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Federal Legislative and Regulatory Update From CMA

October 1, 2013

CMA leaders have been in Washington, DC, and in district offices meeting with members of Congress on the important issues facing medicine. Below are the highlights of the priority bills and regulations.


Medicare and Medi-Cal will continue to operate but CDC, FDA, public health, and NIH are impacted.

On October 1, as the Affordable Care Act (ACA) went live and tens of thousands of Californians called the Covered California Health Insurance Exchange to purchase insurance, Congress’s failure to agree on a 2014 budget and the future of the ACA forced a federal government shutdown. This day will surely go down in history as one of the most memorable on the journey to implement the controversial Affordable Care Act.

A stalemate in Congress over a spending plan for the 2013–2014 fiscal year and a delay in the Affordable Care Act (ACA) has forced a federal shutdown at midnight last night, closing many federal agencies, including a number of departments under the U.S. Department of Health and Human Services (HHS). The new fiscal year began today, October 1. The House Republicans are proposing to continue spending at current levels with a one-year delay in the implementation of the ACA. While the Senate Democrats have also agreed to continue government operations at current spending levels, they have resoundingly rejected the House Republican proposals to defund or delay the ACA multiple times in the last week.

Ironically, this shutdown comes on the very day that health benefit exchanges across the country, including Covered California, open for enrollment. Under the ACA, these exchanges are expected to provide health insurance to millions of previously uninsured Americans, including more than 6 million in California. The federal government shutdown will not impact open enrollment and exchanges will continue working on implementation as the January 1, 2014, launch date approaches.

Deliberations to fund the government continue, and some congressional leaders anticipate that at least a short-term budget will be enacted in the next few days. In the meantime, however, many government programs have been forced to stop operating and federal employees are on furlough until Congress reaches an agreement.

In the short-term, entitlement programs, such as Medicare and Medicaid, will experience little disruption, and claims will continue to be paid. The transition to the new Medicare claims payment contractor, Noridian, will continue. Other activities conducted by the Centers for Medicare and Medicaid Services (CMS), including healthcare fraud and abuse control, the Center for Medicare and Medicaid Innovation, and activities related to implementation of the Affordable Care Act, will continue. States will continue to receive funding for Medicaid and the Children’s Health Insurance Program.

Programs impacted by the shutdown:

  • The Centers for Disease Control and Prevention will be unable to support the annual seasonal influenza program.
  • The Health Resources and Services Administration will be unable to make payments under the Children’s Hospital GME Program and Vaccine Injury Compensation Claims.
  • CMS will discontinue discretionary funding for healthcare fraud and abuse strike force teams; recertification and initial surveys for Medicare and Medicaid providers will be delayed.
  • The Food and Drug Administration (FDA) will be unable to support most of its food safety, nutrition, and cosmetics activities.
  • With limited exceptions, the National Institutes for Health (NIH) will not admit new patients or initiate new protocols, nor will it take any actions on grant applications or awards. NIH will continue patient care for current patients.

In all, about 52% of HHS employees will be furloughed. Most staff will be retained in agencies that have a substantial direct service component, like the Indian Health Service.

CMA is urging Congress to reach an agreement on the federal budget and get on with the important business of reforming the Medicare payment system and other priority issues before Congress that will improve access to care.


On July 31, the House Energy and Commerce Committee voted unanimously to approve BIPARTISAN Medicare Sustainable Growth Rate (SGR) overhaul legislation, HR 2810. It would repeal the failed SGR formula and institute a 5-year period of stability with 0.5% annual updates. After the initial 5 years, physicians could choose two payment paths. The first path provides annual updates for a fee-for-service program that requires quality reporting and participation in clinical improvement projects. The second path incentivizes physicians to participate in alternative payment models.

CMA Position: While CMA has concerns with the legislation, particularly the penalties, inadequate updates, and the duplicative programs, CMA is pleased that Congress is moving forward with a bill to eliminate the SGR, establish stability, and provide a path to a better payment system. Congress also recognizes that HR 2810 needs improvement. CMA is also urging Congress to focus on curbing unnecessary spending in the post-acute care arena and to establish ways for solo and small practices to virtually integrate to get assistance in meeting the quality and clinical goals of this bill.

