by Alex Sange, MPP

For the first time in months, Congress agreed to and passed a bipartisan, non-appropriations bill last week – the Payroll Tax Extension of 2012 – which extended the payroll tax holiday that was set to expire this month, among other things.  This new law extends the holiday through December 31, 2012 and means that 160 million working Americans will be spared a tax hike this year, along with extending Unemployment Insurance (UI) for those have been out of work long enough to receive long-term unemployment assistance, and staving off immediate deep cuts to Medicare fee-for-service providers (through a so-called short-term Medicare “doc fix”).  In the midst of posturing on both sides about the deficit, jobs, and taxes on the middle class, both chambers ultimately agreed to a $152 billion package that was not fully paid for.  Although not all Democrats and Republicans backed the package, it passed 60-36 in Senate and 293-132 in the House with bipartisan majorities in both chambers.  Much of the opposition to the package centered around its offsets – with some Democrats objecting to the health care cuts in the package and some Republicans unhappy that the new law will add money (about $100 billion) to the federal deficit.

Although the package was not fully paid for, it was partially paid for – the Medicare doc-fix and UI extensions were paid for with just over $50 billion in offsets from the health sector, reductions to federal pension benefits and the sale of the public spectrum for broadcasting.  The health care cuts in particular, which may impact some health centers directly though not deeply, are worth noting.  Specifically, two provisions in the bill are worth highlighting:

Section 3201 – Reducing Bad Debt Payments: CBO estimates the proposal achieves $6.9 billion in savings through 2022 by phasing down bad debt payments in Medicare to all eligible providers, including health centers. Much of the savings are expected to come from reduced payments to hospitals and other inpatient providers. The new law would phase down the amount health centers and other providers can collect on Medicare bad debt, ultimately allowing providers to collect 65% of their Medicare bad debt in 3 years (phasing down from the 100% collection on bad debt health centers are currently allowed to collect by law).

Section 3205 – Reducing the Prevention and Public Health Fund: CBO estimates the proposal achieves $5 billion in savings through 2012 by cutting it from the Prevention and Public Health Fund established in the Affordable Care Act to support programs in the Public Health Service Act.  Although some of this fund has been spent, the bill will rescind $5 billion over time, reducing this dedicated public health and prevention money in the future. It is important to note that this Prevention Fund is separate from the Health Center Fund, which was not cut.

The Medicare Bad Debt provision is not a new one – we’ve seen it in the President’s deficit reduction proposal at the end of last summer and in the House’s version of last year’s extenders package – though the new law will have less of an impact on health centers and other providers than in its previous iterations.  However, health centers who are currently collecting Medicare bad debt will be impacted by this new law to some degree.  NACHC’s analysis had indicated that health centers were not widely benefitting from this provision given the challenges to utilizing it, but if your health center has been benefitting from the Medicare Bad Debt provision, we would like to hear from you. The Prevention and Public Health Fund cut will not directly impact health center funding – however, the Prevention Fund reduction will impact other PHSA programs that health centers may benefit from and utilize by growing that fund’s reach more slowly.  Here in DC we are following these changes closely and will continue to report on their implementation – so stay tuned to the blog, and let us know if you have any questions on this new law.