On June 13, 2008, the Medicare Payment Advisory Commission (MedPAC) released its June 2008 report to the Congress on “Reforming the Delivery System.” MedPAC discusses a variety of payment and delivery reforms to improve Medicare quality, coordinate care, and reduce cost growth.

Major recommendations include the following:

  • Primary Care — MedPAC recommends a budget-neutral adjustment that increases fee schedule payments for primary care services furnished by clinicians focused on delivering primary care. It also proposes establishing a Medicare “medical home” coordinated care pilot program
  • Resource Use Around a Hospitalization — MedPAC recommends several changes in Medicare payment for care provided around a hospitalization (e.g., inpatient stay plus 30 days postdischarge) to encourage care coordination and efficiency. First, the Secretary should confidentially report to hospitals and physicians information about resource use around a hospitalization and readmission rates, followed by public reporting of the data in two years. Medicare also should reduce payments to hospitals with relatively high readmission rates for select conditions while allowing hospitals and physicians to share in the savings that result from providing care more efficiently. MedPAC also recommends that CMS conduct a voluntary pilot program to test bundled payment for all services around a hospitalization for select conditions.
  • Skilled Nursing Facilities — MedPAC recommends revising the SNF prospective payment system (PPS) to incorporate a nontherapy ancillary payment component, a therapy payment component, and an outlier policy based on exceptionally high ancillary costs per stay. MedPAC also recommends that CMS require SNFs to report on patient diagnoses, service use during the SNF stay, and nursing costs. MedPAC concurrently released a contractor report prepared by staff from the Urban Institute on “Model Alternative Designs for a Revised PPS”.
  • Cost-Effectiveness — MedPAC examines issues associated with creating a comparative effectiveness entity, including issues related to the structure and governance of the entity. MedPAC endorses a dedicated, broad-based, public and private financing mechanism.
  • Physician-Manufacturer/ASC Relationships — MedPAC examines options for collecting data on physicians’ financial relationships with manufacturers, hospitals, and ambulatory surgical centers.
  • Hospice — MedPAC observes that Medicare hospice spending increases have been largely driven by more beneficiaries using the hospice benefit and increases in hospice length of stay, in part due to incentives in Medicare’s hospice payment system that financially reward longer lengths of stay. Overall, Medicare payments to hospices appear adequate, but MedPAC found that this assessment masks considerable variation. In 2005, nonprofit and provider-based hospices had small negative margins, while for-profit and freestanding hospices had large positive margins.

While MedPAC’s recommendations are not binding on Congress, lawmakers often consider MedPAC’s advice as they develop Medicare policy.