx?NewsID=11064.

As specified in the Health Care and Education Reconciliation Act, Medicare Advantage (MA) payment rates will be unchanged for calendar year 2011. Among other changes in response to the legislation, state payment rates for end stage renal disease will remain at the 2010 amounts. The announcement also discusses provisions in the health reform legislation that begin to close the Medicare prescription drug coverage gap in 2011 and changes to MA payment policies for CY 2011 based on comments the agency received on its advance notice for 2011.

For more information, go to http://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/Announcement2011.pdf

The Centers for Medicare & Medicaid Services (CMS) changed its website address from www.cms.hhs.gov to www.cms.gov.  Existing bookmarks and links from other websites will continue to work following this address change.

The Health Care and Education Reconciliation Act (HR 4872) was signed into law on March 30. As part of the Act, there are several provisions that will affect Medicare providers and suppliers. Some of these are as follows:

• Changes the date after which physician ownership of hospitals to which they self refer is prohibited to December 31.
• Changes the effective date of imaging cuts to January 1, 2011. This provision takes into account the Centers for Medicare & Medicaid Services (CMS) imaging rule that went into effect January 1, but changes the utilization rate to 75 percent for the practice expense portion of advanced diagnostic imaging services.
• Accelerates phase-in of Medicare physician practice expense adjustment for areas with below-average expense payment rates. The national blend this year would be increased from 1/4 to 1/2.

For further details, go to http://dpc.senate.gov/healthreformbill/healthbill53.pdf

The Medicare Payment Advisory Commission (MedPAC) has recommended changes to Medicare’s funding of graduate medical education (GME) to better support the workforce skills needed in a delivery system that reduces cost growth while maintaining or improving quality. Specifically, beginning in October 2013, MedPAC has recommended that a portion of the indirect medical education (IME) payments be used to fund a new performance-based GME program

For further details, visit http://www.medpac.gov/