Medicare Payment Advisory Commission

The Medicare Payment Advisory Commission (“MedPAC”) held its monthly public meetings in Washington, D.C., on November 1-2, 2018. The purpose of this and other MedPAC public meetings is for the commissioners to analyze existing challenges and issues within the Medicare program and to provide future policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. These meetings offer a comprehensive perspective on the current state of Medicare as well as future outlooks for the program.

As thought leaders in healthcare law, Epstein Becker Green monitors MedPAC developments to determine how regulations and policies will impact the health care marketplace. Here are our five biggest takeaways from the November meeting:

  1. MedPAC Reviewed Mandate Related to Long-Term Care Hospitals and Presented Initial Findings Using Data Through 2016

In response to a congressional mandate due in June 2019, the Commission reviewed operational changes made by Long-term Care Hospitals (LTCHs) in response to policy changes and performance trends, patterns of post-hospital discharge to other post-acute care and hospice providers, and LTCH quality data since the implementation of the new dual-payment rate structure.  For operational changes, the degree of change that occurred varied from facility to facility.  It was reported that some LTCHs either changed their admission patterns to admit only patients who met criteria, continued to take beneficiaries who do not meet the criteria, or halted admitting cases that did not meet criteria.  It was also reported that some LTCHs made efforts to contract with private payors, including Medicare Advantage plans, in order to expand the mix of patients and payors.  Additionally, facilities examined increased their capabilities adding bariatric and ICU beds as well as telemetry services.  However, these changes often led to a decline in occupancy and closures.  Over 40 facilities closed (roughly 10% of the industry) – most located in an area with other LTCHs.

In terms of discharges, the share of cases that met the criteria for the new dual-payment rate structure increased from 50% to 64% over the last few years.  This was attributed to some facilities having the capacity to change their admission patterns and take a higher share of cases that meet the criteria.  Finally, LTCH quality data showed that measures of unadjusted direct acute-care hospital re-admissions, in-LTCH mortality, and 30-day mortality remained stable since 2015.  Whereas 30-day mortality and re-admissions have remained at similar rates, the rate for in-LTCH mortality has increased.  However, the Commission could not conclude whether these changes in quality were the result of implementing the dual-payment rate structure.

  1. MedPAC Discusses Ways CMS Could Improve the Use of Functional Assessment in the Medicare Program

MedPAC staff examined the pros and cons of the use of functional assessment in the Medicare program to improve functional assessment usage in the Medicare Program.  MedPAC highlighted that patient assessment data does not always reflect the actual care needs of patients.  Concerns relative to function data reported by Inpatient Rehabilitation Facilities (IRFs), Home Health Agencies, Skilled Nursing Facilities (SNFs), and Long-term Care Hospitals (LTCH) were expressed in regards to payment incentives received by these entities.  When reporting rules changed relative to financial incentives, the mentioned entities changed the amount of therapy they offered and how they coded therapy modalities.  MedPAC believed that if providers were making these changes based on financial incentives, the recording of disability would likely increase since payments are tied to functional status.  Thus, the Commission suggested that CMS could help improve the accuracy of these provider-reported data or collect information about patient function by (1) improving monitoring of provider-reported assessment and penalize providers found misreporting; (2) requiring hospitals to complete discharge assessments to patients referred to post-acute care; and (3) gathering patient-reported outcomes (PROs).

  1. Promoting greater Medicare-Medicaid integration in dual-eligible special-needs plans

MedPAC presented potential policies that would promote greater Medicare-Medicaid integration in dual-eligible special needs plans (“D-SNPs”) to improve care coordination and health outcomes.  Under the existing structure, D-SNPs only enroll dual eligible beneficiaries compared to regular plans which open up to all beneficiaries in their service area.  D-SNPs are required to follow an evidence-based model of care and must take steps to integrate Medicaid coverage by forming contracts with states that meet certain minimum standards.  However, there are D-SNPs that require higher standards for integration that are known as fully integrated D-SNPs, or FIDE SNPs, which enables such plans to receive higher Medicare payments.  Under the FIDE SNP framework, the plan must have a capitated Medicaid contract, which includes acute and primary care services along with services like nursing home care.  Currently, the challenge has been the low levels of integration as most plans either do not provide Medicaid services or provide a limited subset, such as Medicare cost sharing.  Factors that have limited Medicaid integration in D-SNPs include the large number of D-SNP enrollees that are partial-benefit dual eligible as well as misaligned enrollment.

