Medicare Program; CY 2021 Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts, 71916-71920 [2020-25024]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 85, Number 219 (Thursday, November 12, 2020)]
[Notices]
[Pages 71916-71920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25024]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8074-N]
RIN 0938-AU14


Medicare Program; CY 2021 Inpatient Hospital Deductible and 
Hospital and Extended Care Services Coinsurance Amounts

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) 2021 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts. For CY 2021, the inpatient 
hospital deductible will be $1,484. The daily coinsurance amounts for 
CY 2021 will be: $371 for the 61st through 90th day of hospitalization 
in a benefit period; $742 for lifetime reserve days; and $185.50 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, 2021.

FOR FURTHER INFORMATION CONTACT: 
    Yaminee Thaker, (410) 786 7921 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 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 2021

    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 2021 for hospitals 
paid under the inpatient prospective payment system is the market 
basket percentage increase, otherwise known as the market basket 
update, reduced by an adjustment based on changes in the economy-wide 
productivity (the multifactor productivity (MFP) adjustment) (see 
section 1886(b)(3)(B)(xi)(II) of the Act). Under section 
1886(b)(3)(B)(viii) of the Act, for FY 2021, the applicable percentage 
increase for hospitals that do not submit quality data as specified by 
the Secretary is reduced by one quarter

[[Page 71917]]

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 2021 
for hospitals excluded from the inpatient prospective payment system is 
as follows:
     The percentage increase for long term care hospitals is 
the market basket percentage increase reduced by the MFP 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 is the market basket percentage increase reduced by a 
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 is the market basket percentage 
increase reduced by the MFP 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 inpatient 
prospective payment system 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 inpatient prospective payment system market basket percentage 
increase for FY 2021 is 2.4 percent and the MFP adjustment is 0.0 
percentage point, as announced in the final rule that appeared in the 
Federal Register on September 18, 2020 entitled, ``Hospital Inpatient 
Prospective Payment Systems for Acute Care Hospitals and the Long-Term 
Care Hospital Prospective Payment System and Final Policy Changes and 
Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid 
Promoting Interoperability Programs Requirements for Eligible Hospitals 
and Critical Access Hospitals'' (85 FR 58432). Therefore, the 
percentage increase for hospitals paid under the inpatient prospective 
payment system that submit quality data and are meaningful EHR users is 
2.4 percent (that is, the FY 2021 market basket update of 2.4 percent 
less the MFP adjustment of 0.0 percentage point). The average payment 
percentage increase for hospitals excluded from the inpatient 
prospective payment system is 2.34 percent. This average includes long 
term care hospitals, inpatient rehabilitation 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 2021 is 2.39 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 2020 compared to FY 2019. (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 2020. These bills represent a total of about 6.1 million 
Medicare discharges for FY 2020 and provide the most recent case-mix 
data available at this time. Based on these bills, the change in 
average case-mix in FY 2020 is 2.8 percent. Based on these bills and 
past experience, we expect the overall case mix change to be 3.8 
percent as the year progresses and more FY 2020 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. Real case-mix is that portion of case-mix 
that is due to changes in the mix of cases in the hospital and not due 
to coding optimization. COVID-19 has complicated the determination of 
real case-mix increase. COVID-19 cases typically have higher-weighted 
MS-DRGs which would cause a real increase in case-mix while hospitals 
have experienced a reduction in lower-weighted cases which would also 
cause a real increase in case-mix. We compared the average case-mix for 
February 2020 through July 2020 (COVID-19 period) with average case-mix 
for October 2019 through January 2020 (pre-COVID-19 period). Since this 
increase applies for only a portion of CY 2020, we allocated this 
increase by the estimated discharges over the 2 periods--a 2.5 percent 
increase for FY 2020. The 1.3-percent residual case-mix increase is a 
mixture of real case-mix and coding optimization. Over the past several 
years, we have observed total case mix increases of about 0.5 percent 
per year and have assumed that they are real. Thus, since we do not 
have further information at this time, we expect that 0.5 percent of 
the residual 1.3 percent change in average case-mix for FY 2020 will be 
real. The combination of the 2.5-percent COVID-19 effect and the 
remaining residual 0.5-percent real case-mix increase is a 3.0-percent 
increase in real case-mix for FY 2020. Note that all case-mix 
calculations do not include the extra 20 percent adjustment in the MS-
DRG relative weights for COVID-19 cases. The extra 20-percent 
adjustment is a payment artifact that should not be included in the 
measurement of case-mix.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
2.39 percent, and the real case-mix adjustment factor for the 
deductible is 3.0 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 2021 to be $1,484. 
This deductible amount is determined by multiplying $1,408 (the 
inpatient hospital deductible for CY 2020 (84 FR 61619)) by the 
payment-weighted average increase in the payment rates of 1.0239 
multiplied by the increase in real case-mix of 1.03, which equals 
$1,484.90 and is rounded to $1,484.

