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[Federal Register Volume 89, Number 220 (Thursday, November 14, 2024)]
[Notices]
[Pages 89998-90001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26472]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8086-N]
RIN 0938-AV36

Medicare Program; CY 2025 Inpatient Hospital Deductible and 
Hospital and Extended Care Services Coinsurance Amounts

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice of 2025 deductible and coinsurance amounts.

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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) 2025 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts. For CY 2025, the inpatient 
hospital deductible will be $1,676. The daily coinsurance amounts for 
CY 2025 will be as follows: $419 for the 61st through 90th day of 
hospitalization in a benefit period; $838 for lifetime reserve days; 
and $209.50 for the 21st through 100th day of extended care services in 
a skilled nursing facility in a benefit period.

DATES: The deductible and coinsurance amounts announced in this notice 
are effective on January 1, 2025.

FOR FURTHER INFORMATION CONTACT: Suzanne Codespote, (410) 786-7737 or 
Yaminee Thaker, (410) 786-7921.

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 the Secretary of 
the Department of Health and Human Services (the Secretary) 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 calendar 
year (CY).

II. Computing the Inpatient Hospital Deductible for CY 2025

    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 the Secretary's 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 2025 for hospitals 
paid under the inpatient prospective payment system (IPPS) is the IPPS 
operating market basket percentage increase, otherwise known as the 
IPPS market basket update, reduced by an adjustment based on changes in 
the economy-wide productivity (productivity adjustment) (see section 
1886(b)(3)(B)(xi)(II) of the Act). Under section 1886(b)(3)(B)(viii) of 
the Act, for FY 2025, the applicable percentage increase for hospitals 
that do not submit quality data as specified by the Secretary is 
reduced by one quarter of the market basket update. 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 not be affected, since the majority of hospitals submit 
quality data and receive the full market basket update. Section 
1886(b)(3)(B)(ix) of the Act requires that any hospital that is not a 
meaningful electronic health record (EHR) user (as defined in section 
1886(n)(3) of the Act) will have three-quarters of the market basket 
update reduced by 100 percent for FY 2017 and each subsequent FY. We 
are estimating that after accounting for these hospitals receiving the 
lower market basket update, the calculated deductible will not be 
affected, since the majority of hospitals are meaningful EHR users and 
are expected to receive the full market basket update.
    Under section 1886 of the Act, the percentage increase used to 
update the payment rates (or target amounts, as applicable) for FY 2025 
for hospitals excluded from the inpatient prospective payment system is 
as follows:
     The percentage increase for long term care hospitals 
(LTCH) is the LTCH market basket percentage increase reduced by the 
productivity adjustment (see section 1886(m)(3)(A) of the Act). In 
addition, these hospitals may also be impacted by the quality reporting 
adjustments and the site-neutral payment rates (see sections 1886(m)(5) 
and 1886(m)(6) of the Act).
     The percentage increase for inpatient rehabilitation 
facilities (IRF) is the IRF market basket percentage increase reduced 
by the productivity adjustment in accordance with section 
1886(j)(3)(C)(ii)(I) of the Act. In addition, these hospitals may also 
be impacted by the quality reporting adjustments (see section 
1886(j)(7) of the Act).
     The percentage increase used to update the payment rate 
for inpatient psychiatric facilities (IPF) is the IPF

[[Page 89999]]

