In our previous posts, we mentioned that the Medicare Secondary Payer (MSP) law imposes obligations upon Group Health Plans (GHPs).   This post will explain those obligations, both provided for in the regulations and in the CMS guidance, in more detail, and highlight the potential compliance pitfalls for GHPs. Given recent enforcement trends, and the risk of raising damages for non-compliance from double to treble, including a minimum fine of $1000 per day per unreported beneficiary, GHPs may want to review and audit their compliance with MSP requirements.

Generally, a GHP is sponsored by an employer to provide healthcare to employees and their families.[1]  These include self-insured plans that may be administered through a third party administrator (TPA) and plans arranged by employers through a health insurer.  The MSP requires that GHPs with 20 or more employees report certain information to CMS to avoid payment conflicts (although smaller companies have certain limited reporting obligations).  CMS refers to these plans as Responsible Reporting Entities (RREs), and they must report all Active Covered Individuals to Medicare.  An Active Covered Individual is defined as:

  • Those between 45 and 64 years of age covered through the GHP based on their own or a family member’s current employment status;
  • Those 65 and older covered based on their own or their spouse’s current employment status;
  • All individuals covered under a GHP who have been receiving kidney dialysis or have received a kidney transplant (ESRD); and
  • All individuals covered under a GHP who are under 45, are known to be entitled to Medicare, and have coverage in the plan based on their own or a family member’s current employment status.[2]

There are exceptions to this definition for (i) employers with less than 20 employees, who need not report unless a covered individual has ESRD, in which case the ESRD covered individuals must be reported, and (ii) employers with less than 20 employees who must report if they are part of a multi-employer/multiple employer GHP.[3]

CMS recognizes that this will constitute a large class of individuals for many GHPs, and also recognizes that many people who are currently not eligible for Medicare will have their information reported as a part of this process.[4]  Retirees and their spouses who are covered under a GHP do not count as Active Covered Individuals, but are termed Inactive Covered Individuals and do not need to be reported in the same manner as Active Covered Individuals.  The reason for this is that in most cases Inactive Covered Individuals (retirees) have Medicare as a primary payer.

GHP RREs have multiple reporting options, but the basic option requires a GHP RRE to submit an MSP Input File containing information about each Active Covered Individual, as outlined in the CMS manual.  The GHP RRE submits reports to a CMS website known as the Coordination of Benefits Secure Website (COBSW).[5]  The GHP may submit a Query Only Input File to the website, which helps the GHP assess if potential employees are covered by Medicare.

There are many situations that create potential pitfalls for GHPs.  For example, if an employer hires several new employees and adds them to its health plan, a GHP administrator may fail to ask the essential questions necessary to determine if any employee is an Active Covered Individual.  While it is clear that those over the age of 45 need to be reported, if the plan does not inquire about the current health coverage for an employee’s family, the plan might fall out of compliance with MSP reporting requirements if it did not know that a family member receives health care coverage due to a disability or has ESRD. In addition, while a GHP with less than 20 employees generally does not have to submit a report, the small GHP may forget to inquire about the coverage status of a new employee’s family.

The basic rules are summarized in the following chart:

Acting Party Responsibilities Liabilities for Non-Compliance
Group Health Plans (GHPs) (Generally Employer-Sponsored Plans)

 

 

·         20+ GHPs[6] must generally be the primary payer for all Active Covered Individuals except for ESRD patients

·         100+ GHPs[7] must generally be the primary payer for all Active Covered Individuals

·         20+ GHPs must report quarterly all Active Covered Individuals (includes all covered individuals over 45, including employees or spouses/partners, and those with ESRD regardless of age, and those under 45 who are known to be entitled to Medicare.)

·         Failure to report results in a minimum fine of $1000 a day per unreported beneficiary, with CMS reserving the right to collect double damages

 

This is part 3 of 7 in the Medicare Secondary Payer Compliance series. Subscribe to our blog for future updates. Part 2 can be accessed here: Medicare Secondary Payer Compliance: Conditional Payments (Part II)

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 26 USC § 5000(b)(1).

[2] CMS, MMSEA Section 111 MSP Mandatory Reporting: GHP User Guide 7-2—7-3 (v5.0 2017).

[3] CMS, MMSEA Section 111 MSP Mandatory Reporting: GHP User Guide 7-3 (v5.0 2017).

[4] CMS, MMSEA Section 111 MSP Mandatory Reporting: GHP User Guide 7-2 (v5.0 2017).

[5] https://www.cob.cms.hhs.gov/Section111/LoginWarning.action

[6] 20+” means GHPs with 20 or more employees

[7] 100+” means GHPs with 100 or more employees

On February 9, 2018, President Trump signed into law the Bipartisan Budget Act of 2018 (“BBA”). Among the most notable changes that will occur with the enactment of the BBA is the inclusion of certain provisions taken from the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (“CHRONIC”) Care Act of 2017 bill (S.870) which the Senate passed in September 2017. Among other things, the CHRONIC Care provisions will have the effect of redefining new criteria for special-needs plans (“SNPs”), in particular the special-needs Medicare Advantage (“MA”) plans for chronically ill enrollees. The CHRONIC Care provisions also will expand the integration and coverage under Medicare for certain telehealth-based chronic care services.

Impact on MA Special Needs and Other MA Plans

The BBA includes provisions taken from the CHRONIC Care Act that largely affect MA SNPs, though other types of MA plans may also be affected by the enacted changes.

The critical issue Congress finally settled through the enactment of the BBA is the long-term status of the MA SNP Program (the “Program”).  Congress created the Program through the Medicare Modernization Act of 2003 (enacted Dec. 8, 2004).  However, the Program was time limited, with a scheduled end date of December 2008.  The Program has since been extended a total of 7 times, with Congress generally pushing out the Program’s end date by a year or two but never giving stakeholders a clear signal of support for the Program, leaving many stakeholders hesitant in making large investments in a program that was scheduled to terminate.[1]

The amendments made by the BBA have provided not only a more secure future to encourage plan sponsors and other stakeholders to further invest in the Program, but have also made changes to strengthen these programs. With respect to those SNPs targeting the dual eligible population (“Dual SNPs”), statutory changes provide for:  increasing integration through use of mechanisms to better coordinate contact with and information dissemination to State partners; requiring the Secretary to develop a unified grievances and appeals process for Dual SNPs to implement by 2021; and imposing more stringent standards to demonstrate integration. With respect to those SNPs focused on serving the chronically ill (“Chronic SNPs”), the BBA broadens the definition of beneficiaries who qualify to enroll in a Chronic SNP, imposes more stringent care management standards, and authorizes Chronic SNPs to provide certain Supplemental Benefits. The BBA further amends the Social Security Act to authorize the Secretary to require quality reporting at the plan level for SNPs, and, subsequently, for all MA plan offerings.

