Medicare Program; Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts for 2000

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[HCFA-8005-N]

RIN 0938-AB52

Medicare Program; Inpatient Hospital Deductible and Hospital and

Extended Care Services Coinsurance Amounts for 2000

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 2000 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 $776. The daily

coinsurance amounts will be: (a) $194 for the 61st through 90th day of

hospitalization in a benefit period; (b) $388 for lifetime reserve

days; and (c) $97 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, 2000.

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 2000

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 (BBA '97) (Public Law 105-

33), the percentage increase used to update the payment rates for

fiscal year 2000 for hospitals paid under the prospective payment

system is the market basket percentage increase minus 1.8 percentage

points.

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

4411(a) of the BBA '97, the percentage increase used to update the

payment rates for fiscal year 2000 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--

(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 2000 is 2.9

percent, as announced in the Federal Register on July 30, 1999 (64 FR

41490). Therefore, the percentage increase for hospitals paid under the

prospective payment system is 1.1 percent. The average payment

percentage increase for hospitals excluded from the prospective payment

system is 0.9 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 2000 is 1.09

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 1999 compared to fiscal year 1998. (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 April 1999. These bills

represent a total of about 5.6 million discharges for fiscal year 1999

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 1999 is -

0.87 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

1999 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 1999. 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 1999 is 0.0 percent.

[[Page 57104]]

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

applicable percentage increases used for updating the payment rates is

1.09 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

2000 is $776. This deductible amount is determined by multiplying $768

(the inpatient hospital deductible for 1999) by the payment-weighted

average increase in the payment rates of 1.0109 multiplied by the

increase in real case mix of 1.000, which equals $776.37 and is rounded

to $776.

III. Computing the Inpatient Hospital and Extended Care Services

Coinsurance Amounts for 2000

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 2000, 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 $194 (one-fourth of the inpatient hospital

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

$388 (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 $97 (one-eighth

of the inpatient hospital deductible).

IV. Cost to Beneficiaries

We estimate that in 2000 there will be about 8.6 million

deductibles paid at $776 each, about 2.2 million days subject to

coinsurance at $194 per day (for hospital days 61 through 90), about

1.0 million lifetime reserve days subject to coinsurance at $388 per

day, and about 31.7 million extended care days subject to coinsurance

at $97 per day. Similarly, we estimate that in 1999 there will be about

8.5 million deductibles paid at $768 each, about 2.2 million days

subject to coinsurance at $192 per day (for hospital days 61 through

90), about 1.0 million lifetime reserve days subject to coinsurance at

$384 per day, and about 29.9 million extended care days subject to

coinsurance at $96 per day. Therefore, the estimated total increase in

cost to beneficiaries is about $360 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.

VI. Regulatory Impact Statement

We have examined the impacts of this notice as required by

Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Public

Law 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.

As stated in section IV of this notice, we estimate that the total

increase in costs to beneficiaries associated with this notice is about

$360 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.

We have reviewed this notice under the threshold criteria of

Executive Order 13132, Federalism. We have determined that it does not

significantly affect the rights, roles, and responsibilities of States.

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

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

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance)

Dated: October 13, 1999.

Michael M. Hash,

Deputy Administrator, Health Care Financing Administration.

Dated: October 18, 1999.

Donna E. Shalala,

Secretary.

[FR Doc. 99-27625 Filed 10-19-99; 11:35am]

BILLING CODE 4120-01-P