The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on September 7-8, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the September meeting are as follows:

  1. MedPAC opens the new season with daunting challenges facing the Medicare program.

MedPAC began the 2017-2018 MedPAC year by providing context to the issues MedPAC will address this coming year. Starting from 2014, healthcare spending has modestly accelerated, driven in part by health insurance expansions under the ACA and increases in prescription drug spending.  Additionally, because of increased enrollment,  the size of the Medicare program will nearly double within the next decade; rising from approximately $700 billion in total spending in 2017 to more than $1.3 trillion in 2026.  The increasing cost to the Medicare program, in conjunction with the decreasing workforce contribution per beneficiary, is projected to deplete several Medicare funds such as the HI Trust Fund, which covers Part A services, by 2029.  Unless federal revenues, which are historically approximately 17 percent of GDP, increase above 19 percent, Medicare, Medicaid, other major federal health programs, Social Security, and net interest are projected to outpace total federal revenues by 2039.  Also, MedPAC showed that out-of-pocket spending for healthcare services by Medicare beneficiaries and by individuals and families in private insurance plans, are continuing to increase.

  1. MedPAC discusses two comparative clinical effectiveness research programs that may address low-value spending.

MedPAC presented two sponsor comparative clinical effectiveness research initiatives: (1) the Patient-Centered Outcomes Research Institute (“PCORI”); and (2) the Institute for Clinical and Economic Review (“ICER”). PCORI was established and funded by the Patient Protection and Affordable Care Act to identify, fund, and disseminate comparative clinical effectiveness research.  As of July 2017, it has awarded $1.69 billion to approximately 580 comparative clinical effectiveness research, data infrastructure, and methods projects.  Additionally, PCORI launched pragmatic clinical trials, which compare two or more alternatives for preventing, diagnosing, treating, or managing a particular clinical condition.  To date, $289 million has funded 24 pragmatic clinical trials.  PCORI’s funding will expire September 30, 2019 if it is not reauthorized by Congress.

ICER is an independent nonprofit organization mostly funded 70% by various other nonprofit organizations, but also funded 30% by health care industry entities, i.e., life science companies, health plans, and pharmacy benefit management companies.  ICER compares clinical and cost-effectiveness of a treatment versus its alternative.

Because most of the studies are still ongoing, it is unknown how Medicare’s utilization of data from these programs implicates or will implicate low-value spending.

  1. MedPAC begins Medicare payments for telehealth services discussions under Congress’ 21st Century Cures Act of 2016 mandate.

Congress mandated MedPAC to answer the following questions by March 15, 2018:

  • What telehealth services are covered under the Medicare Fee-for-Service program Parts A and B?
  • What telehealth services do commercial health plans cover?
  • In what ways can commercial health plan coverage of telehealth services be incorporated into the Medicare Fee-for-Service program?

MedPAC briefly addressed the first question at the meeting. Medicare covers telehealth in four areas of the program with varying degrees: (1) physician fee schedule (“PFS”); (2) other fee-for-service payment systems (“FFS”); (3) Medicare Advantage (“MA”); and (4) the Center for Medicare and Medicaid Innovation (“CMMI”) initiatives.  Medicare coverage for PFS is constrained.  Medicare will cover PFS only if the telehealth services: (i) originate in rural areas and take place at one of several types of facilities; (ii) are conducted via two-way video or store-and-forward technology; and (iii) are for particular fee schedule service codes (i.e., office visits, mental health, substance abuse, and pharmacy management).  The reason for coverage parameters is because there is no incentive to curb the use of telehealth services, and therefore there is concern of a volume incentive.  In contrast, there is flexible coverage for FFS, MA, and CMMI initiatives because the incentive to use telehealth services exists only if it reduces costs.  The latter two questions will be addressed in the following two months.

  1. MedPAC addresses the Specialty Pharmacy Industry, and recommends reform in management and data disclosure.

MedPAC began with a general overview of the specialty drug market before shifting to specific specialty drug policy issues within the context of Medicare. In sum, pharmacy benefit managers (“PBMs”) and specialty drug management will have to be reformed in order to contain increased drug spending.