Impact on Accountable Care Organizations

The BBA makes several statutory changes impacting Accountable Care Organizations (“ACOs”) and beneficiary participation in such entities. Specifically, under the terms of the Act, fee-for-service (“FFS”) beneficiaries will be able to prospectively and voluntarily select an ACO-participating professional as their primary care provider and for purposes of being assigned to that ACO. The BBA further authorizes ACOs to provide incentive payments to encourage fee-for-service beneficiaries to obtain medically necessary primary care services.

Expansion of Medicare FFS Telehealth Coverage for Chronic Care Services

Additionally, the BBA includes certain provisions taken from the CHRONIC Care Act that will provide a needed expansion of Medicare FFS coverage for certain telehealth-based chronic care services. The BBA preserves many of the telehealth-focused aspects of the original 2017 bill equivalent and, seemingly, reflects a commitment by the federal government to improving access to telehealth services for qualified Medicare beneficiaries and further integrating these services into the U.S. health care system. For example, with the enactment of the BBA, Medicare coverage of telehealth services will be expanded to include services provided at home for beneficiaries dealing with end-stage renal disease (“ESRD”) or those being treated by practitioners participating in Accountable Care Organizations (“ACOs”). Additionally, with the enactment of the BBA, some of the geographic requirements traditionally required by Medicare’s coverage rules for telehealth services (e.g., originating sites, rural health professional shortage areas, counties outside Metropolitan Statistical Areas) will be lifted if such telehealth services are rendered to beneficiaries with ESRD, or who are being treated by ACO practitioners, or who are being diagnosed, evaluated, or treated for symptoms of an acute stroke. There are some important caveats to these changes in the coverage rules. For example, for ESRD beneficiaries who utilize telehealth services from their homes, an in-person clinical assessment will be required for such beneficiaries every month for the first 3 months and then once every 3 months thereafter. Likewise, payments will not be made for any telehealth services rendered by ACO practitioners to beneficiaries in their homes if such services typically are furnished in inpatient settings (e.g., hospitals).

As part of increasing benefits offered to special needs MA plan enrollees (as discussed above), the enactment of the BBA also will allow MA plans to offer more telehealth services to its enrollees, including services provided through supplemental health care benefits, starting in the year 2020. However, this provision requires that the same types of items and services an MA plans offers to its enrollees via telehealth are also offered to enrollees in-person. CMS is required to solicit public comments regarding this particular provision by November 30, 2018.

*          *          *

With the BBA establishing a long-term MA SNP Program, we are more likely to see increased investment into the Program by stakeholders and plan sponsors, thus growing and strengthening the Program. But, as explained above, the BBA also introduces several amendments that will certainly affect Dual and Chronic SNP standards, benefits, and coordination of care.  Although CMS has not formally solicited public comments regarding implementation of the referenced changes to SNP requirements, stakeholders and plan sponsors may want to consider the impact these changes may have on them and their industry and submit comments and input to help CMS in developing its proposed regulations.

For telehealth advocates, the inclusion of so many meaningful provisions in the BBA signals a newly energized willingness on the part of policymakers to work to expand use of telehealth services for Medicare beneficiaries, even in an environment where there are financial incentives for providers and health plans to restrain costs. Although lawmakers have historically resisted expanding these types of services in a FFS context, the belief being that doing so would add to (and not replace) services already otherwise being delivered, the enactment of the BBA signals strong potential for change in this regard.  As telehealth integration into various Federal programs increases, the enactment of the BBA being a critical step in this process, stakeholders and plan sponsors may want to consider the various implementation strategies by which telehealth items and services will be offered since each program carries its own set of standards and requirements.

[1] Pub. L. 110–173, §[  ], substituted ‘‘2010’’ for ‘‘2009’’; Pub. L. 110–275, §164(a), substituted ‘‘2011’’ for ‘‘2010”; Pub. L. 111–148, § 3205(a), substituted “2014” for “2011”;  P.L. 112-240, §607, struck out “2014” and inserted “2015”; P.L. 113-67, §1107, struck out “2015” and inserted “2016”; P.L. 113-93, §107, struck out “2016” and inserted “2017”; P.L. 114-10, §206 struck “2017”, inserted “2019″.

 

The Centers for Medicare and Medicaid Services’ (“CMS”) recently announced its intent to expand what may be considered “supplemental benefits,” broadening the scope of items and services that could be offered to Medicare Advantage (“MA”) plan enrollees over and above the benefits covered under original Medicare. However, in articulating the standards for covering this broadened group of items and services, CMS proposed a new requirement that could greatly limit enrollees’ ability to access all types of supplemental benefits and increase the already substantial burden on MA participating providers; CMS now proposes to require that the supplemental benefits be ordered by a licensed provider.

Under current CMS guidance, supplemental benefits may not be a Part A or Part B covered service, must be primarily health related in that “the primary purpose of the item or service is to prevent, cure or diminish an illness or injury,” and the plan sponsor must incur a non-zero cost for the benefit. Medicare Managed Care Manual, Ch. 4, Sec. 30.1. Within the draft 2019 Call Letter, released on February 1, 2018, CMS proposes to expand the scope of items and services considered “primarily health related” to now include items and services to help maintain health status and not only those that “prevent, cure or diminish illness or injury.” According to CMS, under its new interpretation, in order for a service or item to be primarily health related “it must diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization.” Current CMS guidance explicitly excludes from being a supplemental benefit those items or services which are solely for daily maintenance purposes.  CMS’s broadened definition follows medical and health care research studies which have shown the value of certain ‘maintenance’ items and services in diminishing the effects of injuries or health conditions and decreasing avoidable emergency and health care services.

While broadening the scope of items and services eligible to be considered supplemental benefits, CMS concurrently proposes to add a more stringent standard to an enrollee’s receipt of such benefits. “Supplemental benefits under this broader interpretation must be medically appropriate and ordered by a licensed provider as part of a care plan if not directly provided by one.” Although current guidance specifies medical necessity as a standard for supplemental benefits that extend the coverage of original Medicare, there is no requirement that supplemental benefits be ordered by a licensed provider. Depending upon the nature of the supplemental benefit, such a rule could prevent an enrollee from accessing certain benefits. For example, plan sponsors may provide acupuncture or other alternative therapies as supplemental benefits, but enrollees would only be able to access such services if their provider accepts the value of such services and agrees that they are medically necessary. Given that many in traditional medicine do not support the use of alternative therapies, it is likely that at least some enrollees will be unable to access these benefits under this newly proposed standard.  Also, requiring a provider to review and order other types of supplemental benefits would likely create a paperwork burden with no benefit, including, for example, with respect to a supplemental transportation benefit, fitness benefit or over-the-counter drug benefit.

Although CMS should be applauded for seeking to expand the definition of “health related” in identifying eligible supplemental benefits, its proposal to require that such benefits be ordered by a provider as part of a treatment plan will decrease plan flexibility and increase burden for providers and enrollees alike, with minimal benefit.