MedPAC proposed a couple of changes that could assist in achieving greater integration.  First, it was proposed that there should be a limit on the ability of partial dual beneficiaries to enroll in D-SNPs.  Secondly, the Commission proposed requiring D-SNPs to follow an aligned enrollment practice where beneficiaries cannot enroll in a D-SNP unless they were enrolled in a Managed Long Term Services and Supports (“MLTSS”) plan offered by the same parent company.  The goal is that this policy would ensure that all D-SNP enrollees are receiving both Medicare and Medicaid benefits from the same parent company while laying the foundation for integration into other areas, such as developing a single care coordination process overseeing all Medicare and Medicaid service needs.

  1. MedPAC Reviews Its Recommendations for Improving the Medicare Advantage Quality Bonus Program and Provides Potential Next Steps

MedPAC led off its presentation by summarizing the Medicare Advantage (“MA”) quality bonus program, which has been implemented since 2012. This program pays bonuses to MA plans based on their overall “star rating,” which tracks and weighs forty-six quality measures. MA plan contracts greater than or equal to a 4-star rating receive the bonus, which ultimately increases a plan’s ability to receive rebate dollars (and therefore attract beneficiaries by reducing enrollee premiums and/or offering coverage to a greater variety of services). Overall star ratings and the breakdown of MA plans’ individual quality measures are publicly reported and can be accessed via Medicare’s Health Plan Finder. MedPAC then expressed its concern for the effectiveness of these star ratings and resulting bonus payments. Notably, these star ratings are awarded at the MA contract level, meaning that the star rating often applies to a vast geographical region. Indeed, according to MedPAC, “about 40 percent of enrollees of MA [Health Maintenance Organizations] and local [Preferred Provider Organizations] are in contracts that include enrollees from non-contiguous states.” Moreover, MedPAC stated that boosted star ratings are the result of health care “consolidations,” where the acquired MA contract inherits the star rating of the “surviving” MA contract. These factors have led to “unwarranted bonus payments” and decreased reliance on star rating as an indicator for plan quality in the enrollee’s region.

In its March 2018 report to Congress, MedPAC recommended two courses of action to address these flaws: (1) freeze quality reporting units at pre-consolidation so these plans do not inherit the ratings of their acquirer and (2) require quality reporting at local market level instead of the large MA contract level. In the meeting, MedPAC stated that the Bipartisan Budget Act of 2018 partly addressed the first recommendation—the act requires an average of quality results for consolidated contracts effective in year 2020.[1]

MedPAC then provided its current recommendations for improving the MA quality bonus program. MedPAC advocated for (1) restructuring the MA bonus evaluation system to remove the current seventeen “process measures”[2] and (2) implementing a “claims-based” outcome measures based on MA claims and encounters, which would, according to MedPAC, improve accuracy and uniformity, align more closely with fee-for-service quality results, and lessen reporting burdens. MedPAC also presented “cliff” and “plateau” issues with the bonus cutoff[3] and offered the potential solution of “a continuous scale for bonus payments” similar to its hospital value incentive program (“HVIP”).[4] MedPAC also presented this solution to address the “tournament model” of the current star system.[5] Finally, MedPAC proposed solutions to various issues with the quality measures (e.g., uneven measure adjustments, narrow differences in measure results, etc.). MedPAC plans to further discuss how to move the MA quality bonus program towards budget neutrality.