market basket percentage increase reduced by the productivity 
adjustment (see section 1886(s)(2)(A)(i) of the Act). In addition, 
these hospitals may also be impacted by the quality reporting 
adjustments (see section 1886(s)(4) of the Act).
     The percentage increase used to update the target amounts 
for other types of hospitals that are excluded from the inpatient 
prospective payment system and that are paid on a reasonable cost 
basis, subject to a rate-of-increase ceiling, is the IPPS operating 
market basket percentage increase, which is described at section 
1886(b)(3)(B)(ii)(VIII) of the Act and 42 CFR 413.40(c)(3). These other 
types of hospitals include cancer hospitals, children's hospitals, 
extended neoplastic disease care hospitals, and hospitals located 
outside the 50 states, the District of Columbia, and Puerto Rico.
    The IPPS operating market basket percentage increase for FY 2025 is 
3.4 percent and the productivity adjustment is 0.5 percentage point, as 
announced in the final rule that appeared in the Federal Register on 
August 28, 2024 entitled, ``Medicare and Medicaid Programs and the 
Children's Health Insurance Program; Hospital Inpatient Prospective 
Payment Systems for Acute Care Hospitals and the Long-Term Care 
Hospital Prospective Payment System and Policy Changes and Fiscal Year 
2025 Rates; Quality Programs Requirements; and Other Policy Changes'' 
(89 FR 68986). Therefore, the percentage increase for hospitals paid 
under the inpatient prospective payment system that submit quality data 
and are meaningful EHR users is 2.9 percent (that is, the FY 2025 IPPS 
operating market basket update of 3.4 percent less the productivity 
adjustment of 0.5 percentage point). The average payment percentage 
increase for hospitals excluded from the inpatient prospective payment 
system is 3.05 percent. This average includes long term care hospitals, 
inpatient rehabilitation facilities, inpatient psychiatric facilities 
and other hospitals excluded from the inpatient prospective payment 
system. 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 2025 is 2.92 percent.
    To develop the adjustment to reflect changes in real case-mix, we 
first calculated an average case-mix for each hospital 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 inpatient prospective payment 
system in FY 2024 compared to FY 2023. (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 2024. These bills represent a total of about 5.8 million 
Medicare discharges for FY 2024 and provide the most recent case-mix 
data available at this time. Based on these bills, the change in 
average case-mix in FY 2024 is -0.3 percent. Based on these bills and 
past experience, we expect the overall FY 2024 case mix change to be -
0.3 percent as the year progresses and more FY 2024 data become 
available.
    Section 1813(b) 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. Real case-mix is that portion of case-mix 
that is due to changes in the mix of cases and not due to coding 
optimization. COVID-19 has complicated the determination of real case-
mix changes over the last few years, since these cases typically had 
higher-weighted Medicare Severity Diagnosis Related Groups, which 
resulted in an increase in real case-mix. However, the number of COVID-
19 cases and the severity of these cases is lower in 2024, compared to 
the last several years, and resulted in a decrease in case-mix of -0.3 
percent. We are assuming that this decrease in case-mix is real and not 
a result of coding optimization.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
2.92 percent, and the real case-mix adjustment factor for the 
deductible is -0.3 percent. Therefore, using the statutory formula as 
stated in section 1813(b) of the Act, we calculate the inpatient 
hospital deductible for services furnished in CY 2025 to be $1,676. 
This deductible amount is determined by multiplying $1,632 (the 
inpatient hospital deductible for CY 2024 (88 FR 59035)) by the 
payment-weighted average increase in the payment rates of 1.0292 
multiplied by the decrease in real case-mix of 0.997, which equals 
$1,674.62 and is rounded to $1,676 (based on rounding to the nearest 
multiple of 4).

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2025

    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 2025, 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 
$419 (one-fourth of the inpatient hospital deductible as stated in 
section 1813(a)(1)(A) of the Act); the daily coinsurance for lifetime 
reserve days will be $838 (one-half of the inpatient hospital 
deductible as stated in section 1813(a)(1)(B) of the Act); and the 
daily coinsurance for the 21st through 100th day of extended care 
services in a skilled nursing facility (SNF) in a benefit period will 
be $209.50 (one-eighth of the inpatient hospital deductible as stated 
in section 1813(a)(3) of the Act).

IV. Cost to Medicare Beneficiaries

    Table 1 summarizes the deductible and coinsurance amounts for CYs 
2024 and 2025, as well as the number of each that is estimated to be 
paid.

Table 1--Medicare Part A Deductible and Coinsurance Amounts for CYs 2024
                                and 2025
------------------------------------------------------------------------
                                        Value           Number paid (in
                               ----------------------      millions)
     Type of cost sharing                            -------------------
                                   2024       2025       2024      2025
------------------------------------------------------------------------
Inpatient hospital deductible.     $1,632     $1,676       5.00     4.91
Daily coinsurance for 61st-           408        419       1.23     1.21
 90th day.....................
Daily coinsurance for lifetime        816        838       0.62     0.61
 reserve days.................
SNF coinsurance...............     204.00     209.50      24.66    24.46
------------------------------------------------------------------------

[[Page 90000]]

    The estimated total increase in costs to beneficiaries is about 
$170 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. We 
determine the increase in cost to beneficiaries by calculating the 
difference between the 2024 and 2025 deductible and coinsurance amounts 
multiplied by the estimated change in the number of deductible and 
coinsurance amounts paid.

V. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 1871 of the Act and section 553(b) of 
the Administrative Procedure Act (APA). Section 1871(a)(2) of the Act 
provides that no rule, requirement, or other statement of policy (other 
than a national coverage determination) that establishes or changes a 
substantive legal standard governing the scope of benefits, the payment 
for services, or the eligibility of individuals, entities, or 
organizations to furnish or receive services or benefits under Medicare 
shall take effect unless it is promulgated through notice and comment 
rulemaking. Unless there is a statutory exception, section 1871(b)(1) 
of the Act generally requires the Secretary to provide for notice of a 
proposed rule in the Federal Register and provide a period of not less 
than 60 days for public comment before establishing or changing a 
substantive legal standard regarding the matters enumerated by the 
statute. Similarly, under 5 U.S.C. 553(b) of the APA, the agency is 
required to publish a notice of proposed rulemaking in the Federal 
Register before a substantive rule takes effect. Section 553(d) of the 
APA and section 1871(e)(1)(B)(i) of the Act usually require a 30-day 
delay in effective date after issuance or publication of a rule, 
subject to exceptions. Sections 553(b)(B) and 553(d)(3) of the APA 
provide for exceptions from the advance notice and comment requirement 
and the delay in effective date requirements. Sections 1871(b)(2)(C) 
and 1871(e)(1)(B)(ii) of the Act also provide exceptions from the 
notice and 60-day comment period and the 30-day delay in effective 
date. Section 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act 
expressly authorize an agency to dispense with notice and comment 
rulemaking for good cause if the agency makes a finding that notice and 
comment procedures are impracticable, unnecessary, or contrary to the 
public interest.
    The annual inpatient hospital deductible and the hospital and 
extended care services coinsurance amounts announcement set forth in 
this notice does not establish or change a substantive legal standard 
regarding the matters enumerated by the statute or constitute a 
substantive rule which would be subject to the notice requirements in 
section 553(b) of the APA. However, to the extent that an opportunity 
for public notice and comment could be construed as required for this 
notice, we find good cause to waive this requirement.
    Section 1813(b)(2) of the Act requires publication of the inpatient 
hospital deductible and the hospital and extended care services 
coinsurance amounts between September 1 and September 15 of the year 
preceding the year to which they will apply. Further, the statute 
requires that the agency determine and publish the inpatient hospital 
deductible and hospital and extended care services coinsurance amounts 
for each CY in accordance with the statutory formulae, and we are 
simply notifying the public of the changes to the deductible and 
coinsurance amounts for CY 2025. We have calculated the inpatient 
hospital deductible and hospital and extended care services coinsurance 
amounts as directed by the statute; the statute establishes both when 
the deductible and coinsurance amounts must be published and the 
information that the Secretary must factor into the deductible and 
coinsurance amounts, so we do not have any discretion in that regard. 
We find notice and comment procedures to be unnecessary for this notice 
and we find good cause to waive such procedures under section 553(b)(B) 
of the APA and section 1871(b)(2)(C) of the Act, if such procedures may 
be construed to be required at all. Through this notice, we are simply 
notifying the public of the updates to the inpatient hospital 
deductible and the hospital and extended care services coinsurance 
amounts, in accordance with the statute, for CY 2025. As such, we also 
note that even if notice and comment procedures were required for this 
notice, for the reasons stated above, we would find good cause to waive 
the delay in effective date of the notice, as additional delay would be 
contrary to the public interest under section 1871(e)(1)(B)(ii) of the 
Act. Publication of this notice is consistent with section 1813(b)(2) 
of the Act, and we believe that any potential delay in the effective 
date of the notice, if such delay were required at all, could cause 
unnecessary confusion both for the agency and Medicare beneficiaries.

VI. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

VII. Regulatory Impact Analysis

    Although this notice does not constitute a significant regulatory 
action (defined below), we nevertheless prepared this Regulatory Impact 
Analysis (RIA) section in the interest of ensuring that the impacts of 
this notice are fully understood.