CMS is accepting comments on the draft Call Letter through 6pm EST, Monday March 5, 2018.

Over the past week, the White House administration (the “Administration”) has issued two documents addressing drug pricing. First, on February 9, 2018, the White House’s Council of Economic Advisers released a white paper titled “Reforming Biopharmaceutical Pricing at Home and Abroad” (the “White Paper”).  Second, on February 12, 2018, the Administration issued its 2019 Budget Proposal (“2019 Budget”).

Whereas the recommendations set forth in the White Paper are more conceptual or exploratory, the 2019 Budget purportedly reflects the Administration’s more specific priorities for 2019. The developments are significant because, after outspoken pledges to reduce drug prices over a year ago, the White Paper and the 2019 Budget, taken together, are the Administration’s first attempt to set forth its drug pricing policy framework.

FY 2019 Budget Proposal Outline

The Administration’s 2019 Budget proposes strategies to address drug pricing reform in several areas.

  • Medicaid: The 2019 Budget proposes for new Medicaid demonstration authority to allow five states to test drug coverage and financing reform. Under this demonstration, instead of participating in the Medicaid Drug Rebate Program, these states would determine their own drug formularies and negotiate drug prices directly with manufacturers, with the resulting negotiated prices being exempt from Best Price.
  • Medicare Part B: With respect to the Medicare program, the 2019 Budget provides several proposals. First, the 2019 Budget would require all manufacturers of Part B drugs to report average sales price (“ASP”) data, and to penalize those who do not report ASP data. Additionally, the 2019 Budget proposes to limit the increase in ASP-based drug payment to the annual rate of inflation. For drugs reimbursed based on wholesale acquisition cost (“WAC”) rather than ASP, the 2019 Budget proposes to reduce this payment rate from 106% of WAC down to 103% of WAC. The 2019 Budget also proposes to modify reimbursement to hospitals for drugs acquired at 340B discounts by rewarding hospitals that provide charity care, and reducing payments to hospitals that provide little to no charity care. The 2019 Budget proposes to consolidate certain drugs covered under Part B into Part D coverage.
  • Medicare Part D: For beneficiaries enrolled in Part D plans, the 2019 Budget proposes to establish an out-of-pocket maximum in the catastrophic coverage phase, eliminate cost-sharing for generic drugs for low-income seniors, and permanently authorize a Part D demonstration that provides retroactive and point-of-sale coverage to certain low-income patients.
  • FDA: The 2019 Budget proposes to give the FDA greater ability to bring generics to market more quickly. If a first-to-file generic application is not yet approved due to deficiencies, the 2019 Budget proposes to allow the FDA to tentatively approve a subsequent generic application rather than waiting for the first-to-file application to amend its application deficiencies.

Council of Economic Advisers White Paper

The White Paper discusses options for drug pricing reforms that would impact Medicaid, Medicare, the 340B drug discount program, and FDA. The following provides a summary of the major ideas proposed in the White Paper:

  • Medicaid: The White Paper contends that the determination of Best Price on a single unit of drug under the Medicaid Drug Rebate Program operates as an inducement to manufacturers to inflate commercial prices. The White Paper posits that CMS could revise the applicable rules for Best Price without conflicting with the statutory language, such that Best Price could be determined post-sale based on “the patient’s recovery”, i.e., the health outcome or effectiveness of the drug. The White Paper suggests that more clarity from CMS on value-based contracting would encourage drug purchasers to negotiate for lower prices.
  • Medicare Part B: With respect to drugs reimbursable under Medicare Part B, the White Paper focuses on expensive specialty drugs and biologics administered by physicians. The White Paper contends that due to the cost-plus reimbursement methodology under Medicare Part B (ASP plus 6 per cent), physicians do not have incentives to prescribe cheaper medications to control costs. The White Paper cites solutions proposed by MedPAC and other government agencies to realign incentives including: (i) introducing physician reimbursement that is not tied to drug prices, (ii) moving Medicare Part B drug coverage into Medicare Part D, where price-competition over drug prices is better structured, and (iii) changing how pricing data is reported to increase transparency.
  • Medicare Part D: The White Paper scrutinizes the Part D program as being structured in a manner that prevents pricing competition and causes “perverse incentives.” Specifically, the White Paper suggests that Part D’s requirement to cover at least two non-therapeutically equivalent products within each class and category prevents Part D sponsors from competitively negotiating lower prices and that the prohibition of formulary tier-based cost-sharing for low income beneficiaries creates a disincentive to use “high value” rather than high cost drugs. In addition, the White Paper states that since the 50% discount drug manufacturers are required to provide during the coverage gap is applied to the patient’s true out-of-pocket costs, enrollees have an incentive to use high cost drugs while in the coverage gap.In addition to making the specific observations above, the White Paper cites more general options proposed by MedPAC, OIG and other government agencies to address “misaligned incentives”: (i) requiring plans to share drug manufacturer discounts with patients, (ii) allowing plans to manage formularies to negotiate better prices for patients, (iii) lowering co-pays for generic drugs for patients; and (iv) discouraging plan formulary design that speeds patients to the catastrophic coverage phase of benefit and increases overall spending.
  • 340B Drug Discount Program: The White Paper posits that there are two significant issues with the 340B Program. The first is “imprecise eligibility criteria has allowed for significant program growth beyond the intended purpose of the program.” The second is the use of program revenue for purposes other than providing care for low-income patients, which is what the Administration believes was originally intended. While not providing specifics, the White Paper suggests establishing “more precise” eligibility criteria as an alternative to the DSH percentage currently used to establish hospital eligibility, and requiring that the 340B discount more directly benefit poor patient populations.
  • FDA: The White Paper suggests modifying the existing FDA criteria for expedited review to include new molecular entities that are second or third in a class, or second or third for a given indication for which there are no generic competitors. The White Paper states that this would reduce the time period a particular drug would be able to benefit from a higher price before facing generic competition. The White Paper also suggests policies aimed at reducing the cost of innovation, including having the FDA continue to facilitate the validation and qualification of new drug development tools that allow manufacturers to demonstrate safety and efficacy more efficiently and earlier, and speeding up the issuance of FDA final guidelines to add certainty and attract additional biosimilar applicants to the marketplace.
  • Pharmacy Benefit Managers: The White Paper scrutinizes the PBM industry as having “outsized profits” due to the high concentration of the PBM market (3 PBMs account for 85% of the market) and criticizes the lack of transparency with respect to the rebates that PBMs receive. The White Paper states that the “undue market power” causes manufacturers to set artificially high list prices, which are reduced via rebates to PBMs without reducing the costs to consumers. The White Paper suggests that policies to decrease concentration in the PBM market could reduce the price of drugs paid by consumers.
  • Drug Pricing in Foreign Countries: The White Paper discusses in detail how the United States bears a disproportionate share of the burden of the cost of innovation, since foreign governments, in exercising price control, are able to set drug prices lower than that in the United States. The White Paper suggests drug pricing reform abroad with the United States changing the incentives of foreign governments to price drugs at levels that reward innovation. The White Paper broadly suggests achieving this goal through enhanced trade policy or policies tying reimbursement levels in the United States to prices paid by foreign governments that set lower prices or other methods.