  1. MedPAC Reviews Medicare Advantage Encounter Data and Introduces Proposed Policy Options for the Program

In 2012, CMS started to collect “encounter data”[6] from MA plans, mainly for purposes of risk adjustment. MedPAC stated that it has access to this encounter data for 2012–2014 (and “preliminary files” for 2015) for six provider types/settings.[7] For each of these settings, MedPAC validated encounter data by comparing it with other data sources of MA utilization. MedPAC uncovered three broad categories of MA encounter data issues in its review: (1) MA plans “are not successfully submitting encounters for all settings,”[8] (2) “about 1 % of encounter data records attribute enrollees to the wrong plan,”[9] and (3) there were substantial differences in encounter data from other data sources used for comparison. MedPAC focused its discussion on addressing this third issue.

MedPAC compared encounter data with four other MA utilization sources that originate from provider reports (including hospitals, home health agencies, skilled nursing facilities, and dialysis facilities). Encounter data was not consistent with these reports. In 2015, the percentage of MA enrollees reported in encounter data were consistent with the following reports:

  • 90% encounter data consistency with data reported by hospitals (for inpatient stays)
  • 89% consistency with data reported by dialysis facilities (for having dialysis services)
  • 49% consistency with data reported by skilled nursing facilities (for skilled nursing stays)
  • 47% consistency with data reported by home health agencies (for home health services)

These results, combined with MA plans’ lack of encounter data submissions, demonstrate a need for CMS to better assess encounter data completeness and ensure consistency and ability to utilize this data for risk adjustment. MedPAC then gave three policy options to incentivize MA plans to submit complete encounter data: (1) to expand the performance metric framework (e.g., to include specific information about missing encounter data); (2) to apply payment withholds proportional to degree of incomplete encounter data submissions; and (3) to collect encounter data through Medicare Administrative Contractors (which already process fee-for-service claims for all Part A and B services). By enforcing complete encounter data through these methods, MedPAC hopes to learn more about how care is provided to MA enrollees and ensure Medicare benefits are properly administered.

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[1] MedPAC expressed concern that various “consolidation strategies” may still result in unwarranted higher star ratings and accompanying bonus payments.

[2] MedPAC asserted that these administrative measures could effectively be monitored by compliance activities.

[3] Currently, the 4-star requirement for bonus acquisition causes two distinct issues. Contracts with a overall rating of less than 3.75 stars (which is rounded to 4 stars) do not receive any bonus payments (i.e., the “cliff”), and contracts with an overall rating above 4 stars receive “the same benchmark increase” as those with 4-star ratings (i.e., the “plateau”) and there are minimal incentives to reaching star rating above a 4.

[4] A recent blog post discussed MedPAC’s review of its new HVIP in the September meetings.

[5] Under this tournament model, 5-star plans exist despite decreases in overall quality. MedPAC also suggested the establishment of pre-set objectives to promote improvement.

[6] Health care providers generate this “encounter data,” which includes detailed documentation of diagnosed clinical conditions and items and services furnished to treat these conditions.

[7] The six provider types/settings MedPAC referred to are “physician/supplier Part B,” inpatient hospital, outpatient hospital skilled nursing facility, home health, and durable medical equipment.

[8] According to MedPAC, only 80% of MA contracts have “at least one encounter record for each of the six settings.”

[9] MedPAC asserts that this issue may be corrected by changing data processing.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, D.C., on October 4-5, 2018. The purpose of this and other public meetings of MedPAC is for the commissioners to analyze existing challenges and issues within the Medicare program and to provide future policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. These meetings offer a comprehensive perspective on the current state of Medicare as well as future outlooks for the program.