[[Page 71918]]

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2021

    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 2021, 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 
$371 (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 $742 (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 $185.50 (one-eighth of the inpatient hospital deductible as stated 
in section 1813(a)(3) of the Act).

IV. Cost to Medicare Beneficiaries

    The Table below summarizes the deductible and coinsurance amounts 
for CYs 2020 and 2021, as well as the number of each that is estimated 
to be paid.

                   Part A Deductible and Coinsurance Amounts for Calendar Years 2020 and 2021
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                                                               Value                 Number paid (in millions)
              Type of cost sharing               ---------------------------------------------------------------
                                                       2020            2021            2020            2021
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Inpatient hospital deductible...................          $1,408          $1,484            5.81            6.45
Daily coinsurance for 61st-90th Day.............             352             371            1.31            1.46
Daily coinsurance for lifetime reserve days.....             704             742            0.65            0.72
SNF coinsurance.................................          176.00          185.50           28.82           32.19
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    The estimated total increase in costs to beneficiaries is about 
$2,450 million (rounded to the nearest $10 million) due to: (1) The 
increase in the deductible and coinsurance amounts; and (2) the 
increase in the number of deductibles and daily coinsurance amounts 
paid. We determine the increase in cost to beneficiaries by calculating 
the difference between the 2020 and 2021 deductible and coinsurance 
amounts multiplied by the estimated increase 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 2021. 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 2021. 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

[[Page 71919]]

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 substantive rule, we 
nevertheless prepared this Regulatory Impact Analysis section in the 
interest of ensuring that the impacts of this notice are fully 
understood.

A. Statement of Need

    Section 1813(b)(2) of the Act requires the Secretary to publish, 
between September 1 and September 15 of each year, the amounts of the 
inpatient hospital deductible and hospital and extended care services 
coinsurance applicable for services furnished in the following CY.

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), 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), the Congressional Review Act (5 U.S.C. 804(2)), and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    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, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). Although we do not consider this notice to constitute a 
substantive rule, this notice is economically significant under section 
3(f)(1) of Executive Order 12866. As stated in section IV of this 
notice, we estimate that the total increase in costs to beneficiaries 
associated with this notice is about $2,450 million due to: (1) The 
increase in the deductible and coinsurance amounts; and (2) the 
increase in the number of deductibles and daily coinsurance amounts 
paid.
    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 health care 
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 $8.0 
million to $41.5 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 
2021 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 determined 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 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. This annual notice 
announces the Medicare Part A deductible and coinsurance amounts for CY 
2021 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 determined that this notice will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    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 2020, that 
threshold is approximately $156 million. This notice does not impose 
mandates that will have a consequential effect of $156 million or more 
on state, local, or tribal governments or on the private sector.
    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.
    Executive Order 13771, titled ``Reducing Regulation and Controlling 
Regulatory Costs,'' was issued on January 30, 2017 (82 FR 9339, 
February 3, 2017). It has been determined that this notice is a 
transfer notice that does not impose more than de minimis costs and 
thus is not a regulatory action for the purposes of E.O. 13771.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

C. Congressional Review

    Consistent with the Congressional Review Act provisions of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 
801 et seq.), this notice has been transmitted to the Congress and the 
Comptroller General for review.


[[Page 71920]]


    Dated: October 30, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 2, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-25024 Filed 11-6-20; 4:15 pm]
BILLING CODE 4120-01-P