EBG Considerations

The combined result of the 2019 Budget and the White Paper is a hodgepodge of policy ideas that could impact a wide range of government programs and industry stakeholders throughout the drug distribution and reimbursement channel. While the proposals set forth in the 2019 Budget are more specific, the ideas in the White Paper are more conceptual and less developed.  For example, policies to address the high concentration of the PBM market and foreign government drug price control appear more aspirational and lack detail on what such policies would entail or how they would be accomplished.  This suggests that, while the 2019 Budget and White Paper are indicative of the Administration’s direction with respect to drug pricing policy, the policy is likely still a “work in progress” and subject to further development.

We will continue to report on how these ideas take shape in this Administration.

This post is the first in a series from Epstein Becker Green on the growing area of enforcement of the Medicare Secondary Payer Act (MSP). There has been a recent growth in enforcement actions and regulatory interest that may not have yet attracted the attention of many providers and traditional and non-traditional payers. Noncompliance with the MSP can result in monetary penalties and government enforcement action. In particular, the MSP is garnering attention as an enforcement tool under the False Claims Act (FCA).  This series of blogs provides a general overview of the MSP, discusses requirements for compliance for differing entities, describes recent MSP enforcement actions under the False Claims Act (FCA), and sets forth  key takeaways to potentially reduce liability.

The Medicare Secondary Payer Act: The Basics

In order to understand why the MSP is relevant and may create new risks for payers and providers, we’ll start with an overview of the law and why Congress wanted to remedy a problem with the Medicare program. Before the MSP was enacted, Medicare made payments on behalf of its beneficiaries for any medical services, except those covered by workers’ compensation.  In many cases, claims were paid by the Medicare program even though beneficiaries had other sources of coverage for their care. This resulted in a rapid depletion of the Medicare Trust Fund, and in 1980 Congress passed the MSP statute to cut health care costs and reduce Medicare disbursements. The MSP currently affects providers, employer sponsored group health plans (GHPs), liability and no-fault insurers, workers’ compensation funds and plans (collectively, Non-Group Health Plans, or NGHPs), and Medicare beneficiaries.  Generally, the MSP:

(1) requires that Medicare be a secondary payer if a beneficiary carries certain types of employer sponsored health plans[1];

(2) prohibits the Centers for Medicare and Medicaid Services (CMS) from making payments for Medicare-covered services if payment has been made, or can reasonably be expected to be made, by a another payer[2]; and

(3) permits CMS to make “conditional payments” to the beneficiary if there is a delay in reimbursement from another entity for a covered service.[3]

Congress also enacted a parallel MSP provision that applies to state Medicaid plans.[4]

Special rules apply to Medicare beneficiaries covered under a GHP,[5] and Medicare is generally the secondary payer for these covered services when:

  • A beneficiary is entitled to Medicare on the basis of age, but is covered under a GHP by virtue of his or her current employment or the current employment status of a spouse of any age; or
  • A beneficiary is entitled to Medicare on the basis of End Stage Renal Disease (ESRD) for the first 18 months of eligibility; or
  • A beneficiary is entitled to Medicare on the basis of disability, but is covered under a GHP by virtue of his or her current employment status or the current employment status of a family member.[6]

In order to help primary payers and providers in meeting their MSP obligations, CMS established a Coordination of Benefits (COB) system that collects beneficiary coverage data.  The Benefits Coordination & Recovery Center (BCRC) administers the COB by ensuring the accuracy of the Common Working File (CWF), a CMS database that stores information regarding MSP data and investigations.  CMS shares this data with other payers to ensure proper claim submission to Medicare.  The COB collects data from a variety of sources, including:

  • IRS/SSA/CMS Claims Data Match – By law, the IRS, Social Security Administration (SSA) and CMS must share information regarding beneficiaries. Employers must complete the IRS/SSA/CMS Claims Data Match questionnaire for each GHP that Medicare eligible beneficiaries and their spouses choose.
  • Voluntary Data Sharing Agreements (VDSAs) – These agreements allow employers and CMS to exchange GHP enrollment information.
  • COB Agreement (COBA) Program – This program established a national standard contract between the BCRC and other health insurance organizations for the purpose of transmitting beneficiary eligibility data and Medicare paid claims data.
  • Section 111 Required Reporting Requirements – Under this law, GHPs, workers’ compensation, self-insurance, and no-fault insurance (collectively, non-group health plans, or NGHPs) must register as a Responsible Reporting Entity (RRE) and report certain information pertaining to each enrollee’s Medicare eligibility, as discussed in more detail below.
  • Other Data Exchanges – CMS has created data exchanges with other entities, such as Pharmaceutical Benefit Managers, State Pharmaceutical Assistance Programs, and other prescription drug payers for the purpose of educating these entities regarding COB processes and the MSP framework.

Through these databases, the COB coordinates efforts between CMS, primary payers, and providers to ensure that Medicare is billed properly.

This wide variety of reporting sources may be daunting for many providers and payers who are required to report. However, these  fears can be overcome by incorporating these tasks into the organization’s existing compliance program if the requirements for reporting are known. In the next blog post, we will be addressing compliance with conditional payment requirements provided by Medicare.

This is part 1 of 7 in the Medicare Secondary Payer Compliance series. Subscribe to our blog for future updates.

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 42 USC § 1395y(b)(2)(A)(i); 42 CFR § 411.20.

[2] 42 USC § 1395y(b)(2)(A)(ii); 42 CFR § 411.20.

[3] 42 USC § 1395y(b)(2)(B); 42 CFR §§ 411.21 & 411.24.

[4] 42 USC § 1396a(a)(25); 42 CFR §§ 433.135-140.

[5] 42 USC § 1395y(b)(1); 26 USC § 5000(b)(1).

[6] 42 CFR § 411.20

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on December 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 December meeting are as follows:

  1. MedPAC proposes replacing the Merit-Based Incentive Program with a new Voluntary Value Program.

MedPAC provided an overview of the Chairman’s draft recommendation for an alternative to the Merit-Based Incentive Program (“MIPS”). As discussed in the October and November meetings, MedPAC is concerned that the MIPS is burdensome, inequitable, and will neither improve care for beneficiaries, nor move the Medicare program and clinicians towards high-value care. Because clinicians are reporting in 2017 for the 2019 payment year, MedPAC feels it is imperative that the Congress act now. The Chairman’s draft recommendation asks the Congress to eliminate the current MIPS and establish a new voluntary value program (“VVP”) in fee-for-service Medicare.