As thought leaders in health care law, Epstein Becker Green monitors MedPAC developments to determine how regulations and policies will impact the health care marketplace. Here are our five biggest takeaways from the October meeting:

Managing Prescription Opioid Use in Medicare Part D

MedPAC provided an informational overview of opioid use and polypharmacy as an update to its work in prior years. MedPAC first discussed the use of opioids by Medicare beneficiaries. Since the 1990s, aggressive marketing of extended-release opioid formulations and liberal prescribing of these drugs for acute and chronic pain due to ambiguous clinical guidelines for safe prescribing contributed to the “opioid crisis.”  The Centers for Disease Control and Prevention (“CDC”) reported over 17,000 prescription opioid overdose deaths in 2016. Due to their age and accompanying pain and “illness burdens,” Medicare beneficiaries are especially prone to the toxicity and harm associated with even low-dosage opioid prescriptions. In its 2016 guideline, CDC generally addressed safe opioid prescribing for acute and chronic pain, including its preference for non-pharmacologic therapy and non-opioid pharmacologic therapy and recommendation that “additional caution” be used “when initiating opioids for patients age 65 and older.”

MedPAC then presented updated data on patterns of opioid use in Medicare Part D. From 2012 to 2016, opioid analgesic (i.e., pain-relief drugs) prescriptions per 1,000 Medicare Part D enrollees have declined about 18 percent. While it recognized this positive trend, MedPAC expressed continued concern that (1) “opioid use in Part D continues to be widespread, with nearly one-third of enrollees filling at least one opioid prescription in a given year”; (2) most opioid use did not relate to hospice care or cancer treatment; and (3) gross spending on opioids is among the highest in Part D, totaling $4.1 billion in 2016. MedPAC also discussed varying “opioid-related adverse drug events” (“ADEs”), defined narrowly by MedPAC  as “diagnosis codes specifying poisoning by opioid in inpatient and outpatient claims, including emergency department visits that resulted in inpatient stays.” MedPAC found that “high-intensity users”—17% of Part D beneficiaries defined as those with higher average dosage and treatment lasting longer than three months—had nearly seven times the ADE rate of “low-intensity opioid users,” defined by MedPAC as beneficiaries with “50 [morphine milligram equivalents (“MME”)] per day or less and treatment lasting three months or less.” MedPAC also stressed that polypharmacy, or beneficiaries using multiple drugs, is another key contributor to ADEs.

Lastly, MedPAC described steps that the Centers for Medicare & Medicaid Services (“CMS”) and Part D plan sponsors have been taking to monitor opioid use and manage opioid misuse. In 2013, CMS required plan sponsors to identify enrollees who were at “high risk of opioid abuse or misuse,” monitor high cumulative enrollee dosages, and notify pharmacists to coordinate with the enrollee’s prescriber. CMS uses its Overutilization Monitoring System (“OMS”) to supervise these plan sponsors’ compliance. In 2019, Part D plan sponsors will now have the authority to limit at-risk beneficiaries’ access to frequently abused drugs using a tailored approach. For example, plans must limit opioid quantity to a seven-day prescription for post-surgery patients. Plans may also limit access through a drug management program. Examples of restrictions include placing restrictions on beneficiaries’ fills, locking beneficiaries into seeking prescriptions from certain prescribers, and prescriber “safety checks” once cumulative daily dosage reaches 90 MME. Through Medicare Drug Integrity Contractors (“MEDIC”), CMS also monitors providers or opioids to ensure they are not prescribing inappropriately. In 2019, offending prescribers may ultimately be placed on CMS’s “preclusion list,” where Part D plan sponsors must reject their pharmacy claims.

Opioids and Alternatives in Hospital Settings

Under the new SUPPORT for Patients and Communities Act, MedPAC is required to report on the following opioid issues in inpatient and outpatient hospital settings by March 2019: (1) how Medicare pays for opioid and non-opioid alternatives, (2) incentives under prospective payment systems for prescribing opioids versus opioid alternatives, and (3) how Medicare claims data tracks opioid use. MedPAC addressed each issue in succession.

