Department of Health and Human Services, Centers for Medicare & Medicaid Services: Medicare Program; Part A Premiums for CY 2014 for the Uninsured Aged and for Certain Disabled Individuals Who Have Exhausted Other Entitlement

GAO-14-201R: Nov 22, 2013

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GAO reviewed the Department of Health and Human Services, Centers for Medicare & Medicaid Services' new rule on the Medicare Program; Part A premiums for CY 2014 for the uninsured aged and for certain disabled individuals who have exhausted other entitlement. It was published in the Federal Register as a notice on October 30, 2013. GAO found that (1) the notice announces Medicare's Hospital Insurance (Part A) premium for uninsured enrollees in calendar year (CY) 2014. This premium is paid by enrollees age 65 and over who are not otherwise eligible for benefits under Medicare Part A (hereafter known as the uninsured aged) and by certain disabled individuals who have exhausted other entitlement; and (2) CMS complied with applicable requirements in promulgating the rule.

B-325317

November 22, 2013

The Honorable Max Baucus
Chairman
The Honorable Orrin G. Hatch
Ranking Member
Committee on Finance
United States Senate

The Honorable Dave Camp
Chairman
The Honorable Sander M. Levin
Ranking Member
Committee on Ways and Means
House of Representatives

Subject: Departmentof Health and Human Services, Centers for Medicare & Medicaid Services: MedicareProgram; Part A Premiums for CY 2014 for the Uninsured Aged and for CertainDisabled Individuals Who Have Exhausted Other Entitlement

Pursuant to section 801(a)(2)(A) of title 5, United StatesCode, this is our report on a major rule promulgated by the Department ofHealth and Human Services, Centers for Medicare & Medicaid Services (CMS) entitled“Medicare Program; Part A Premiums for CY 2014 for the Uninsured Aged and forCertain Disabled Individuals Who Have Exhausted Other Entitlement” (RIN: 0938-AR57). We received the rule on October 29, 2013. It was published in the FederalRegister as a notice on October 30, 2013. 78 Fed. Reg. 64,951.

The notice announces Medicare’sHospital Insurance (Part A) premium for uninsured enrollees in calendar year(CY) 2014. This premium is paid by enrollees age 65 and over who are nototherwise eligible for benefits under Medicare Part A (hereafter known as theuninsured aged) and by certain disabled individuals who have exhausted otherentitlement. The monthly Part A premium for the 12 months beginning January 1,2014, for these individuals will be $426. The premium for certain otherindividuals as described in the CMS notice will be $234.

Enclosed is our assessment of CMS’s compliance with theprocedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5with respect to the rule. Our review of the procedural steps taken indicatesthat CMS complied with the applicable requirements.

If you have any questions about this report or wish tocontact GAO officials responsible for the evaluation work relating to thesubject matter of the rule, please contact Shirley A. Jones, Assistant GeneralCounsel, at (202) 512-8156.

signed

Robert J. Cramer
Managing Associate General Counsel

Enclosure

cc: AnnStallion
Program Manager
Department of Health and Human Services

ENCLOSURE

REPORT UNDER 5 U.S.C.§ 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
CENTERS FOR MEDICARE & MEDICAID SERVICES
ENTITLED
"Medicare Program; Part A Premiumsfor CY 2014
for the Uninsured Aged and for Certain Disabled
Individuals Who Have Exhausted Other Entitlement"
(RIN: 0938-AR57)

(i) Cost-benefit analysis

CMS outlined the monthlypremium calculation and the cost to beneficiaries. CMS estimates that in CY2014, 43,923,567 people aged 65 years and over will be entitled to benefits(without premium payment), and that they will incur about $224.753 billion inbenefits and related administrative costs. Thus, CMS notes that the estimatedmonthly average per capita amount is $426.41 and the monthly premium is $426. Subsequently,CMS explains that the full monthly premium reduced by 45 percent is $234.