First, MedPAC discussed the use of exclusive specialty pharmacy networks in Part D. Although the “any-willing provider” rule in Part D precludes the use of exclusive networks, MedPAC found that PBMs could get around the rule by “setting fees that discourage certain specialty pharmacies from participating in their network.” Thus, MedPAC recommends Congress to consider the effect of such exclusive networks on the availability of specialty drugs for Medicare beneficiaries. If more of the rebates and fees for specialty drugs shift from PBMs to specialty pharmacies, it may mean increased Medicare program costs.Second, MedPAC recommends CMS provides Plan D sponsors increased access to data related to the amounts of rebates or fees received by PBMs. Plan D sponsors currently do not have access to such information when requested and such disclosures would be “essential for accurate payment, program integrity, and…in evaluating PBM performance.”Third, MedPAC proposed allowing Medicare Advantage Prescription Drug plans (“MA-PDs”) to manage specialty drugs as medical benefits, as is done within the commercial sector. Increased integration in how medical and pharmacy benefits are managed would cap drug spending and facilitate better care. However, MedPAC recognizes that in order for such integration to be feasible, “programmatic changes” within Medicare would have to occur.

  1. Use of High Quality Post-Acute Care Providers by Medicare Beneficiaries

Post-acute care (“PAC”) in the United States is delivered primarily through skilled nursing facilities (“SNFs”), home health agencies (“HHAs”), patient rehab facilities, and long-term acute care hospitals. About 40% of hospital discharges use one or more of these services, and approximately $60 billion was spent on PAC in 2015. MedPAC’s concern lies not in the availability of PAC facilities, but in the quality of care provided by the majority of PAC facilities. The rate of rehospitalization doubles between a SNF in the bottom quartile of performance and a SNF in the top percentile. As such, ensuring adequate placement of beneficiaries in high quality PAC facilities is imperative in ensuring long-term health and decreasing repeated hospitalizations. However, the challenge lies in just how to incentivize beneficiaries to choose higher-quality PAC facilities upon discharge.

Medicare has publicly released data rating various SNFs and HHAs; however, the data reflects broad categories of patients and does not report results for specific conditions. Indeed, MedPAC found that such data generally fails to influence which PAC facility a beneficiary will choose. MedPAC considered a wide array of policies and incentives that could positively impact which PAC facilities beneficiaries will attend after discharge.

First, MedPAC supports granting hospitals greater flexibility to recommend PAC providers as part of the discharge process. Hospitals are currently prohibited from recommending specific PAC providers. Granting such flexibility would align discharge planning with the accountability for post-hospital care that hospitals have under programs such as the Hospital Reduction Program or within ACOs. MedPAC also recommends strengthening and implementing current requirements, such as those set forth by the IMPACT Act, which require hospitals to use quality measures as a factor in discharge planning and require providing such quality data to beneficiaries. Furthermore, MedPAC recommends expanding the financial incentives for hospitals and PAC providers to provide higher-quality care. For example, the Hospital Reduction program currently penalizes hospitals with high rates of readmission for six conditions. MedPAC suggested expanding the number of conditions subject to the penalty could encourage hospitalize to scrutinize the quality of the PAC provider to which patients are referred. Finally, MedPAC suggested expanding value-based purchasing programs for PAC facilities.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on April 6-7, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the April meeting are as follows:

1. MedPAC unanimously passes a draft recommendation aimed at improving the current ASP payment system and developing the Drug Value Program as an alternative, voluntary program.

In the March meeting, MedPAC discussed a proposed recommendation to address the rapid growth in Part B drug spending. The short-term policy reforms for the current ASP payment system would be made in 2018, while the Drug Value Program would be created and phased in no later than 2022. MedPAC passes this draft recommendation unanimously with no changes. In the June report to Congress, MedPAC intends to add text to reflect more detail on certain issues, as well as other approaches and ideas for reducing Part B drug spending.

2. MedPAC discusses key issues addressed in a draft chapter on premium support in Medicare to appear in MedPAC’s June report.