Reporting on the first issue, MedPAC stated that Medicare uses bundled payments for inpatient and outpatient hospital settings via the inpatient prospective payment system (“IPPS”) and outpatient prospective payment system (“OPPS”), respectively. The IPPS bundles all goods and services together, including drugs supplied during the hospital stay, whereas the OPPS pays for integral goods and services that are bundled into categories based on clinical and cost similarity. Medicare Part B pays for analgesics, including opioids, that are integral to the procedure or treatment for the beneficiary. For example, post-surgical opioid prescriptions are considered integral by CMS. Non-integral opioids may or may not be paid by Medicare Part D.

Although MedPAC acknowledged that patient-specific and clinical factors play a role in a provider’s prescribing choices, MedPAC focused on the financial incentives that guide prescribers’ opioid administration. Both IPPS and OPPS incentivize hospital prescribers to select the lowest-cost goods and services while adhering to Medicare’s quality measurement and reporting programs and clinical professionalism. MedPAC then stated it has “begun an analysis of the differences in prices between opioid and non-opioid drugs commonly used . . . [a]nd . . . options about non-drug alternatives.”

MedPAC lastly described how Medicare tracks opioid use. As described in the earlier section, CMS monitors Part D opioid use through OMS; ensuring plan sponsors implement opioid overutilization policies effectively. CMS also uses quality measures to track trends in opioid overuse and publicizes providers’ prescribing data through its online Part D Opioid Prescribing Mapping Tool. MedPAC then stated that CMS does not yet track opioid use in inpatient and outpatient hospital settings (Medicare Parts A and B). MedPAC listed multiple reasons for CMS initiating opioid monitoring in hospital settings, including the severity of the opioid epidemic and the need to understand the extent to which beneficiaries are exposed to opioids while in the hospital. It also acknowledged some challenges to implementation, including questions about how to interpret the “appropriateness of opioid prescriptions identified by a tracking program” and how Parts A and B do not have plan sponsors on which to rely for reporting data.

Medicare Payment Policies for APRNs and PAs

In response to Commissioner interest on rebalancing the physician fee schedule, MedPAC discussed Medicare payment polices for advanced practice registered nurses (“APRNs”) and physician assistants (“PAs”). APRNs include four types of licensed practitioners: nurse practitioners (“NPs”), certified nurse anesthetists (“CNAs”), clinical nurse specialists (“CNSs”), and certified nurse midwives (“CNMs”). While individual states determine the services and responsibilities that APRNs and PAs have, their authority and independence have substantially increased nationwide over time. Based on its review of existing literature, MedPAC concluded that “NPs and PAs provide roughly equivalent care in terms of quality and patient experience” at a lower cost for their provider-employers (although evidence of lower payer costs is mixed).

MedPAC then addressed Medicare payment for APRNs and PAs, whose services are generally covered if medically necessary. Medicare pays APRNs and PAs directly through their national provider identifier (“NPI”) at 85% of the physician fee schedule. Under this direct billing, MedPAC noted substantially increasing trends in total Medicare FFS allowed charges for APRNs and PAs—NPs total allowed charges billed have increased 158% from 2010–2016. MedPAC also pointed to rapidly growing (149% from 2010–2016) APRN/PA primary care patient visits, especially compared to the decline in traditional primary care physicians (-13% change from 2010–2016). Medicare also pays NPs and PAs under “incident to” billing at 100% of the physician fee schedule: the physician NPI is used instead of the NP or PA NPI. Certain circumstances (e.g., hospital settings, new patients, new problems for existing patients) require that NPs bill directly to Medicare; however, the rapid expansion of NPs and PAs suggests that incident to billing will also expand, especially in “evaluation and management” services (“E&M”) according to MedPAC. Based on its analysis, MedPAC concluded that for E&M office visits performed for established patients, NPs likely utilized incident to billing practices roughly 40% of the time, and PAs billed this way roughly 30% of the time. MedPAC then concluded with two policy options: (1) to eliminate incident to billing for APRNs and PAs—potentially reducing Medicare and beneficiary expenditures and (2) improving Medicare’s specialty designations for APRNs and PAs to indicate primary care as a field of practice.

