CMS Statement on Medicare and Medicaid Extenders Act of 2010

Centers for Medicare and Medicaid Services (CMS) issued the following statement today:

President Obama Signs the Medicare and Medicaid Extenders Act of 2010

On Wednesday, December 15, 2010, President Obama signed into law the Medicare and Medicaid Extenders Act of 2010 (MMEA).  This new law prevents a scheduled payment cut for physicians who treat Medicare patients from taking effect. The Centers for Medicare & Medicaid Services (CMS) is pleased that this law has addressed key issues for beneficiaries and providers and we are actively engaged in implementing these changes. 

CMS is also working to implement several important new provisions for Medicare beneficiaries made possible by the Affordable Care Act – the health reform law.  In 2011:

  • Beneficiaries who reach the prescription drug coverage gap, known as the donut hole, will receive a 50 percent discount when buying Part D-covered brand-name prescription drugs.
  • Virtually all Medicare beneficiaries are eligible to receive many free preventive care services and a free annual wellness visit.

These provisions will improve care for Medicare beneficiaries and we encourage you to share this information with your patients.  More information on these Affordable Care Act provisions can be found at and at also contains a timeline and other key information about the new law and a highly praised insurance finder for coverage options in public and private insurance programs, which family members and friends of Medicare beneficiaries may find useful.

Below please find technical summaries of key provisions of the MMEA along with some information about how these changes may affect providers and provider billing. 

Physician Payment Update

Section 101 of the MMEA prevents a payment cut for physicians that would have taken effect on January 1, 2011.  While the physician fee schedule update will be zero percent, other changes to the relative value units (RVUs) used to calculate the fee schedule rates must be budget neutral.  To make those changes budget neutral, the conversion factor must be adjusted for 2011.  CMS is currently developing the 2011 Medicare Physician Fee Schedule (MPFS) to implement the zero percent update, and we expect all 2011 claims to be processed timely, in compliance with the new legislation.

Extension of Medicare Physician Work Geographic Adjustment Floo

Current law requires payment rates under the MPFS to be adjusted geographically for three factors to reflect differences in the cost of provider resources needed to furnish MPFS services:  physician work, practice expense, and malpractice expense.  Section 103 of the MMEA extends the existing 1.0 floor on the “physician work” geographic practice cost index, through December 31, 2011.  As with the physician payment update, this change will be accomplished through a revised 2011 MPFS.

Extension of Physician Fee Schedule Mental Health Add-On Payments

For calendar year 2010, certain mental health services’ payment rates continued to be increased by five percent.  Section 107 of the MMEA extends the five percent increase in payments for these mental health services, through December 31, 2011.  Similar to the zero percent update and the physician work geographic adjustment floor extension, the five percent increase will be reflected in the revised 2011 MPFS.

Extension of Medicare Modernization Act Section 508 Reclassifications

Section 102 of the MMEA extends Section 508 and special exception hospital reclassifications from October 1, 2010, through September 30, 2011.  Effective April 1, 2011, Section 102 also requires removing Section 508 and special exception wage data from the calculation of the reclassified wage index if doing so raises the reclassified wage index.  All hospitals affected by Section 102 of the MMEA shall be assigned an individual special wage index effective April 1, 2011.  If the Section 508 or special exception hospital’s wage index applicable for the period beginning on October 1, 2010, and ending on March 31, 2011, is lower than the period beginning on April 1, 2011, and ending on September 30, 2011, the hospital shall be paid an additional amount that reflects the difference between the wage indices.  The provision applies to both inpatient and outpatient hospital payments.  For hospital outpatient payments, a special exception hospital’s reclassified wage index will be applicable from January 1, 2011, through December 31, 2011.

 Extension of Exceptions Process for Medicare Therapy Caps

Section 104 of the MMEA extends the exceptions process for outpatient therapy caps.  Outpatient therapy service providers may continue to submit claims with the KX modifier, when an exception is appropriate, for services furnished on or after January 1, 2011, through December 31, 2011.  

The therapy caps are determined on a calendar year basis, so all patients begin a new cap year on January 1, 2011.  For physical therapy and speech language pathology services combined, the limit on incurred expenses is $1,870.  For occupational therapy services, the limit is $1,870.  Deductible and coinsurance amounts applied to therapy services count toward the amount accrued before a cap is reached.    

Extension of Moratorium On Independent Laboratory Billing for the Technical Component (TC) of Physician Pathology Services Furnished to Hospital Patients

In the final physician fee schedule regulation published in the Federal Register on November 2, 1999, CMS stated that it would implement a policy to pay only the hospital for the TC of physician pathology services furnished to hospital patients.   At the request of the industry, to allow independent laboratories and hospitals sufficient time to negotiate arrangements, the implementation of this rule was administratively delayed.  Subsequent legislation formalized a moratorium on the implementation of the rule. 

Although the previous extension of the moratorium expired at the end of 2010, the MMEA restores the moratorium through 2011.  Therefore, independent laboratories may continue to submit claims to Medicare for the TC of physician pathology services furnished to patients of a hospital, regardless of the beneficiary’s hospitalization status (inpatient or outpatient) on the date that the service was performed.  This policy is effective for claims with dates of service on or after January 1, 2011, through December 31, 2011.

Extension of Ambulance Add-On Payments

The provisions that were extended by Section 106 of the MMEA are: (1) the 3 percent increase in the ambulance fee schedule amounts for covered ground ambulance transports that originate in rural areas and the 2 percent increase for covered ground ambulance transports that originate in urban areas; (2) the provision relating to air ambulance services that considers any area that was designated as a rural area as of December 31, 2006, shall continue to be treated as a rural area for purposes of making payments under the ambulance fee schedule for such air ambulance services; and (3) the provision relating to payment for ground ambulance services where the base rate is increased when the ambulance transport originates in an area that is included in those areas comprising the lowest 25th percentile of all rural populations arrayed by population density.

All of these payment provisions are extended through December 31, 2011.

Extension of Outpatient Hold Harmless Provision

Section 108 of the MMEA extends the Outpatient Hold Harmless provision, effective for dates of service on and after January 1, 2011, through December 31, 2011, to rural hospitals with 100 or fewer beds and to all sole community hospitals and Essential Access Community Hospitals regardless of bed size. 

Extension of Medicare Reasonable Cost Payment for Clinical Lab Tests Furnished to Hospital Patients in Certain Rural Areas

Section 109 of the MMEA extends the reasonable cost payment for clinical lab tests furnished by hospitals with fewer than 50 beds in qualified rural areas as part of their outpatient services for cost reporting periods beginning on or after July 1, 2011, through June 30, 2012.  This could affect services furnished as late as June 30, 2013. 

If your hospital qualifies under Section 109, you do not need to take any action.  Your hospital will receive reasonable cost reimbursement for an entire year, starting with the facility cost reporting period beginning on or after July 1, 2011.

Repeal of the Delay of RUG-IV

Section 202 of the MMEA repeals the delay of the Skilled Nursing Facility (SNF) PPS RUG-IV classification system.  Therefore, RUG- IV will continue to remain in effect from October 1, 2010, as previously implemented by the final SNF payment regulation for FY 2011.   All claims processing activities shall proceed in accordance with the existing instructions.


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