Medicare Program; Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts for 1999

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[HCFA-8001-N]

RIN 0938-AJ02

Medicare Program; Inpatient Hospital Deductible and Hospital and

Extended Care Services Coinsurance Amounts for 1999

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the inpatient hospital deductible and

the hospital and extended care services coinsurance amounts for

services furnished in calendar year 1999 under Medicare's hospital

insurance program (Medicare Part A). The Medicare statute specifies the

formulae used to determine these amounts.

The inpatient hospital deductible will be $768. The daily

coinsurance amounts will be: (a) $192 for the 61st through 90th day of

hospitalization in a benefit period; (b) $384 for lifetime reserve

days; and (c) $96 for the 21st through 100th day of extended care

services in a skilled nursing facility in a benefit period.

EFFECTIVE DATE: This notice is effective on January 1, 1999.

FOR FURTHER INFORMATION CONTACT: Clare McFarland, (410) 786-6390.

For case-mix analysis only: Gregory J. Savord, (410) 786-1521.

SUPPLEMENTARY INFORMATION:

I. Background

Section 1813 of the Social Security Act (the Act) provides for an

inpatient hospital deductible to be subtracted from the amount payable

by Medicare for inpatient hospital services furnished to a beneficiary.

It also provides for certain coinsurance amounts to be subtracted from

the amounts payable by Medicare for inpatient hospital and extended

care services. Section 1813(b)(2) of the Act requires us to determine

and publish, between September 1 and September 15 of each year, the

amount of the inpatient hospital deductible and the hospital and

extended care services coinsurance amounts applicable for services

furnished in the following calendar year.

II. Computing the Inpatient Hospital Deductible for 1999

Section 1813(b) of the Act prescribes the method for computing the

amount of the inpatient hospital deductible. The inpatient hospital

deductible is an amount equal to the inpatient hospital deductible for

the preceding calendar year, changed by our best estimate of the

payment-weighted average of the applicable percentage increases (as

defined in section 1886(b)(3)(B) of the Act) used for updating the

payment rates to hospitals for discharges in the fiscal year that

begins on October 1 of the same preceding calendar year, and adjusted

to reflect real case mix. The adjustment to reflect real case mix is

determined on the basis of the most recent case mix data available. The

amount determined under this formula is rounded to the nearest multiple

of $4 (or, if midway between two multiples of $4, to the next higher

multiple of $4).

Under section 1886(b)(3)(B)(i) of the Act, as amended by section

4401(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33), the

percentage increase used to update the payment rates for fiscal year

1999 for most hospitals paid under the prospective payment system is

the market basket percentage increase minus 1.9 percentage points.

Certain nonteaching, nondisproportionate share, non-Medicare-dependent

hospitals, however, are allowed higher updates than those provided for

other hospitals paid under the prospective payment system. These

hospitals must be located in States where, for nonteaching,

nondisproportionate share, non-Medicare-dependent hospitals--

Aggregate Medicare operating payments for their cost

reporting periods beginning during fiscal year 1995 are less than the

aggregate allowable operating costs of inpatient hospital services for

all these hospitals in the State for those cost reporting periods; and

The Medicare operating payments for discharges in the cost

reporting period involved are less than their allowable operating costs

for inpatient hospital services in that period.

For hospitals meeting these criteria, the percentage increase used

to update the payment rates for fiscal year 1999 is the market basket

percentage increase minus 1.6 percentage points.

Under section 1886(b)(3)(B)(ii) of the Act, as amended by section

4411(a) of the Balanced Budget Act of 1997, the percentage increase

used to update the payment rates for fiscal year 1999 for hospitals

excluded from the prospective payment system depends on the hospital's

allowable operating costs of inpatient hospital services. If the

hospital's allowable operating costs of inpatient hospital services for

the most recent cost reporting period for which information is

available--

[[Page 56200]]

(1) Are equal to or exceed 110 percent of the hospital's target

amount for that cost reporting period, the applicable percentage

increase is the market basket percentage;

(2) Exceed 100 percent but are less than 110 percent of the

hospital's target amount for that cost reporting period, the applicable

percentage increase is the market basket percentage minus 0.25

percentage points for each percentage point by which the hospital's

allowable operating costs are less than 110 percent of the target

amount for that cost reporting period (but not less than 0 percent);

(3) Are equal to or less than 100 percent of the hospital's target

amount for that cost reporting period, but exceed two-thirds of the

target amount, the applicable percentage increase is 0 percent or, if

greater, the market basket percentage minus 2.5 percentage points; or

(4) Do not exceed two-thirds of the hospital's target amount for

that cost reporting period, the applicable percentage increase is 0

percent.