The proposed VVP would use a uniform set of population-based measures in the categories of quality, patient experience, and cost or value. The measures would assess care across time and delivery systems, align with other Medicare value-based purchasing programs and advanced alternative payment model (“A-APMs”), and are consistent with outcomes important to beneficiaries and the program. Clinicians would join voluntary groups of other clinicians whose performance as a whole would determine if they qualified for a value payment. Value payments would be funded by a “withhold” applied to all participating clinicians.

Congress will still need to consider and discuss the various tradeoffs, including the size of the withhold and the value payment, as well as how the voluntary group’s composite score would be calculated.

  1. MedPAC reports on payment adequacy and updates for Hospice Services.

MedPAC discussed the Chairman’s draft recommendation to the Congress for Hospice Services. The Chairman’s draft recommendation reads: “The Congress should eliminate the fiscal year 2019 update to the hospice payment rates.” Given that the indicators of payment adequacy within the current system have shown favorable results and the industry has sustained comfortable profit margins, MedPAC believes that hospice providers will be able to cover cost increases in 2019 without any increase in their payment rates. In 2015, the aggregate margin for the industry was 10%, and the marginal profit was 13%. For 2018, the projected aggregate margin for hospice is 8.7%. Additionally, MedPAC reported an increase in both the supply of hospice providers, and in the use of hospice. The number of providers for hospice services increased by 4% in 2016, and approximately 1.4 million beneficiaries elected the hospice benefit. MedPAC also saw a growth in the total number of days beneficiaries remained in hospice, reaching 100 million days in 2016. Specifically, MedPAC noted that longer stays were generally recognized to be more profitable than shorter stays. As a result, MedPAC attributes differences in financial performance across different types of hospice providers largely to the length of stay.

MedPAC expects this recommendation to have no adverse impact on beneficiaries nor the providers’ willingness or ability to provide hospice care.

  1. MedPAC recommends a new payment system within each post-acute care setting.

MedPAC followed up November’s discussion regarding methods to increase the equity of payments within each post-acute care (“PAC”) setting, by combining the setting-specific and PAC prospective payment system (“PAC PPS”) relative weights to establish payments in each setting (e.g., Skilled Nursing Facilities (“SNFs”), Home Health Agencies (“HHAs”), Inpatient Rehabilitation Facilities (“IRFs”), and Long-Term Care Hospitals (“LTCHs”)).  This would be done prior to implementing a unified payment system.  Specifically, MedPAC is concerned that the current PAC payment system fosters different payment for the treatment of similar conditions merely because of different settings, lacks evidence-based guidelines for treatment, and has the effect of incentivizing providers to avoid medically complex patients.

MedPAC recommends blending the current relative weights and the relative weights from the PAC PPS, which will shift payments across conditions. Payments will then be more closely aligned with the cost of care across conditions and thus increase the equity of payments within each setting.  This payment redistribution would, for example, increase payments for medically complex care while decreasing payments for patient stays that involve therapy not related to a patient’s condition.  Payments for providers would be redistributed based on the mix of conditions they treat and their current therapy practices.  The result would increase payments to nonprofit providers and hospital-based providers, and decrease payments to for-profit facilities and freestanding providers.

The Chairman’s draft recommendation will ask Congress to direct the Secretary to begin basing Medicare payments to PAC providers on a blend of the setting-specific relative weights and the unified PAC PPS relative weights in fiscal year 2019.

  1. MedPAC recommends updating the payment system for Skilled Nursing Facilities.

Skilled Nursing Facilities (“SNFs”) Medicare payments are very high when compared to the cost of care. In 2008, MedPAC recommended revising the prospective payment system (“PPS”) because it found that although a provider’s costs increases as more therapy is furnished, payments increase even more, thereby making therapy more profitable if furnished than if not furnished.  Therefore, consistent with the Chairman’s draft recommendation, MedPAC recommends: (1) eliminating the market basket for fiscal years 2019 and 2020, (2) directing the Secretary to report to Congress on the impacts of the revised PPS, and (3) making any additional adjustments needed to more closely align payments with the costs in fiscal year 2021.

Implementing the revised SNF PPS would redistribute payments across conditions and narrow profitability differences across providers. This would enable MedPAC to recommend, and for policymakers to implement, a level of payments that would more closely reflect the cost of care.  According to MedPAC, the revised PPS would not have any adverse impact on beneficiaries, but would increase access to care for medically complex patients.  Payments would shift from freestanding SNFs and for-profit SNFs to hospital-based and non-profit providers.  This would result in a reduction of disparities in Medicare margins across providers.

  1. MedPAC updates payments for hospital inpatient and outpatient services.

MedPAC expects negative Medicare margins in 2018, based on 2016 margins, policy changes during 2017 and 2018, expected price inflation, and mandated ACA adjustments. Yet, MedPAC expects hospitals to continue to have financial incentive to take on Medicare patients because projected Medicare revenues are expected to exceed marginal costs in 2018.  Accordingly MedPAC’s estimated update for inpatient and outpatient rates for 2019 will be 1.25% if current estimated market basket for 2018 remains at 2.8%.  Accordingly, the Chairman’s draft recommendation asks Congress to increase the 2019 payment rate for acute-care hospitals by 1.25%.  MedPAC predicts that the overall Medicare margin will decline from negative 9.6% in 2016 to about negative 11% in 2018.  MedPAC also expects cost growth to be larger than payment updates, which are equal to expected input price inflation, as the margin declines due to expected cost growth around 2.5% per year.  MedPAC does not expect any impact on program spending or on beneficiaries or providers.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC on November 2-3, 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 November meeting are as follows:

  1. MedPAC refines an alternative to MIPS.

MedPAC discussed the potential implementation of a new value-based program, described as a voluntary value program (“VVP”), for clinicians in Medicare fee-for service (“FFS”) if the Merit-based Incentive Payment System (“MIPS”) is eliminated, as was proposed by MedPAC in its October meeting. The VVP would encourage clinicians to form voluntary groups that would receive payment depending on the group’s overall performance. MedPAC did not anticipate recommending restrictions on the size or markup of the voluntary group beyond a minimum threshold, which would depend on specific quality measures, clinician specialties, and attribution rules. MedPAC also discussed the potential of a CMS-established voluntary fallback group for isolated or low-volume clinicians who want to join a group. With respect to different quality measures on which the VVP would reward payments, MedPAC proposed that Congress focus on measuring population-based outcomes, patient experience, and cost. Lastly, to incentivize clinicians to switch from the Medicare FFS, MedPAC proposed that any policy should cap the total value payment as to make it less attractive than an alternative payment model.