MedPAC has developed a draft chapter on premium support in Medicare to serve as guidance if such a model were to be adopted. MedPAC does not take a position on whether such a model should be adopted for Medicare. A premium support model would include Medicare making a fixed payment for each beneficiary’s Part A and Part B coverage, regardless of whether the beneficiary enrolls in fee-for-service or a managed care plan. The beneficiary premium for each option would reflect the difference between its total cost and the Medicare contribution. The draft chapter addresses key issues for this model from previous MedPAC sessions, including the treatment of the fee-for-service program, standardization of coverage options, the calculation of benchmarks and beneficiary premiums, as well as a new proposal regarding premium subsidies for low-income beneficiaries. The draft chapter will be included in MedPAC’s June report to Congress.

3. MedPAC unanimously passes a draft recommendation for the implementation of a unified prospective payment system for post-acute care.

In the March meeting, MedPAC proposed a draft recommendation regarding a PAC PPS. During the discussion in the previous meeting, the percent of the reduction in aggregate payments was the largest point of contention. MedPAC decided the proposed 3% reduction was too low, and increased the reduction to aggregate payments to 5% for the finalized draft recommendation. MedPAC passes this draft recommendation unanimously with the change to the reduction of aggregate payments.

4. Regional variation in Medicare Part A, Part B, and Part D spending and service use

MedPAC compared its most current evaluation of geographic differences in Medicare Program spending and service use with calculations from previous years. The primary takeaway from the current data was that there was much less variation in service use relative to variation in spending.  Most of the service use variation in Part A and B services came from post-acute care.  Among Prescription Drug Plan (PDP) enrollees, drug use also varied less than drug spending.

5. Measuring low-value care in Medicare

MedPAC has been measuring the issue of low-value care, meaning services considered to have little or no clinical benefit, for the last three years. In June 2012, MedPAC had also recommended value-based insurance design, in which the Secretary could alter cost-sharing based on evidence of the value of services. In order to do so, however, CMS would first need information on how to define and measure low-value care.  MedPAC has been using 31 claims-based measures for low value care developed by researchers and published in JAMA. For 2014, MedPAC’s analysis found that 37% of beneficiaries received at least one low-value service.  Medicare spending for these services was estimated to be $6.5 billion.  MedPAC acknowledges that this estimate is conservative because the measures used do not also include downstream services that may result from the initial low-value service.  MedPAC also briefly discussed the issues associated with formulating performance measures in general, including for the merit-based incentive payment system (MIPS) included in Medicare Access and CHIP Reauthorization Act.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on December 8-9, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress. At the annual December meeting MedPAC reviews draft recommendations to Congress regarding Medicare payment policy. MedPAC reviews and formalizes these recommendations during its January meeting.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

1. MedPAC discusses recommending that Congress update Medicare inpatient and outpatient payments by the amounts specified in current law.

MedPAC reviewed the inpatient and outpatient hospital payment adequacy. In doing so MedPAC reviewed beneficiary access to care, provider access to capital, quality of care, and the impact of cost growth on hospital margin. MedPAC found that beneficiary access to care is good, provider access to capital is strong, quality is improving, and that margin for inpatient and outpatient hospital services in Medicare was at 9%. This led the MedPAC make a draft recommendation that Congress update the inpatient and outpatient payments as currently specified in existing law.

2. MedPAC finds annual volume growth in the clinician services highest in five year period, but that beneficiary access to clinician services remained comparable to private health insurance.

In reviewing payment adequacy to physicians and other health professionals MedPAC staff found that the annual volume growth in clinician services was higher in 2015 than it was in the period from 2010-2014. The staff also found that the growth in services reflected a shift from freestanding offices to hospital based settings. However, despite the growth in volume MedPAC also found that Medicare beneficiaries have comparable access to clinician services as those with private insurance. Based on this MedPAC’s draft recommendation to Congress is that they should increase payment rates for physician and other health professional services as specified in current law.

