AIF Announced for the Calendar Year 2022
By Chuck Humphrey, B.A., EMT-B, CAC, CADS*
Second Largest Increase Ever!
The Centers for Medicare and Medicaid Services announced that the Ambulance Inflation Factor (AIF) for 2022 is 5.1%. The increase will be applied to the national Medicare Ambulance Fee Schedule with payments made on claims with a date of service of January 1, 2022 and after.
This is the largest increase in the inflation update portion of the AIF formula which began with the implementation of the national Medicare Ambulance Fee Schedule in 2002. The overall increase is the second-largest ever, second only to a 5.2% increase in 1990.
Two factors…
Let’s take a look at how the AIF is calculated.
Two factors are combined to arrive at the annual ambulance adjustment factor. The first element of the formula is the Consumer Price Index for all urban consumers (CPI-U) which pulls data from the 12-month period ending in June of the previous year (for this year’s June 2020 was the cutoff). Once that value is calculated, then the productivity adjustment is configured, this is equal to the 10-year moving average of changes in the economy-wide private non-farm business multi-factor productivity index (MFP), and begins January 1, 2013 and is subtracted as an adjustment.
And so, the resulting calculation is represented by the following formula:
CPI-U – MFP = AIF
What does CPI-U Mean?
The CPI-U is the statistical metric developed by the U.S. Bureau of Labor Statistics used to monitor the change in the cost of a set list of products. It really is a type of pseudo inflation monitoring device. While not directly measuring inflation, the value provides the Federal government with a window into the price trending and predicts the severity of any pending inflation or deflation.
Using a cross-section of 8 major groups across 200 different types of goods, government statisticians pull the data to arrive at the CPI-U factor. The 8 major groups include: food and beverages, housing, apparel, transportation, medical care, recreation, education, communication and a catch-all category called other goods and services (ie. Tobacco and smoking products, personal care items and services such as funerals expenses etc.)
The monitoring of the fluctuations in the prices urban residents pay to purchase certain sets of “basket” goods ensures that the government can effectively follow the cost of living for those persons residing in the sample statistical areas.
Of course, remember that approximately 80% of the population of the United States resides in an urban setting. So, this particular data set is a very useful tool.
Multifactor Productivity Defined
The MFP or Multifactor Productivity adjustment is the calculation measuring changes in economic output per unit of combined units.
Indices of MFP adjustment are pulled within the United States based on private non-farm business and manufacturing sectors of the economy.
MFP measurements reflect the joint effects of many variables including the effect on the economic efficiency from things like new technologies, economies of scale, managerial skill ratchet, plus changes in organizational factors surrounding production. What this means is the government is tempering any notion of rising costs by our ability to work smarter and more efficiently over time which they believe offsets the impact of inflation.
The end decision since the MFP was added to the AIF formula, is for the government to determine that the ambulance industry does not require a full inflationary boost because our own efficiency offsets the impact of inflation.
The Formula for 2022
For the 12-month period ending in June 2021, the Federal Bureau of Labor Statistics has calculated the CPI-U at a whopping 5.4%, which is a significant increase year-to-year due to rising inflation fanned in part by the COVID-19 pandemic.
For the second year in a row, the MFP has fallen from last year’s 0.4% to 0.3% which equates to just a minute adjustment to the CPI-U. Finalizing in next year’s health increase.
The formula is…
CPI-U 5.4% – MFP 0.3% = AIF 5.1%
Will Sequestration Ruin the Celebration?
The ambulance industry will need to hold off on any celebration just yet as it is possible that government sequestration will return. Sequestration is Federal law dating back to 2013 which required a 2% reduction to the 80% reimbursement of the allowed charge on ambulance payments received directly from Medicare.
Because the Federal Government wished to infuse additional cash into the medical community in response to the COVID-19 pandemic, Congress temporarily suspended the sequestration cuts through the end of 2021. If Congress does not take action to extend the 2% cuts, the anticipated 5.1% AIF increase will be offset in our pocketbooks from the current reimbursement amounts we are receiving in the moment.
What Comes Next?
Now that the AIF is final, the ambulance industry awaits the application to the final National Medicare Ambulance Fee Schedule for 2022. The fee schedule is annually released by CMS using the Public Use File (PUF).
The 5.1% increase will not mean a direct 5.1% dollar increase for next year’s ambulance payments from Medicare. Final fee schedule values won’t be known until the AIF is applied while factoring in the other elements of the fee schedule calculation including Relative Value Units (RVUs) and the Geographic Practice Cost Indices (GPCIs), where regional adjustments are implemented in the final fee schedule calculation.
*Chuck Humphrey is the Senior Director of Compliance and a Territory Sales Manager for Quick Med Claims. He is one of our industry experts with over 30 years of experience in the EMS industry.