The market basket percentage increase for fiscal year 1999 is 2.4

percent, as announced in the Federal Register on July 31, 1998 (63 FR

40954). Therefore, the percentage increase for most hospitals paid

under the prospective payment system is 0.5 percent, and the percentage

increase for the certain nonteaching, nondisproportionate share, non-

Medicare-dependent hospitals paid under the prospective payment system

and meeting the criteria described above is 0.8 percent. The average

payment percentage increase for hospitals excluded from the prospective

payment system is 0.4 percent. Weighting these percentages in

accordance with payment volume, our best estimate of the payment-

weighted average of the increases in the payment rates for fiscal year

1999 is 0.5 percent.

To develop the adjustment for real case mix, we first calculated

for each hospital an average case mix that reflects the relative

costliness of that hospital's mix of cases compared to those of other

hospitals. We then computed the change in average case mix for

hospitals paid under the Medicare prospective payment system in fiscal

year 1998 compared to fiscal year 1997. (We excluded from this

calculation hospitals excluded from the prospective payment system

because their payments are based on reasonable costs and are affected

only by real changes in case mix.) We used bills from prospective

payment hospitals received in HCFA as of July 1998. These bills

represent a total of about 8.5 million discharges for fiscal year 1998

and provide the most recent case mix data available at this time. Based

on these bills, the change in average case mix in fiscal year 1998 is

-0.81 percent. Based on past experience, we expect the overall case mix

change to be -0.6 percent as the year progresses and more fiscal year

1998 data become available.

Section 1813 of the Act requires that the inpatient hospital

deductible be adjusted only by that portion of the case mix change that

is determined to be real. There is a negligible change in overall case

mix for fiscal year 1998. We estimate that there is no change in real

case mix; that is, we estimate that the change in real case mix for

fiscal year 1998 is 0.0 percent.

Thus, the estimate of the payment-weighted average of the

applicable percentage increases used for updating the payment rates is

0.5 percent, and the real case mix adjustment factor for the deductible

is 0.0 percent. Therefore, under the statutory formula, the inpatient

hospital deductible for services furnished in calendar year 1999 is

$768. This deductible amount is determined by multiplying $764 (the

inpatient hospital deductible for 1998) by the payment-weighted average

increase in the payment rates of 1.005 multiplied by the increase in

real case mix of 1.000, which equals $767.82 and is rounded to $768.

III. Computing the Inpatient Hospital and Extended Care Services

Coinsurance Amounts for 1999

The coinsurance amounts provided for in section 1813 of the Act are

defined as fixed percentages of the inpatient hospital deductible for

services furnished in the same calendar year. Thus, the increase in the

deductible generates increases in the coinsurance amounts. For

inpatient hospital and extended care services furnished in 1999, in

accordance with the fixed percentages defined in the law, the daily

coinsurance for the 61st through 90th day of hospitalization in a

benefit period will be $192 (one-fourth of the inpatient hospital

deductible); the daily coinsurance for lifetime reserve days will be

$384 (one-half of the inpatient hospital deductible); and the daily

coinsurance for the 21st through 100th day of extended care services in

a skilled nursing facility in a benefit period will be $96 (one-eighth

of the inpatient hospital deductible).