  1. MedPAC recommends rebalancing Medicare’s physician fee schedule towards primary care services.

MedPAC expressed concern that the current physician fee schedule disfavors primary care practice, often underpricing primary care relative to other Medicare health care services, and thus potentially contributing to the decrease of primary care clinicians. In response, MedPAC proposed two approaches towards rebalancing the fee schedule in favor of primary care services. The first approach would increase fee schedule payments for primary care clinicians and psychiatric services provided by all specialties and clinicians. The payment increase would be distributed on a per service basis, to achieve the goal of spreading the increased dollars among clinicians. Eligible primary care services would include: evaluation and management codes for office visits, home visits, and visits to patients in long-term care settings; chronic care management and transitional care management codes; and “Welcome to Medicare” visits and annual wellness visits.

The second approach would increase fee schedule payments for primary care and psychiatric services provided only by certain specialties and certain clinicians within those specialties. Payment increases could be distributed either on a service-by-service basis or on a per beneficiary basis. While the former may incentivize more discrete primary care visits, the latter would encourage non-face-to-face care coordination and would be consistent with MedPACs 2015 recommendation to Congress. However, as the size of a per beneficiary payment increases, questions would arise about how to attribute patients and whether to risk-adjust the payments.

  1. MedPAC makes payment policy recommendations for non-competitively bid DMEPOS.

MedPAC discussed the proposed recommendations it intends to make to the Centers for Medicare and Medicaid Services (“CMS”) to address the durable medical equipment, prosthetics, and orthotics (“DMEPOS”) fee schedule rates, which MedPAC finds to be excessive. As proposed, the recommendations would shift more DMEPOS products currently paid on a fee schedule basis to a competitive bidding program (“CBP”). MedPAC’s recommendations also call for immediate reduced payment rates for certain non-CBP products while CMS works on incorporating them into the CBP. Alternatively, MedPAC recommends a policy option that aligns balance billing and participation rules for DMEPOS suppliers with the rest of Medicare and that further protects beneficiaries. This policy option would have CMS consider capping balance billing at a percentage of the fee schedule rate and reducing the allowed amount by five percent for non-participating suppliers.

  1. MedPAC makes coverage-gap discount policy recommendations for biosimilars in Medicare Part D.

Consistent with its 2016 recommendations and the Chairman’s draft recommendation, MedPAC’s proposed policy for Part D would have the manufacturing coverage gap discount apply to both originator biologics and biosimilars, which currently applies only to originator biologics. However, the discount would no longer apply to the beneficiary’s out-of-pocket spending for either originator biologics or biosimilars. MedPAC believes that the standardized use of the coverage gap discount will better align the incentives. Because the discount would no longer distort price signals between the two products, there would be slightly lower plan liability for biosimilars than originator biologics, therefore incentivizing sponsors to put the lower-priced biosimilars on their formulary. This change would also result in Medicare paying lower reinsurance. Although some enrollees would have higher cost sharing, cost sharing above the out-of-pocket threshold would be eliminated, creating a hard cap. Because prices for biologics have been outpacing Part D as a whole, MedPAC anticipates the hard cap would become more valuable over time.

  1. MedPAC provides principles for evaluating the expansion of Medicare’s coverage of telehealth services.

This month is MedPAC’s third and last address to Congress’ mandate concerning telehealth expansion under Medicare. MedPAC discussed three principles that policy makers should consider when evaluating telehealth services or policies for potential incorporation into the FFS Medicare program: 1. increased access; 2. improved quality; and 3. reduced costs. Through examples, MedPAC appears to recommend (1) expanding telehealth services into urban areas; and (2) covering direct-to-consumer (“DTC”) services across all areas and for all beneficiaries. According to MedPAC, Medicare’s coverage of urban telehealth and DTC services would increase beneficiary access and convenience, especially in areas with certain service coverage shortages (i.e., stroke specialists, mental practitioners). For programs like telestroke, MedPAC notes that expanding access would likely improve quality by reducing mortality or more serious disability. MedPAC acknowledges that expanding telehealth services may increase costs, and noted that policy makers would need to decide whether the benefits in access and quality that result from telehealth services justify the extra costs of those services.

MedPAC also briefly reported its take on FFS Medicare’s telehealth service expansion for Medicare Advantage (“MA”). Rather than changing the MA program or its payment policy, MedPAC focuses on addressing the question of whether the Medicare benefit should be the same regardless of whether a beneficiary enrolls for FFS Medicare or MA. One option would keep the benefit between FFS Medicare and MA the same. Another option would allow MA plans to include telehealth services in their bids, thereby making the Medicare payment for telehealth services included in the program’s base payment and not financed by rebate dollars. This would mean all plan members would have access to the telehealth benefits, but not be able to opt out in exchange for lower premiums.

In response to Republicans’ failure to repeal the Affordable Care Act (ACA), the Trump Administration is using administrative action to modify the ACA and health insurance options for Americans. On October 12, 2017, President Trump signed an executive order that instructs various departments to consider regulations related to association health plans and short-term insurance. Shortly after, the Administration announced that they would no longer make cost sharing reduction (CSR) payments to insurers on the Exchanges.  Section 1402 of the ACA requires insurance companies to reduce the amount that eligible low-income policyholders pay out of pocket for co-payments and deductibles.  Accordingly, the federal government must reimburse insurers for reductions when the Secretary of HHS is notified.

Without these payments, insurers will either increase premiums or pull out of the Exchanges altogether. In anticipation of the announcement, some insurers have already increased premiums for the 2018 enrollment period. In spite of this, policy makers can mitigate the harm that could be felt as a result of not funding CSR payments.

The Passage of the Murray-Alexander Stabilization Bill

Senator Lamar Alexander (R-TN), Chairman of the Senate Committee on Health, Education, Labor, and Pensions (HELP) and Ranking Member Senator Patty Murray (D-WA) revealed a bipartisan plan to help stabilize the insurance market. The Murray-Alexander Bill seeks to stabilize the insurance market by funding the CSR subsidies and increasing state flexibility in their administration of the Marketplace.

The bill proposes to fund CSR payments for the remainder of 2017, as well as 2018 and 2019. The bill also reduces the time for the Center for Medicare and Medicaid Services (CMS) review of 1332 waivers, from 180 days to 90 days and creates a new 45 day expedited review process for qualifying circumstances. Through Section 1332 waivers, states are allowed to implement insurance market innovations that provide coverage “comparable” in benefits and affordability.

The Congressional Budget Office (CBO) scored the Murray-Alexander Bill and found that it would cut the federal deficit by $3.8 billion in the next decade. The CBO notes that savings would come from states offering lower-cost policies, attracting younger and healthier individuals into the market.  Insurers would lower their premiums because of the influx of younger individuals and in the long-term, save the government more than $1.1 billion in premium tax credits. Despite the savings scored by CBO, the Murray-Alexander bill will not have an affect on 2018 plans. Further, the bill may not pass before open enrollment ends on December 15.  The bill has bipartisan support in the Senate, but will have difficulties in the House because of Speaker Paul Ryan’s opposition to the current version.