According to CMS, the CY 2014premium of $426 is approximately 3.40 percent lower than the CY 2013 premium of$441. CMS estimates that approximately 626,000 enrollees will voluntarilyenroll in Medicare Part A by paying the full premium. Furthermore, CMS notesthat the CY 2014 reduced premium of $234 is approximately 3.70 percent lowerthan the CY 2013 premium of $243. CMS estimates that an additional 55,000enrollees will pay the reduced premium. Therefore, CMS estimates that thetotal aggregate savings to enrollees paying these premiums in CY 2014, comparedto the amount that they paid in CY 2013, will be about $119 million.

(ii) Agency actions relevant to the RegulatoryFlexibility Act (RFA), 5 U.S.C. §§ 603-605, 607, and 609

For purposes of the RFA,small entities include small businesses, nonprofit organizations, and smallgovernmental jurisdictions. CMS states that most hospitals and most otherproviders and suppliers are small entities, either by nonprofit status or byhaving revenues of less than $7.0 million to $35.5 million in any 1 year. Individualsand states are not included in the definition of a small entity. CMS notesthat the annual notice announces Medicare’s Hospital Insurance (Part A) premiumfor uninsured enrollees in calendar year 2014. As a result, CMS is notpreparing an analysis for the RFA because the Secretary of Health and HumanServices has determined that this notice will not have a significant economicimpact on a substantial number of small entities.

In addition, section 1102(b)of the Social Security Act requires the preparation of a regulatory impactanalysis if a rule may have a significant impact on the operations of asubstantial number of small rural hospitals. This analysis must conform to theprovisions of section 604 of the RFA. For purposes of section 1102(b) of theAct, CMS defines a small rural hospital as a hospital that is located outsideof a Metropolitan Statistical Area for Medicare payment regulations and hasfewer than 100 beds. CMS explains that it is not preparing an analysis forsection 1102(b) of the Act, because the Secretary has determined that thenotice will not have a significant impact on the operations of a substantialnumber of small rural hospitals.

(iii) Agency actions relevant to sections 202-205 of theUnfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532-1535

CMS states that the noticedoes not impose mandates that will have a consequential effect of $141 millionor more on state, local, or tribal governments or on the private sector.

(iv) Other relevant information or requirements underacts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

CMS uses general notices,rather than notice and comment rulemaking procedures, to make announcementssuch as this premium notice. In doing so, CMS acknowledges that, under theAdministrative Procedure Act (APA), interpretive rules, general statements ofpolicy, and rules of agency organization, procedure, or practice are exceptedfrom the requirements of notice and comment rulemaking. CMS consideredpublishing a proposed notice to provide a period for public comment. However,under APA, CMS may waive that procedure if it finds good cause that priornotice and comment are impracticable, unnecessary, or contrary to the publicinterest. CMS is not using notice and comment rulemaking in this notificationof Medicare Part A premiums for CY 2014 as that procedure is unnecessarybecause of the lack of discretion in the statutory formula that is used tocalculate the premium and the solely ministerial function that this noticeserves.

Paperwork Reduction Act (PRA), 44 U.S.C. §§ 3501-3520

CMS states that the noticedoes not impose information collection and recordkeeping requirements and, consequently,it need not be reviewed by the Office of Management and Budget (OMB) under theauthority of PRA.

Statutory authorization for the rule

CMS states that final rule is authorized by section 1818 ofthe Social Security Act. 42 U.S.C. § 1395i-2.

Executive Order No. 12,866 (Regulatory Planning and Review)

CMS estimates that theoverall effect of the changes in the Part A premium will be a savings tovoluntary enrollees (section 1818 and section 1818A of the Act) of about $119million. As a result, this notice is economically significant under the Order.Accordingly, CMS states that OMB has reviewed the notice.

Executive Order No. 13,132 (Federalism)

CMS states that since thenotice does not impose any costs on state or local governments, therequirements of the Order are not applicable.

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