IV. Cost to Beneficiaries

We estimate that in 1999 there will be about 8.4 million

deductibles paid at $768 each, about 2.3 million days subject to

coinsurance at $192 per day (for hospital days 61 through 90), about

1.1 million lifetime reserve days subject to coinsurance at $384 per

day, and about 34.4 million extended care days subject to coinsurance

at $96 per day. Similarly, we estimate that in 1998 there will be about

8.6 million deductibles paid at $764 each, about 2.3 million days

subject to coinsurance at $191 per day (for hospital days 61 through

90), about 1.1 million lifetime reserve days subject to coinsurance at

$382 per day, and about 32.3 million extended care days subject to

coinsurance at $95.50 per day. Therefore, the estimated total increase

in cost to beneficiaries is about $100 million (rounded to the nearest

$10 million), due to (1) the increase in the deductible and coinsurance

amounts and (2) the change in the number of deductibles and daily

coinsurance amounts paid.

V. Waiver of Proposed Notice and Comment Period

The Medicare statute, as discussed previously, requires publication

of the Medicare Part A inpatient hospital deductible and the hospital

and extended care services coinsurance amounts for services for each

calendar year. The amounts are determined according to the statute. As

has been our custom, we use general notices, rather than notice and

comment rulemaking procedures, to make the announcements. In doing so,

we acknowledge that, under the Administrative Procedure Act,

interpretive rules, general statements of policy, and rules of agency

organization, procedure, or practice are excepted from the requirements

of notice and comment rulemaking.

We considered publishing a proposed notice to provide a period for

public comment. However, we may waive that procedure if we find good

cause that prior notice and comment are impracticable, unnecessary, or

contrary to the public interest. We find that the procedure for notice

and comment is unnecessary because the formula used to calculate the

inpatient hospital deductible and hospital and extended care services

coinsurance amounts is statutorily directed, and we can exercise no

discretion in following that formula. Moreover, the statute establishes

the time period for which the deductible and coinsurance amounts will

apply and delaying publication would be contrary to the public

interest. Therefore, we find good cause to waive publication of a

proposed notice and solicitation of public comments.

[[Page 56201]]

VI. Regulatory Impact Statement

We have examined the impacts of this notice as required by

Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Pub. L.

96-354). Executive Order 12866 directs agencies to assess all costs and

benefits of available regulatory alternatives and, when regulation is

necessary, to select regulatory approaches that maximize net benefits

(including potential economic, environmental, public health and safety

effects; distributive impacts; and equity). The RFA requires agencies

to analyze options for regulatory relief for small businesses. For

purposes of the RFA, States and individuals are not considered small

entities.

Also, section 1102(b) of the Act requires the Secretary to prepare

a regulatory impact analysis for any notice that may have a significant

impact on the operations of a substantial number of small rural

hospitals. Such an analysis must conform to the provisions of section

604 of the RFA. For purposes of section 1102(b) of the Act, we consider

a small rural hospital as a hospital that is located outside of a

Metropolitan Statistical Area and has fewer than 50 beds. We have

determined that this notice will not have a significant effect on the

operations of a substantial number of small rural hospitals. Therefore,

we are not preparing an analysis for section 1102(b) of the Act.

This notice announces that the inpatient hospital deductible for

calendar year 1999 is $768. It also announces the daily coinsurance

amounts of $192 for the 61st through 90th day of hospitalization in a

benefit period; $384 for lifetime reserve days; and $96 for the 21st

through 100th day of extended care services in a skilled nursing

facility in a benefit period. We believe that the total increase in

costs to beneficiaries associated with this notice is about $100

million due to (1) the increase in the deductible and coinsurance

amounts and (2) the change in the number of deductibles and daily

coinsurance amounts paid. Therefore, this notice is a major rule as

defined in Title 5, United States Code, section 804(2) and is an

economically significant rule under Executive Order 12866.

In accordance with the provisions of Executive Order 12866, this

notice was reviewed by the Office of Management and Budget.

Authority: Section 1813(b)(2) of the Social Security Act (42

U.S.C. 1395e(b)(2)).

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance)

Dated: September 18, 1998.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing Administration.

Dated: October 8, 1998.

Donna E. Shalala,

Secretary.

[FR Doc. 98-28162 Filed 10-16-98; 9:34 am]

BILLING CODE 4120-01-P