3. MedPAC considers recommending changes to how Medicare pays for skilled nursing facility (SNF) services.

MedPAC’s review of the current SNF payment model found that Medicare fee-for-service payments remain higher then Medicare Advantage payments for services and that differences in beneficiary population across payment models does not explain the payment differences. They also found that the current payment model has resulted in a wide disparity in SNF margins partially due to the current payment model favoring intensive therapy over medically complex care. MedPac’s draft recommendation is for Congress to eliminate the market basket for 2018 and 2019 and direct the Secretary of Health and Human Services to revise the prospective payment system for SNFs.

4. MedPAC considers recommending Congress eliminate the update to Medicare hospice payments for 2018.

MedPAC review of the Medicare hospice benefit found that the number of hospice providers has continued to increase and that the number of Medicare beneficiaries utilizing hospice has also increased. Medicare hospice providers saw a marginal profit of 11% in 2014. Given the strength of marginal profit and the increase of in the number of hospice providers MedPAC’s draft recommendation is that Congress should eliminate the update to the hospice payment rates for fiscal year 2018.

5. MedPAC considers recommending changes to Medicare’s home health payment model, including reducing the total payment level.

MedPAC found that Medicare home health benefits have resulted in a provider margin of better than 16% in the 2001 to 2014 period. MedPAC also found that the current payment model may be creating inefficiencies in treatment by incentivize multiple therapy visits per episode. To address these areas MedPAC’s draft recommendation is that Congress should reduce payments by 5% in 2018, and implement a two year rebasing of the payment system, beginning in 2019. Further, MedPAC draft recommendation is that Congress should direct the Secretary of Health and Human Services to revise the PPS to eliminate the use of therapy visits as a factor in payment determinations, concurrent with rebasing.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 6-7, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

1. While Accountable Care Organizations received high marks for quality they failed to produce Medicare savings in 2015.

MedPAC staff provided a status report on Medicare Accountable Care Organizations (“ACOs”). The report found that while ACOs received high marks for quality they failed to produce significant Medicare savings in 2015. Pioneer model ACOs produced net savings of only $5 million while Medicare Shared Savings ACOs cost the Medicare program $216 million. The MedPAC staff conducted a review of the ACO data and found that ACOs in the south, those that are physician led, and are smaller in size were more likely to produce savings. However, the most important variable was the historic level of service use in the area where the ACO was located. Regions with a high historic use of services had more success producing savings.

2. MedPAC finds the rate of potentially avoidable hospital admissions varied significantly among long-stay nursing facilities.

As part of an ongoing project to develop measures to properly evaluate initiatives aimed at reducing the number of hospital admissions and use of skilled nursing facilities among long-stay nursing facility residents, MedPAC staff found a wide discrepancy among nursing facility providers. Overall the staff found that in 2014 long-stay nursing residents accounted for 200,000 “potentially avoidable” hospital admissions and 20 million days of skilled nursing facility care. They found that nursing facilities with fewer than 100 beds and rural nursing facilities made up a disproportionate share of facilities with high potentially avoidable hospital admission rates. The data showed that some facility-level characteristics affected the rate of potentially avoidable hospital admissions; facilities with higher portions of hospice days and access to x-ray services on site had lower potential avoidable admissions, and facilities with a higher use of licensed practical nurses and lower frequency of physician visits had higher rates of hospital use.

3. MedPAC considering suggesting changes to Part B drug payment policies.

MedPAC discussed a number of policy options with respect to the Part B drug payments. The options the Commission discussed sought to either increase price competition and address the growth in Part B prices or improve the current payment formula and available data.  The polices designed to increase price completion and address price growth  included: consolidating billing codes for drugs and biologics with similar health effects, limit the growth in drug prices based on inflation, and introduced a restructured competitive acquisition program. The policies designed to improve the payment formula and improve available data included: modifying the average sale price add-on formula, modifying the wholesale accusation cost formula, and strengthen the manufacture reporting requirements. MedPAC is expected to continue to actively work towards developing policy recommendations regarding Part B drug payment reforms.

4. MedPAC continues to develop a premium support model to reward high quality plans and ACOs and incentivize beneficiaries to seek out high quality care.

