[Federal Register Volume 75, Number 216 (Tuesday, November 9, 2010)]
[Notices]
[Pages 68799-68802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28251]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8040-N]
RIN 0938-AP86


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for CY 2011

AGENCY: Centers for Medicare & Medicaid Services (CMS), 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 (CY) 2011 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts. For CY 2011, the inpatient 
hospital

[[Page 68800]]

deductible will be $1132. The daily coinsurance amounts for CY 2011 
will be--(a) $283 for the 61st through 90th day of hospitalization in a 
benefit period; (b) $566 for lifetime reserve days; and (c) $141.50 for 
the 21st through 100th day of extended care services in a skilled 
nursing facility in a benefit period.

DATES: Effective Date: This notice is effective on January 1, 2011.

FOR FURTHER INFORMATION CONTACT: Clare McFarland, (410) 786-6390 for 
general information. Gregory J. Savord, (410) 786-1521 for case-mix 
analysis.

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 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 CY.

II. Computing the Inpatient Hospital Deductible for CY 2011

    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 CY, adjusted 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 (FY) that begins on October 
1 of the same preceding CY, and adjusted to reflect changes in 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)(XX) of the Act, the percentage 
increase used to update the payment rates for FY 2011 for hospitals 
paid under the inpatient prospective payment system is the market 
basket percentage increase, otherwise known as the market basket 
update, reduced by .25 percentage points. Under section 
1886(b)(3)(B)(viii) of the Act, hospitals will receive this update only 
if they submit quality data as specified by the Secretary. The update 
for hospitals that do not submit this data is reduced by 2.0 percentage 
points. We are estimating that after accounting for those hospitals 
receiving the lower market basket update in the payment-weighted 
average update, the calculated deductible will remain the same.
    Under section 1886(b)(3)(B)(ii)(VIII) of the Act, the percentage 
increase used to update the payment rates for FY 2011 for hospitals 
excluded from the inpatient prospective payment system is the market 
basket percentage increase reduced by .5 percentage points for Long 
Term Care Hospitals and reduced by .25 percentage points for Inpatient 
Rehabilitation facilities and Psychiatric Hospitals, defined according 
to section 1886(b)(3)(B)(iii) of the Act.
    The market basket percentage increase for 2011 is 2.6 percent, as 
announced in the final rule with comment period published in the 
Federal Register on August 16, 2010 entitled, ``Medicare Program; 
Changes to the Hospital Inpatient Prospective Payment Systems for Acute 
Care Hospitals and Fiscal Year 2011 Rates; and Changes to the Long-Term 
Care Hospital Prospective Payment System and Rate Years 2011 and 2010 
Rates (IPPS/RY 2011 LTCH PPS) (75 FR 50042-50677).'' Therefore, the 
percentage increase for hospitals paid under the inpatient prospective 
payment system is 2.35 percent. The average payment percentage increase 
for hospitals excluded from the inpatient prospective payment system is 
2.73 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 FY 2011 is 2.40 percent.
    To develop the adjustment to reflect changes in 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 
FY 2010 compared to FY 2009. (We excluded from this calculation 
hospitals whose payments are not based on the inpatient prospective 
payment system because their payments are based on alternate 
prospective payment systems or reasonable costs.) We used Medicare 
bills from prospective payment hospitals that we received as of July 
2010. These bills represent a total of about 8.5 million Medicare 
discharges for FY 2010 and provide the most recent case-mix data 
available at this time. Based on these bills, the change in average 
case-mix in FY 2010 is 0.3 percent. Based on these bills and past 
experience, we expect the overall case mix change to be 0.5 percent as 
the year progresses and more FY 2010 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. In the FY 2011 IPPS/RY 2011 LTCH PPS final 
rule with comment period, we indicated that we believe the adoption of 
the Medicare severity-based diagnosis-related groups (MS-DRGs) led to 
increases in aggregate payments without a corresponding increase in 
actual patient severity of illness due to the incentives for improved 
documentation and coding. In that final rule with comment period, we 
estimated that changes in coding or classification that do not reflect 
real change in case-mix would be 0.0 percent for FY 2010. Therefore, 
since we are expecting overall case mix to increase by 0.5 percent and 
0.0 percent of that to be caused by coding changes, real case mix 
changes resulted in an increase of 0.5 percent for FY 2010.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
2.40 percent, and the real case-mix adjustment factor for the 
deductible is 0.5 percent. Therefore, under the statutory formula, the 
inpatient hospital deductible for services furnished in CY 2011 is 
$1132. This deductible amount is determined by multiplying $1100 (the 
inpatient hospital deductible for CY 2010) by the payment-weighted 
average increase in the payment rates of 1.0240 multiplied by the 
increase in real case-mix of 1.005, which equals $1132.03 and is 
rounded to $1132.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2011

    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 CY. The increase in the deductible 
generates increases in the coinsurance amounts. For inpatient hospital 
and extended care services furnished in CY 2011, 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 
$283 (one-fourth of the inpatient hospital deductible); the daily

[[Page 68801]]

coinsurance for lifetime reserve days will be $566 (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 $141.50 (one-eighth of the 
inpatient hospital deductible).

IV. Cost to Medicare Beneficiaries

    Table 1 below summarizes the deductible and coinsurance amounts for 
CYs 2010 and 2011, as well as the number of each that is estimated to 
be paid.

               Table 1--Part A Deductible and Coinsurance Amounts for Calendar Years 2010 and 2011
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                                                                       Value                 Number paid (in
                                                           ----------------------------         millions)
                   Type of cost sharing                                                -------------------------
                                                                2010          2011          2010         2011
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Inpatient hospital deductible.............................      $1100         $1132            8.40         8.59
Daily coinsurance for 61st-90th Day.......................       $275          $283            2.25         2.30
Daily coinsurance for lifetime reserve days...............       $550          $566            1.13         1.16
SNF coinsurance...........................................       $137.50       $141.50        42.41        43.66
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    The estimated total increase in costs to beneficiaries is about 
$900 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 
CY. 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 (APA), 
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 formulae used to calculate the 
inpatient hospital deductible and hospital and extended care services 
coinsurance amounts are statutorily directed, and we can exercise no 
discretion in following the formulae. 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. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

VII. Regulatory Impact Statement

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354), section 1102(b) of the Social Security Act, section 202 of 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive 
Order 13132 on Federalism (August 4, 1999), and the Congressional 
Review Act (5 U.S.C.804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). As stated in 
section IV of this notice, we estimate that the total increase in costs 
to beneficiaries associated with this notice is about $900 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.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and 
government agencies. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $7.0 million to $34.5 million in any 1 year. Individuals 
and States are not included in the definition of a small entity. We 
have determined that this notice will not have a significant economic 
impact on a substantial number of small entities. Therefore, we are not 
preparing an analysis under the RFA.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. The Secretary has 
determined that this notice will not have a significant impact on the 
operations of a substantial number of small rural hospitals. Therefore, 
we are not preparing an analysis under section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2010, that 
threshold is approximately $135 million. This notice has no 
consequential effect on State, local, or Tribal governments or on the 
private sector. However, States may be required

[[Page 68802]]

to pay the deductibles and coinsurance for dually-eligible 
beneficiaries.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This notice will not have a substantial effect on State 
or local governments.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance)

    Dated: September 9, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 29, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-28251 Filed 11-4-10; 2:15 pm]
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