Medicare, Medicaid, and Other Health Provisions in the American Taxpayer Relief Act of 2012

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Jim Hahn, Coordinator
Specialist in Health Care Financing

Severalpolicies that would have reduced spending and increased revenues were poised totake effect at the end of 2012; collectively, these were referred to bysome as the “fiscal cliff.” Had these policies taken effect, CBO projectedthat the ensuing fiscal contraction would have resulted in a recession in2013. On January 2, 2013, the President signed H.R. 8, the American Taxpayer ReliefAct of 2012 (ATRA, P.L. 112-240), which prevented most—but not all—of thefiscal cliff policies from going into effect. This Act was passed by theSenate on January 1, 2013 by a vote of 89-8, and by the House later thatday, 257-167. Title VI of the Act extends several expiring provisions inthe Medicare and Medicaid programs and makes other changes in federally funded healthprograms.

Provisions in Title VI of ATRA that will result in higher physician feeschedule payments include the override of the sustainable growth rate(SGR) update mechanism of the Medicare physician fee schedule that wouldhave reduced payments had it taken effect, and the extensions of the physicianwork geographic adjustment. Other provisions preserved some Medicare hospital paymentsby extending adjustments for low-volume hospitals and the Medicare-dependent hospitalprogram. Sections that addressed Medicare managed care include the extension ofthe Medicare Advantage special needs plans and reasonable cost contracts.Medicare beneficiaries will continue to have access to the exceptionsprocess for outpatient therapy limits and outreach and assistance programsfor low-income beneficiaries. Other health programs extended by the ATRAinclude the qualifying individual program, the transitional medical assistanceprogram, the Medicaid and the State Children’s Health Insurance Program(CHIP) express lane option, familyto- family health information centers,and special diabetes programs for Type I diabetes and for American Indiansand Alaska Natives.

The Congressional Budget Office (CBO) estimates that the health provisions inH.R. 8 will result in a net increase in direct spending of $800 millionover the ten-year period from FY2013 through FY2022. The physician paymentoverride (“doc fix”) and the various health-related extensions cumulativelyadd an estimated $29.3 billion to direct spending. CBO estimates that the other healthprovisions cumulatively result in offsets of all but $800 million as a resultof the direct effects of the provisions and the interactions betweenprovisions. While some sections of ATRA make changes to federal healthprograms that result in savings to the federal budget, other sectionsaddressing federal health care programs have little or no impact on directspending in the federal budget.


Date of Report: January 31, 2013
Number of Pages: 21
Order Number: R42944
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