Included in the bill is the CMA-sponsored California Medicare locality reform known as the “California GPCI Fix.” The California locality provision is a compromise between Committee Chairman Fred Upton (R-MI) and Ranking Democrat Henry Waxman (D-CA) who insisted the California update be part of the committee bill. It is based on legislation by Congressman Sam Farr (D-Santa Cruz/Monterey) and Darrell Issa (R-San Diego) who are leading the effort to see it enacted. House Majority Whip, California Congressman Kevin McCarthy (R-Bakersfield), was also key to the agreement. And the Obama Administration stepped-in to assist with the legislation.

CMA is pleased with this herculean effort to include a bipartisan California locality provision in the Energy & Commerce Committee Medicare SGR legislation. CMA physicians have cleared the first hurdle in a long legislative process to achieve locality reform.

Next Steps: The House Ways and Means Committee and the Senate Finance Committee are both expected to start to move their Medicare payment reform legislation in mid to late October. Once the Ways and Means Committee passes a bill, it will have to be reconciled with the House Energy Commerce Committee bill, HR 2810.

Funding Sources: All Committees are waiting until there is final agreement on the policy before assigning funding sources to pay for the SGR repeal. The “Pay-fors” are expected to be the most controversial part of the legislation. Some of the identified funding sources include hospital outpatient services that are reimbursed at higher rates than when provided in a physician’s office, higher cost-sharing by Medicare beneficiaries, benefit changes, pharmaceutical rebates and controversial cuts to the Affordable Care Act. CMA and AMA are opposed to the RUC funding source in HR 2810 which removes the budget neutrality provision in the RUC process for misvalued codes and redirect it as an overall legislative funding source. Under current law, any savings from changing misvalued codes are reinvested in other physician services. These savings will be particularly important for the new care coordination and patient management services the bill is promoting. CMA, AMA and other state and specialty societies weighed-in heavily with the Committee to remove this provision.

CMA Projections: CMA will continue to advocate our goals as this bill moves through Congress. Given the bipartisan nature of this SGR bill and the early timeline, CMA is cautiously optimistic that Congress will address the SGR issues this year. Of course, the current discord over the budget and the debt ceiling could delay action on the physician payment issues.

However, Congress is sending a clear bipartisan message to incent physicians to participate in alternative models. The Committee is establishing opportunities for physicians to be reimbursed in different ways for care coordination, managing patients with chronic conditions, participating in clinical improvement projects, setting up primary care or specialty specific medical homes, or achieving overall Medicare savings by reducing ER visits and hospital admissions.

Below are more detailed summaries of the Locality Update and the SGR reform.

A. Summary of the Medicare Locality Provisions (“The California GPCI Fix”)

Background: While Medicare updates the hospital geographic regions and payments annually, it has not updated the physician regions in over 16 years. Therefore, counties such as, San Diego and Sacramento are still designated as rural and not accurately compensated based on their higher local costs to provide care. Fourteen California counties (San Benito, Santa Cruz, Marin, Santa Barbara, San Diego, Monterey, Sonoma, Placer, El Dorado, Yolo, Sacramento, San Luis Obispo, Riverside and San Bernardino) are underpaid by up to 10% each year according to Medicare’s own data.

Medicare could update the localities, but it would cause an immediate and corresponding reduction to physicians practicing in rural counties. Therefore, CMA sought legislation to update the newly urbanized counties and minimize the reductions to the rural counties. The Institute of Medicine (IOM), GAO, MedPAC and others have studied the problem and agree the localities need to be updated. California physicians and their Medicare patients in these regions forego $54 million in Medicare funding each year. And this does not include the private sector contracts tied to Medicare rates.

The Locality Reform Proposal: The GPCI locality provision would start to transition all California Medicare physician payment localities to Metropolitan Statistical Areas (MSAs) in 2017 just as Medicare pays and organizes hospitals according to MSAs.