State Efforts

States can play a role in telling insurers where to apply their premium increases. For example, states could tell insurers to apply premiums to only Silver marketplace plans, all metal level plans inside and outside the marketplace, or all Silver plans inside and outside the marketplace. About 30 states assumed that CSR payments would not be disseminated and either encouraged or required states to increase premiums onto marketplace silver plans only. States that choose this option allows consumers in the marketplace to receive premium tax credits and consumers outside the marketplace to not experience any increase in premiums. Additionally, some legal scholars and health policy experts argue that states could pay for the premium themselves and then bill the federal government.

Legal Challenges

Eighteen states and the District of Columbia sued the Trump Administration seeking an immediate injunction to block President Trump from ending CSR payments to insurers. California federal judge, U.S. District Judge Vince Chhabria, denied the motion for an injunction.  Judge Chhabria argued that states had enough time to plan for the end of the cost-sharing payments and adjusted accordingly. Although Judge Chhabria has denied the injunction, California Attorney, General Xavier Becerra, will still proceed with the lawsuit.

Despite the Trump Administration’s attempt to unravel parts of the ACA, states and Congress are working to anticipate more downstream impacts and must act to find solutions or ways to mitigate the issues that will arise for low-income policy holders.

Stakeholders should anticipate a continuation of unstable markets as insurers will have to adjust their rates or leave the Exchanges if there are no changes made to fund CSR payments. State regulators will have to use creativity and flexible ways to help their constituents.

On November 1, 2017, the Centers for Medicare & Medicaid Service (“CMS”) released the Medicare Hospital Outpatient Prospective Payment System (“OPPS”) final rule (“Final Rule”), finalizing a Medicare payment reduction from Average Sales Price (“ASP”) + 6% to ASP – 22.5%, for 340B discounted drugs in the hospital outpatient setting, as was proposed in the OPPS proposed rule earlier this year. This payment reduction is effective January 1, 2018, and would primarily impact disproportionate share hospitals, rural referral centers, and non-rural sole community hospitals.

340B Program Generally

The 340B program, established by section 340B of the Public Health Service Act by the Veterans Health Care Act of 1992, generally allows for certain eligible health care providers (“Covered Entities”) to purchase outpatient drugs at discounted prices. The 340B program is administered by Health Resources and Services Administration (“HRSA”).

CMS Policy Background for the Final Rule

In response to reports of the growth of 340B drug utilization by hospital providers, as well as the recent trends in high and growing prices of several separately payable drugs administered under Part B, CMS reexamined the appropriateness of the ASP +6% payment methodology to 340B drugs. This policy change as finalized would allow the Medicare program and beneficiaries to pay less for outpatient drugs, in a way that more closely aligns Medicare payment for 340B drugs to the resources expended by hospitals in acquiring such drugs. Additionally, CMS did not believe that beneficiaries should be responsible for a copayment rate tied to ASP + 6% when the actual cost to acquire the drug under the 340B program is much lower than the ASP for the drug.

340B Drug Payment Reduction

Under the Medicare program, CMS generally reimburses separately payable outpatient drugs and biologics based upon a drug’s ASP as reported by its manufacturer, plus a 6% markup, regardless of whether the drug is purchased at a 340B discount price. Drugs that are not separately payable are packaged into the payment for the associated procedure and no separate payment is made for them.

Effective January 1, 2018, CMS will reduce this payment rate to ASP – 22.5% for non-pass-through separately payable drugs and biologics acquired with a 340B discount. Excluded from this payment reduction are drugs or biologics that have pass-through payment status (which are required to be paid under the ASP + 6% methodology), or vaccines (which are excluded from the 340B program). In the proposed rule, CMS contemplated excluding blood clotting factors and radiopharmaceuticals from this payment reduction, however, CMS has decided to subject these two product types to the new policy. CMS noted that this ASP – 22.5% payment rate is based upon a 2015 MedPAC report in which MedPAC estimated that, on average, hospitals in the 340B Program “receive a minimum discount of 22.5 percent of the [ASP] for drugs paid under the [OPPS].”

Certain types of hospitals will not be affected by the change. CMS has exempted Covered Entities that are rural sole community hospitals, children’s hospitals, and cancer hospitals from this 340B drug payment reduction policy. Additionally, critical access hospitals are not affected by this policy because they are not paid under the OPPS. CMS has stated this payment reduction does not apply to 340B drugs furnished at non-excepted off-campus provider based departments.

To implement this payment reduction, CMS will be utilizing a claims modifier to track whether a drug is a 340B-acquired drug, and another claims modifier for whether the Covered Entity is exempt from this payment reduction policy. Hospitals will be required to report modifier “JG” with the associated nonpass-through separately payable drug’s HCPCS code to identify whether the drug was acquired with a 340B discount. The rural sole community hospitals, children’s hospitals, and cancer hospitals exempt from this payment reduction policy will be required to report the modifier “TB” with the associated HCPCS code of the 340B-acquired drug.

Additional Considerations

It is important to note that this new payment reduction policy generally does not apply to 340B drugs dispensed at contract pharmacies. Drugs reimbursed under the Medicare OPPS are generally physician administered drugs, whereas drugs dispensed at a contract pharmacy are generally self-administered retail drugs. Furthermore, this payment reduction policy does not affect 340B drug reimbursement for non-hospital Covered Entities, such as Federally Qualified Health Centers and Ryan White Grantees.

While HRSA manages the 340B program, this payment reduction is specifically for drugs reimbursed under the Medicare program. Accordingly, this policy does not affect reimbursement of 340B drugs by other government or private payers. However, it is possible that the Final Rule may embolden other payers to follow suit by adopting 340B payment reductions similar to CMS.

Organizations representing hospitals already have announced intent to take legal action against this 340B drug payment reduction. This legal action will likely focus on arguments that CMS exceeded its statutory authority in its ability to calculate and adjust 340B acquired drug payment rates, and doing so in a manner that discriminates against safety net hospitals violates the Medicare statutes.

The OPPS Final Rule will be published in the Federal Register on November 13, 2017 and available online at https://federalregister.gov/d/2017-23932. Epstein Becker & Green is available to provide guidance on how this new policy affects you.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 5-6, 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 October meeting are as follows:

  1. MedPAC reports the results from its recently conducted survey regarding telehealth utilization across the healthcare system.