As part of its efforts to develop a payment model that rewards high quality care and incentivizes beneficiaries to seek high quality care MedPAC continued its discussion of alternative quality measures that could be used across the Medicare delivery system. Under this alternative model Medicare would use a smaller number of population based health outcomes and patient experience to measures to measure quality across the delivery spectrum (including fee-for service). The Commission suggests that these quality measures be collected at a local market level; each market will then be given a quality benchmark based on the measures. Medicare Advantage (“MA”) plans and ACOs which have quality scores that are higher than the benchmark would see an increased federal contribution to lower beneficiary premiums, with the hope of pushing more beneficiaries into higher quality delivery systems based on the lower beneficiary premiums.

5. MedPAC is considering how to improve Medicare’s behavioral health benefits.

MedPAC staff gave an overview of behavioral health issues among Medicare beneficiaries and of highlighted potential areas for programmatic improvement. The staff suggested Medicare improve payment of inpatient psychiatric care and work towards integrating primary care delivery and behavioral health services. MedPAC appears to be committed to dedicating more resources towards developing policy options for achieving these suggestions in the future.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on September 8-9, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the September meeting are as follows:

  1. MedPAC expects Medicare spending growth to outpace GDP, with total Medicare spending to reach approximately $1 trillion by 2025
    MedPAC began its September meeting with a discussion of the projected growth in the Medicare program. Although the growth in both Medicare and overall health care spending slowed from 2009 to 2013, the Congressional Budget Office (“CBO”) and the Medicare Trustees (“Trustees”) project that total Medicare spending will return to growing at a rate that outpaces gross domestic product (“GDP”) growth. Driven by an increase in both enrollment and per beneficiary spending, the CBO and Trustees project that total Medicare spending will grow at an average rate of 7 percent annually through 2025; if these projections are accurate, the Medicare program will almost double in size—from $600 billion in 2015 to approximately $1 trillion 2025.
  2. MedPAC predicts the trends in Medicare to trigger action from the Independent Payment and Advisory Board in 2017
    MedPAC staff expects the growth in Medicare spending to trigger action from the Independent Payment and Advisory Board (“IPAB”) at some point in 2017. Created by the Affordable Care Act, IPAB is an independent board tasked with proposing Medicare policies designed to reduce spending growth. As of now, no one has been appointed to IPAB. If there are no members when Medicare growth triggers IPAB action, IPAB’s authority will transfer to the Secretary of Health and Human Services. The Secretary will then be required to fulfill IPAB’s role, and the Secretary’s savings proposals will automatically become law unless Congress affirmatively acts to block the proposals.
  3. Physician practice sizes continue to grow, and a greater number are affiliating with health systems and hospitals
    MedPAC staff, using the SK&A Office-based physician database (a commercial database file with information on almost 600,000 physicians), determined that the number of physicians who reported as affiliated with a health system or hospital rose from 34 percent in 2012 to 39 percent in 2014. Over that same time period, the percentage of physicians working in practices with more than 50 physicians grew from 16 percent to 22 percent. MedPAC plans to look deeper into the size and affiliation of physician practice groups, including the geographic distribution of practice groups, to more accurately understand the infrastructure needed to move towards alternative payment models.
  4. MedPAC will focus on recommending steps for adjusting the clinician fee schedule to address “misvalued” services
    MedPAC expressed concern that certain clinician services, mainly primary care, are undervalued and undercompensated as a part of the clinician fee schedule. Accordingly, MedPAC will continue to look at recommendations to improve the Relative Value Scale Update Committee (or “RUC”) process and make suggestions to increase payment for primary care services, including a potential partial capitation payment for primary care services.
  5. MedPAC is considering how to evaluate initiatives for reducing avoidable hospitalizations of long-stay nursing facility residents
    MedPAC staff gave an overview of provider initiatives to reduce avoidable hospitalizations of nursing facility residents. These initiatives included efforts made in conjunction with the Center for Medicare and Medicaid Innovation that feature a new three-part payment model. The new model will make payments to facilities for providing treatment for qualified conditions, increase payments to clinicians for providing treatment in nursing facilities, and establish a new payment to providers who conduct care coordination in nursing facilities. MedPAC is planning on developing measures to evaluate the success of these initiatives at reducing cost and improving beneficiary care.