Medicare’s Role in the Supply of Primary Care Physicians

MedPAC discussed Medicare’s role in the supply of primary care physicians (PCPs), focusing on beneficiaries’ current access to PCPs, factors influencing physicians’ choice of specialty, and methods for recruiting more medical students or graduates into primary care.  Recent statistics have shown that though most Medicare beneficiaries report that they are able to obtain care when needed, there was a small share who reported trouble finding a doctor.  This was a concern to the MedPAC committee given that the absolute number of primary care physicians treating beneficiaries between 2011 and 2016 had increased.

It was reported that physicians focusing on primary care were generally trained in family medicine, geriatric medicine, internal medicine and pediatrics.  Whereas family medicine residents usually ended up practicing primary care, internal medicine residents have increasingly decided to enter subspecialties (e.g., cardiology, gastroenterology), instead of practicing primary care.  The percentage of internal medicine residents going into primary care dropped 6% between 2001 and 2010.

One of the key factors influencing physician choice of specialty was educational debt load.  Medical students with high debts levels were found to be less likely to choose primary care.  The committee found this very concerning because education debt has been rising over time.  For instance, median debt among medical school graduates rose roughly $15,000 between 2010 and 2016.

MedPAC is currently seeking input on ideas to increase the supply of PCPs.  One of the proposed routes was creating a scholarship or loan repayment program for medical students and/or graduates who commit to providing primary care to Medicare beneficiaries.  Design issues to consider include size of programs in terms of dollars and the number of physicians, financing a Medicare program, determining type of medical student eligibility, physician requirement for treating Medicare beneficiaries, and the length of the service commitment.

Episode Based Payments and Outcome Measures Under a Unified Payment System for Post-Acute Care

MedPAC provided an overview regarding 2019 plans for the unified post-acute care prospective payment system (PAC PPS) and the quality measures being developed for PAC providers.  MedPAC has been developing a unified PAC PPS that would extend across four settings – home health agencies, skilled nursing facilities long-term care hospitals, and inpatient rehabilitation facilities – and provide base payments solely on patient characteristics.  The committee sees the system as having an impact in terms of redistributing payments, thus making payments more equitable “across different patient conditions compared with current policy.”  With payments increasing for medically complex patients and decreasing for patients receiving rehabilitative care unrelated to their clinical conditions, the belief is that providers would have less financial incentives to prefer various patients over others.

The committee discussed their initial work regarding patient stays, emphasizing that a stay-based payment system would encourage stays while discouraging providers from “offering a continuum of care.”  The committee proposes an episode-based PPS, where a single payment would cover both stays in the episode of PAC care (this would pertain only to post-acute care and others services like hospital or physician services).  MedPAC believes that such a model provides several advantages such as encouraging institutional PAC providers to offer a continuum of care as well as lower program spending and beneficiary cost sharing.

Finally, the Commission discussed their development of uniform measures to be utilized for measuring quality of care across providers.  In conjunction with the PAC PPS, the Commission recommended implementing a unified value-based payment (VBP) program, which would hopefully discourage shifting of care to other providers as well as overuse of care.  Some of the uniform measures discussed for a PAC VBP include Medicare spending per beneficiary, combined admissions and readmissions, hospital readmissions, and discharge to the community.  The Commission hopes to develop a combined measure of admissions and readmissions that will include admissions to hospitals for both community and inpatient admitted beneficiaries.

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 March 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 March meeting are as follows:

  1. MedPAC proposes a draft recommendation for the implementation of a prospective payment system for post-acute care settings.