The higher rates would be phased-in 1/6 per year over 6 years until full implementation in 2021/2022.

The rural counties in Locality 99 and Locality 3 would be held harmless from payment cuts permanently.

The Committee agreed that the ~$200 million cost would be funded from the Medicare SGR funding sources. However, CMA has presented a Medicaid funding sources that applies an administrative cost savings from moving to one County Organized Health System in Alameda County to cover the costs of the GPCI Fix.

Payment Impact By County: All counties currently in Locality 99 will receive a .30% increase in 2014/2015 pursuant to the CMS proposed fee schedule and GPCI update for 2014. Counties in Locality 3 will also receive the 1.4% update in the CMS proposed fee schedule and GPCI update for 2014. These CMS proposed updates are in a proposed regulation and separate from the legislation.

While it is difficult to predict the 2017 MSA factors, the payment increases are likely to be close to the ranges listed below (Based on the 2013 and 2016 MSA data):

  • San Benito: 9.7 – 13%
  • Marin: 5.1 – 6%
  • Santa Cruz: 4.8 – 5.2%
  • Monterey: 3.3 – 4.2%
  • Santa Barbara: 3.7 – 4.9%
  • San Diego: 4.2 – 4.5%
  • Sonoma: 3.2 – 4.1%
  • Placer: 2.0 – 2.2%
  • Yolo: 1.5 – 2%
  • El Dorado: 1.6 – 2%
  • Sacramento: 1.1 – 2%
  • San Luis Obispo: 0.5 – 1%
  • Riverside: 0.8 – 1.2%
  • San Bernardino: 0.3 – 1.2%

All counties currently assigned to Locality 99 or Locality 3 not listed above will be held harmless from cuts permanently. The bill establishes a payment floor at the 2016 rate.

Physicians practicing in Alameda, Los Angeles, Orange, Santa Clara, San Francisco, San Mateo, and Ventura will not be impacted by this legislation.

B. Summary of the Medicare SGR Provisions

Short Summary

  1. Repeals the SGR.
  2. Provides a Period of Stability for 5 years with 0.5% annual payment updates.
  3. Allows physicians to choose to participate in a fee-for-service (ffs) program or an alternative payment model.
  4. In 2019, for those physicians participating in ffs, it provides up to 1.5% updates for reporting on physician-developed quality measures and for participating in physician-developed clinical projects. Physicians who score poorly will be subject to a net 0.5% cut.
  5. Alternatively, physicians may choose to participate in physician-developed alternative payment models. The incentives favor physicians who are willing to take the necessary steps to participate in new payment and delivery models.

The bill was formally introduced by Congressman Mike Burgess (R-TX), a physician leader on the Committee and cosponsored by all of the Committee Republican and Democratic leaders – Chairman Upton (R-MI), Subcommittee Chairman Pitts (R-PA), Ranking Minority Leaders Waxman (D-CA) and Pallone (D-NJ). The bipartisan nature of this bill is notable. California members on the committee include Lois Capps (D-Santa Barbara), Anna Eshoo (D-Santa Clara), and Doris Matsui (D-Sacramento) who also supported the bill.

CMA Advocacy: While there are several aspects of the bill that concern CMA, including the downside penalties and lack of adequate updates, the bill meets many of the goals that CMA advocated to Congress to eliminate the annual threat of nearly 30% SGR payment cuts, 5 years of stable updates, a continuation of the Fee-for-Service (FFS) program with opportunities for updates, and incentives to help physicians transition to new payment and delivery models. There is still much work to be done on the entire bill and Congress recognizes that.

Detailed SGR Summary: The bill will repeal Medicare’s flawed Sustainable Growth Rate (SGR) formula immediately in 2014.

For 2014-2018, it provides modest, positive updates of 0.5%.

The current reporting programs, PQRS and the EHR Incentive program, will continue through this period.

Fee-for-Service Program: In 2019, the 0.5% updates will continue.