This past summer, MedPAC identified several large health programs, Medicare beneficiaries, primary care physicians, and home health agencies to survey with the goal of better understanding their use and attitudes toward telehealth.  Results of this survey show that despite the success of certain telehealth programs for health plans (e.g., telestroke, telemental health) and the increased use of telehealth services among home health agencies, many of those surveyed believe that telehealth provides convenience and improves care only in limited circumstances.  There appears to be a consensus among plans, providers, and beneficiaries that there is little incentive to employ direct-to-consumer (“DTC”) telehealth services.  Even health systems that use telehealth services for pre-operation and follow-up visits, and observed reductions in hospital inpatient readmissions, reported that telehealth services are only financially justified if they help avoid Medicare’s inpatient readmission penalties.  Among surveyed beneficiaries, a majority reported that they are unlikely to use DTC telehealth services because they already have access to their normal physicians via email and telephone.  The beneficiaries’ reported that their primary concern is DTC services only provide them access to random physicians who would not be familiar with their medical histories.  Primary care physicians (“PCPs”) appeared to be concerned that DTC services would only add to their already burdened caseloads.  This sentiment seems founded in PCPs’ reports that electronic medical record systems add time and technical complications to their days instead of simplifying or making their jobs more effective or efficient.

The health plans surveyed by MedPAC cited various factors they believe hinder adoption of telehealth services, such as: federal and state regulations that limit Federal health care program coverage of telehealth services according to geographic locations or originating sites; the elimination of broadband subsidizing programs; and a perceived increased in administrative burden (i.e., complicated Medicare billing practices, required licensing for telehealth clinicians in each state, and credentialing telehealth providers for each facility.)  The health plans’ responses also suggest that state laws that mandate payment parity between in-person and telehealth services are more likely to encourage expansion of telehealth use than laws that merely mandate coverage parity between the two.

  1. MedPAC discusses commercial health plans’ telehealth coverage.

In MedPAC’s September meeting, MedPAC commenced discussion concerning Medicare payments for telehealth services, as mandated under Congress’ 21st Century Cures Act of 2016.  This month, MedPAC continued that discussion by addressing coverage of telehealth services by commercial health plans.  MedPAC’s discussion included the analysis of 48 individual plans available across all 50 states.  The plans included managed care products and various types of commercial health plans such as employer, individual, small and large group, and exchange plans.[1]

Interestingly, MedPAC’s findings do not indicate a significant difference between Medicare and commercial health plans in telehealth utilization and coverage.  The majority of health plans reported less than 1% of their plan enrollees using some form of telehealth service during the year.  The highest reported use was still less than 5% of enrollees.

Unlike Medicare, commercial health plans are more likely to cover urban-originating sites. However, only approximately half of the surveyed plans cover a patient’s residence as an originating site.  MedPAC found the most commonly covered telehealth services are basic Evaluation and Management (E&M) physician visits, mental health visits, and pharmacy management visits, but few cover a broad range of telehealth services.

The MedPAC report demonstrates that commercial health plans do not implement telehealth services to reduce costs, but rather to keep up with competitors who offer these services.  However, while the plans also did not report actual reductions in costs resulting from telehealth services, they did report improvements in convenience and access and increased telehealth use would eventually translate into cost reductions.

  1. MedPAC proposes eliminating the Merit-Based Incentive Payment System.

MedPAC proposed a drastic policy change to the Medicare Access and CHIP Reauthorization Act (“MACRA”); specifically to its Merit-Based Incentive Program (“MIPS”). MedPAC is concerned that the MIPS will not achieve the goal of identifying and rewarding high-value clinicians because it is overly complex and places an excessive burden on clinicians who wish to comply with reporting standards. Moreover, MedPAC states that the measures used are not proven as associated with high-value patient care or improved patient outcomes. Finally, because clinicians choose on which measures they are evaluated, each clinician’s composite score is comprised of performance on different measures. This leads to inconsistencies in how clinicians are compared to each other, and therefore inequities in their payment adjustments.

Given the above, MedPAC proposed a policy option to eliminate individual-level reporting requirements of the MIPS and to establish a voluntary value program in its place. The new voluntary value program would encourage fee-for-service clinicians to join other clinicians and assume responsibility for the health outcomes of their collective patient panels. Clinicians would have the option of being measured as part of a larger group, comprised of other clinicians in their area or affiliated hospitals. Moreover, population-based measures would easily be extracted from the claims submitted by the clinicians – significantly reducing their reporting burden.

MedPAC is considering formalizing this policy proposal as a draft recommendation in December.

  1. MedPAC proposes limiting the use of Physician-Owned Distributors through the Stark law.

MedPAC proposed two policy approaches to limit the use of Physician-Owned Distributors (“PODs”) through the Stark law. PODs currently operate under the indirect compensation exception and “per unit of service” rule of the Stark law, which allows their business model to avoid self-referral liability. However, MedPAC is concerned that this “loophole” contradicts the spirit of the law because it has the potential to influence care based on financial incentives.

The first proposed policy approach would eliminate the application of the “per unit of service” rule to PODs, which would result in PODs no longer meeting the indirect compensation exception. CMS took this type of direct action before when, after reports of abuse, they explicitly eliminated the application of the per unit of service rule to space and equipment leases. The second proposed policy approach redefines PODs as Designated Health Service entities under the Stark law, thereby prohibiting physician ownership of PODs. Under this new definition, physicians with stakes in PODs would be prohibited from referring patients for services using devices supplied by their POD unless another exception applied.

To address the concerns regarding the effect of these policy changes on medical device innovation, MedPAC proposed an exception for large, publicly traded PODs and for PODs that meet specified, limited criteria – for example, if less than 40% of a POD’s business is generated by physician-owners.

If Congress, or more likely, CMS, implements these changes to the Stark Law, hospitals will have a strong incentive to monitor their supply chain to avoid denial of payment and False Claims Act liability. Further, although such changes would limit PODs, some PODs would likely survive on the ability to sell to non-DHS entities, such as ambulatory surgical centers.

  1. MedPAC recommends paying for sequential stays and aligning regulatory requirements in a unified payment system for post-acute care.

MedPAC discussed the continuation of its efforts for a Post-Acute Care (“PAC”) unified payment system. Specifically, MedPAC addressed two important implementation efforts: 1. the effect of sequential stays in PAC on payment; and 2. how to align the relevant regulatory requirements with the new payment system.

The unified payment system would make payments based on patient characteristics rather than patient settings. As a result, sequential PAC stays in different settings would present challenges to accurate payment. MedPAC wants to ensure that the new payment system would not inadvertently shortchange or influence the care that beneficiaries receive. As such, MedPAC plans to examine the cost of stays over the next year, comparing the length of initial stays and the length of later stays, and to consider policies that adjust payments to more accurately reflect the cost of care.

Similarly, regulatory requirements would need to be reformed to align with a new unified PAC payment system. MedPAC proposed various possibilities, such as eliminating the 25-day average length of stay requirement for long-term care hospitals or eliminating the 60% rule for inpatient rehabilitation facilities, as payment would no longer be based on the setting of the care provided.

MedPAC will conduct research on the implementation of a PAC unified payment system in the coming months for inclusion in the June 2018 report.

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[1] MedPAC did not include fee-for-service plans in its report.