A. Statement of Need

    This notice announces the Medicare Part A inpatient hospital 
deductible and associated coinsurance amounts for hospital and extended 
care services applicable for care provided in CY 2025, as required by 
section 1813 of the Act. It also responds to section 1813(b)(2) of the 
Act, which requires the Secretary to provide for publication of these 
amounts in the Federal Register between September 1 and September 15 of 
the year preceding the year to which they will apply. As this statutory 
provision prescribes a detailed methodology for calculating these 
amounts, we do not have the discretion to adopt an alternative approach 
on these issues.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), Executive Order 14094 titled ``Modernizing 
Regulatory Review'' (April 6, 2024), 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 (March 22, 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 Orders 12866 and 13563 direct 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,

[[Page 90001]]

environmental, public health and safety effects, distributive impacts, 
and equity). The Executive Order 14094, titled ``Modernizing Regulatory 
Review'' amends section 3(f)(1) of Executive Order 12866 (Regulatory 
Planning and Review). The amended section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule that may: (1) have an annual effect on the economy 
of $200 million or more (adjusted every 3 years by the Administrator of 
the Office of Information and Regulatory Affairs (OIRA) for changes in 
gross domestic product)); or adversely affect in a material way the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, territorial, or 
tribal governments or communities; (2) create a serious inconsistency 
or otherwise interfering with an action taken or planned by another 
agency; (3) materially alter the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raise legal or policy issues, for which 
centralized review would meaningfully further the President's 
priorities, or the principles set forth in this Executive order, as 
specifically authorized in a timely manner by OIRA in each case.
    An RIA must be prepared for rules that are likely to result in a 
significant regulatory action(s) as set forth in section 3(f)(1) of 
Executive Order 12866 ($200 million or more in any 1 year). Based on 
our estimates, OIRA has determined that this notice is not significant 
per section 3(f)(1) of E.O. 12866 as measured by the $200 million or 
more impact in any 1 year.
    In accordance with the Congressional Review Act, OIRA has 
determined that this notice meets the criteria set forth in 5 U.S.C. 
804(2). Accordingly, we have prepared an RIA that to the best of our 
ability presents the costs and benefits of this notice.
    As stated in section IV. of this notice, we estimate that the total 
increase in costs to beneficiaries is about $170 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.

C. Accounting Statement and Table

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in table 2, we have prepared an accounting 
statement showing the estimated total increase in costs to 
beneficiaries of about $170 million. As stated in section IV. of this 
notice, we determined the increase in cost to beneficiaries by 
calculating the difference between the 2024 and 2025 deductible and 
coinsurance amounts multiplied by the estimated change in the number of 
deductible and coinsurance amounts paid.

   Table 2--Estimated Transfers for CY 2025 Deductible and Coinsurance
                                 Amounts
------------------------------------------------------------------------
                                                                 Period
              Category                       Transfers          covered
------------------------------------------------------------------------
Annualized Monetized Transfers......  $170 million...........       2025
From Whom to Whom...................  Beneficiaries to         .........
                                       Providers.
------------------------------------------------------------------------

D. Regulatory Flexibility Act

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, 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 small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the Small Business Administration's definition of a small 
business (having revenues of less than $9.0 million to $47 million in 
any 1 year). Individuals and states are not included in the definition 
of a small entity. This annual notice announces the Medicare Part A 
deductible and coinsurance amounts for CY 2025 and will have an impact 
on the Medicare beneficiaries. As a result, we are not preparing an 
analysis for the RFA because the Secretary has certified that this 
notice will not have a significant economic impact on a substantial 
number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA 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. This annual notice announces the Medicare Part A 
deductible and coinsurance amounts for CY 2025 and will have an impact 
on the Medicare beneficiaries. As a result, we are not preparing an 
analysis for section 1102(b) of the Act because the Secretary has 
certified that this notice will not have a significant impact on the 
operations of a substantial number of small rural hospitals.

E. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
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 2024, that 
threshold is approximately $183 million. This notice would not impose a 
mandate that will result in the expenditure by state, local, and Tribal 
governments, in the aggregate, or by the private sector, of more than 
$183 million in any 1 year.

F. Federalism

    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 direct effect on 
state or local governments, preempt state law, or otherwise have 
federalism implications.

G. Congressional Review

    This notice is subject to the Congressional Review Act and has been 
transmitted to the Congress and the Government Accountability Office's 
Comptroller General for review.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on October 31, 2024.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-26472 Filed 11-8-24; 4:15 pm]
BILLING CODE 4120-01-P
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