The bill also maintains a fee-for-service (ffs) program that involves a new quality reporting program. Physicians in the ffs program will receive additional updates based on meeting quality measures and participation in clinical practice improvement activities. Physicians will develop the measures and select the measures and clinical projects that work best for their practice.

Physicians would self-select a “clinical cohort” applicable to their specialty and type of practice, and would be measured based on how well they performed on clinical performance measures. Emphasis would be on measures that improve care coordination, patient safety, prevention, and patient experience with the care provided.

Physicians would be scored on a scale of 1-100, and those scoring in the top third would get an annual ffs update of 1.5%, those scoring in the next third would get a 1% update, and those in the lowest third would get a net minus 0.5% update. Those who decline to participate in the FFS quality reporting program OR an alternative payment model will receive a 5.0% payment cut per year starting in 2019.

Alternative Payment Models: The bill provides strong incentives and opportunities for physicians who are willing to participate in alternative payment and delivery models, such as risk-adjusted capitated Patient Centered Medical Homes, Patient Centered Medical Neighborhoods (for specialists), Accountable Care Organizations, Shared Savings programs, case management fee chronic disease programs or other models that combine FFS with shared savings. These models are an alternative for physicians who do not want to participate in the ffs quality reporting program.

These models will be developed by physicians. Physicians may choose which model works best for their practice situation. Physicians in these models would be paid under the rules applicable to their model.

In 2015, Medicare would be directed to begin paying physicians for care coordination of patients with complex chronic diseases. To qualify for such payments, physicians would have to be in a Patient Centered Medical Home for primary care or specialty care recognized by NCQA or other approved entities.


Another CMA-sponsored medical liability provision was included in HR 2810, the Medicare payment reform bill, and will ensure that any new payment policies or practice guidelines adopted by the Affordable Care Act (ACA) do not establish a new standard of care in medical liability proceedings. This is an important liability protection that CMA has been seeking since the passage of the ACA.


  • HR 1701 (Roe)/S 954 (Coburn): Stops the implementation of the ICD-10 Coding System
  • HR 1310 (Price)/S 236 (Murkowski): Medicare Private Contracting: Allows Medicare patients to use their current Medicare coverage to see a doctor who is not accepting Medicare under a private contract.


A last-minute Senate floor amendment to the Affordable Care Act changed the Medicare Advantage geographic payment formula and discriminates against the efficient California medical groups. The new tiering formula fails to cost and risk-adjust payments. CMA is reviewing the problem and working with Members of the California Congressional delegation to adjust the formula so that it more fairly reimburses California’s physician groups.


The House Judiciary Committee recently passed a CMA-supported bill co-authored by California Congressman Darrell Issa (R-San Diego) that among other things would double the number of J-1 physician visa waiver positions in California from 30 to 60. The California Medical Association (CMA) has been advocating for an increase in the number of positions open to foreign-trained physicians to improve access to care in California’s underserved areas. The bill, known as the Skills Visa Act (HR 2131), was co-authored by Judiciary Committee Chairman Robert Goodlatte (R-VA). It was also supported by ranking California Congresswoman Zoe Lofgren (D-SJ).

Under the J-1 visa program, international medical graduates who have completed U.S. residency training on a J-1 visa may request to stay in the country if they agree to practice at least three years in a medically-underserved community. Physicians and others granted J-1 visas are required to return to their home countries for at least two years before applying to live or work in the United States.

On behalf of CMA, Rep. Issa offered an amendment to double the J-1 visa waivers under a new formula. The bill passed on a bipartisan vote in committee. The bill would allow California to transition up to 60 slots over 5 years as long as 90% of the state's J-1 visa waivers are used in the previous year. California would receive an additional 3 waivers for academic medical centers. The bill would also increase the number of H-1B visas for highly skilled foreign workers and make 55,000 green cards available to foreign graduates of U.S. universities with advanced technical degrees. Both provisions will help to bring more physicians to California.