MedPAC determines a PAC PPS could be implemented as soon as 2021. In considering the various factors, MedPAC proposes a draft recommendation for a PAC PPS. Recommendations include a 3 year transition period for implementation, a 3% reduction in aggregate payments, granting the Secretary the authority for periodic revisions and rebasing of payments to align with the current cost of care, and the incorporation of uniform functional assessment data into the risk adjustment method, when such data is available. MedPAC created the recommendations with the goals of lowering spending, correcting inequities in current payments that favor certain patients and providers over others, redistributing payments across providers to narrow disparities in profitability, and increasing the willingness of providers to treat all types of patients so they will be easier to place upon discharge. These recommendations are only a draft, and particularly the percent of the reduction in payments seems subject to increase. MedPAC will discuss and vote on these recommendations at the April meeting.

  1. MedPAC discusses proposed recommendations to address the rapid growth in Part B drug spending.

MedPAC discusses the package of policy reforms developed over the last few years that have been refined following feedback in the January meeting. The draft recommendations are comprised of both short-term and long-term strategies to reduce Part B drug spending. The short-term strategies including requiring manufacturers paid under Part B to submit ASP data, with a civil monetary penalty for failure to report, reducing wholesale acquisition cost-based payment to ASP plus 3 percentage points, requiring manufacturers to pay a rebate to Medicare when the ASP for a product exceeds an inflation benchmark, and requiring the Secretary to use a common billing code to pay for a reference biologic and its biosimilars. The first long-term strategy proposed is the creation and implementation of a new alternative, voluntary program called the “Drug Value Program” no later than 2022. Under this system, Medicare would contract with private vendors to negotiate prices for Part B products, not to exceed 100% ASP. Providers would pay negotiated prices for DVP products and Medicare would pay providers the negotiated price plus an administrative fee, with the opportunity for shared savings. The second long-term strategy, also to be completed no later than 2022 or upon implementation of the DVP, is to reduce the ASP add-on under the ASP System. MedPAC will discuss and vote on these recommendations at the April meeting.

  1. MedPAC considers proposals to refine MIPS and A-APM’s and to encourage primary care.

MedPAC reviews proposals for two issues related to clinician payments: 1) refining MACRA and 2) finding better methods to support primary care.  MedPAC considers the MIPS system under MACRA to be inadequate at identifying high value physicians, and thus contemplates a series of ideas designed to remedy this problem, including replacing all measure reporting by clinicians with patient experience measures, designing policies to move clinicians from MIPs to A-APMs, and making A-APMs relatively more attractive for clinicians. MedPAC also discusses ways to better support primary care, including upfront payments for primary care providers in two-sided ACOs and providing all primary care providers with a per beneficiary payment.

  1. MedPAC continues its discussion regarding issues in designing a premium support system for Medicare.

MedPAC discusses the extent to which a premium support system in Medicare should have standardization in benefits, cost sharing, and other features.  One premium support model discussed, which is modeled after how Medicare Parts C and D currently function, would involve a standardized benefit package, with cost sharing that is standardized or actuarially equivalent across plans, and a standard option would be available for beneficiaries to buy. Similar to Part C, plan bids will determine the government contribution towards a beneficiary’s choice, and fee-for-service Medicare is treated as a bidding plan. MedPAC also discusses how supplemental Medicare plan could be integrated into a premium support system and how the benchmark plan should be determined.

  1. MedPAC is contemplating both the financial and the quality-related impacts of shifting Medicare to a premium support system.

MedPAC discusses the impact of implementing a premium support system on plan participation.  MedPAC also reviews potential distributional impacts of using premium supports.  MedPAC’s rough analysis shows that premium supports may lead to more than half of Medicare beneficiaries being enrolled in managed care plans due to shifts in the premiums in fee for service plans.  While the financial implications of premium support is the primary focus of the discussion, MedPAC also addresses how to manage and maintain quality standards under premium support, including through the establishment of minimum standards for plans, provider network adequacy, and plan data disclosure requirements that could aid in setting the performance standards and payment adjustments.  MedPAC also discussed promoting higher quality plans through more direct financial incentives, such as allowing a higher contribution from the government towards high-quality plans to incentivize enrollment in these plans.