Raising the RHC Cap?

Bill Finerfrock, Executive Director


Raising the RHC Cap?

A question was posed about the prospects for raising the RHC cap and when this might occur. Raising the RHC cap requires an Act of Congress as the cap is set by law. The current cap is an extension of the RHC cap established in 1988 ($46.00 per visit) adjusted for medical inflation over the intervening 29 years. Obviously it is very out-of-date.

We do not anticipate that Congress will begin to look at Medicare reforms until the Fall at the earliest. We anticipate that much of the Congressional Calendar over the next few months will be devoted to efforts aimed at repealing/replacing the Affordable Care Act and tax reform.

We believe there is strong bi-partisan support in Congress for raising the RHC cap; however, that optimism is tempered by the realization that to do so would result in a significant increase in Medicare expenditures. Under current rules, any change in the Medicare law that results in higher expenditures must typically be offset by savings elsewhere in the Medicare program. So the challenge in raising the RHC cap is not convincing Members of Congress of the need to raise the Cap, it is identifying cuts in the Medicare program that would offset the higher expenditures associated with raising the cap.

Let’s presume that Congress agreed to raise the RHC Medicare cap to $110 per visit as proposed by the Senate Rural Caucus (a bi-partisan coalition of Senators representing largely rural states). Estimates are that this would increase total Medicare spending on RHCs by approximately $150 Million per year or more than $1.5 Billion over ten years. This means that concurrent with raising the cap, Congress would have to cut $150 Million per year or more than $1.5 Billion over 10 years somewhere else in the Medicare program. Finding spending cuts of that magnitude – while not impossible – would be a challenge.

Now, as large as that number – $150 Million – seems to most of us, it is also important to point out that Medicare spending on RHCs constitute less than 1% of Medicare spending. So $150 Million is – in budget terms – a rounding error in Medicare spending.

So I cannot say when the RHC cap might be raised by Congress. We’ve been pushing this for several years.

Finally, I would mention that the NARHC staff is also looking at options and ideas for improving the financial viability of RHCs subject to the cap. Some of these alternatives would not require a change in the RHC statute and could provide financial relief comparable to what would be accomplished by raising the RHC cap. We will have more on this as these ideas evolve. Hope this lengthy explanation is helpful in understanding the opportunity and challenge we face in raising the RHC cap.

Bill Finerfrock