The U.S. Senate passed a comprehensive immigration bill in June, but the bill only provides for an additional eight J-1 visa positions in California. The House will likely move forward with a package of piecemeal immigration reform bills, including HR 2131. While the immigration issue is very contentious, this issue enjoys bipartisan support and has a better chance of success.

Other highlights of the House bill include: Physicians who work in underserved areas for five years (3 years through the J-1 program) would be eligible for a green card through the physician National Interest Waiver (NIW) program and are exempt from the cap on employment based green cards. Physicians who serve in J-1 visa “flex” positions would be eligible for the NIW green card program. Physicians may enter the U.S. on a J-1 visa to receive graduate medical education or training with the intent to immigrate permanently. Spouses and children of J-1 visa waiver physicians would be exempt from the requirement to return to their home country for two years after the physician receives education and training.

This is a huge victory for patient access to care in California. It will significantly help to alleviate the physician shortages in California. CMA will be urging Congress to ensure this new state formula remains in the final immigration reform bill.


The following bills (HR 1201 (Schock/Schwartz); S 577 (Nelson/Schumer/Reid); HR 1180 (Crowley/Grimm)) would all increase the number of new residency positions by 15,000 over a 5 year period, dedicate positions for shortage specialties, provide preferences for the distribution of new positions and require additional studies on physician shortages and the diversity of the physician workforce. CMA is urging Congress to hold hearings and move legislation to lift the caps to meet the future demands for healthcare.



S 214 bans the practice of “pay for delay” for bringing generic drugs to market. It would also reverse the recent Supreme Court decision that allows such activity and give greater authority and enforcement powers to the FTC. CMA has strong HOD policy supporting a ban on such practices.



On September 6, CMA submitted extensive comments to CMS on the proposed 2014 Medicare physician payment rule. The letter is attached. CMA also formed a coalition of urban states to fight another provision that would include nurse practitioners in the physician wage index and reduce payments to physicians in high cost regions, such as California. The joint state coalition letter is also attached.

Summary: While there are major improvements in the fee schedule, such as the practice expense changes to update and improve the data sources (i.e., using commercial rent vs residential rent data) and new physician payment for non face-to-face patient services, CMA registered significant concerns. Among these are a $46 million cut to California physicians that results from moving non-physician clinical staff wages, such as nurse practitioner and physician assistant, from the physician practice expense category to the physician work category for the purpose of computing the physician work component of the geographic practice cost index (GPCI).

Other proposed changes to the 2014 Medicare fee schedule of concern to CMA and AMA are: reducing payments for some physician services up to 50% by assigning them a pay rate that is the same as hospital outpatient departments or ambulatory surgery centers; requiring physician practices to be certified as medical homes and employ physician assistants and advance practice nurses in order to bill for non-face-to-face complex care management services; a proposed five-year look-back for overpayments instead of the current three-year look-back; and a release of physician quality information on a public website before it is verified for accuracy.

CMA is also objecting to CMS's aggressive implementation of the flawed value-based payment modifier, which was mandated by Congress under the Affordable Care Act. This new payment formula creates a "value index," under which physicians, beginning in 2015, will be rewarded if they spend less than the national average per Medicare patient and penalized if they spend more.

Although CMA continues to oppose the value index and is working to eliminate it entirely, we were successful in obtaining amendments to the authorizing legislation that ensure the value index payments are cost and risk-adjusted to account for California's higher practice costs and low-income, uninsured, ethnically diverse patient population.

The final 2014 Medicare payment rule is expected to be issued around November 1.


CMA is urging CMS to adjust the State Plan Amendment for implementation of the Medicaid Primary Care rate increase to ensure that all eligible services are paid at the full Medicare rate.

CMA is also requesting that CMS urge the State not to recoup the 10% Medi-Cal rate cut retroactive to June 2011 as those retroactive cuts will have a devastating impact on safety net physicians.


The coalition is working to finalize a planning grant proposal for the California Health Care Foundation.

Meetings with Members of Congress During the August Recess

CMA thanks the CMA physician leaders and the county medical societies who met with their members of Congress during the August recess.

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