MedPAC Report to Congress on Delivery Reform

The Medicare Payment Advisory Commission (MedPAC) has released its June 2013 Report to the Congress on Medicare and the Health Care Delivery System. The report examines a number of potential ways to reform Medicare, including the following: 

  • Redesigning the Medicare benefit. MedPAC continues to discuss the concept of competitively determined plan contributions (CPC), under which Medicare beneficiaries could receive care through either a private plan or traditional fee-for-service, but the premium paid by the beneficiary could vary depending on the coverage option chosen. The federal government’s payment for a beneficiary’s care would be determined through a competitive process comparing the costs of available options for coverage. The report identifies key issues to be addressed if the Congress wishes to pursue a policy option like CPC, such as how benefits could be standardized for comparability, how to calculate the Medicare contribution, and the structure of subsidies for low-income beneficiaries.
  • Reducing Medicare payment differences across sites of care. MedPAC notes that Medicare payment rates often vary for similar services provided to similar patients, simply because they are provided in different sites of care (e.g., physician’s office vs. hospital outpatient department). The report identifies services that may be eligible for equalizing or narrowing payment differences across settings.
  • Bundling post-acute care services. MedPAC explores the implications for quality and program spending for different design features of post-acute care payment bundles, such as the services included, the length of time covered by the bundle, and the method of payment.
  • Reducing hospital readmissions. MedPAC suggests further refinements to improve incentives for hospitals and generate program savings through reduced readmissions, including proposals to address the effect of random variation on hospitals with small numbers of cases, the inability of the industry to reduce average penalties with improved performance, the correlation of patient income and readmission rates, and the inverse relationship between readmissions and mortality for cardiac patients.
  • Payments for hospice services. MedPAC presents information on the prevalence of long-stay patients and the use of hospice services among nursing home patients to inform future hospice payment reforms. MedPAC also provides additional information supporting its March 2009 recommendations to revise the hospice payment system.
  • Improving care for dual-eligible beneficiaries. MedPAC discusses the potential role that federally qualified health centers and community health centers can play in coordinating care for Medicare-Medicaid dual-eligible beneficiaries.

In addition to discussing these delivery reforms, the MedPAC report addresses Congressionally-mandated reviews of the following topics: Medicare ambulance add-on payments; geographic adjustment of fee schedule payments for the work effort of physicians and other health professionals; and Medicare payment for outpatient therapy services.

OIG Finds Medicare Plans Generally Cover Drugs Commonly Used by Dual Eligibles

The OIG has issued an ACA-mandated report on Medicare Part D prescription drug plan and MA drug plan coverage of drugs commonly used by full-benefit dual-eligible individuals (that is, individuals eligible for Medicare and Medicaid and who receive full Medicaid benefits and Medicare premium and cost-sharing assistance). The OIG determined that for 2013, Part D/MA plan formularies include 96% of 195 commonly-used drugs, with 64% of the commonly-used drugs included in all such formularies. Plans applied utilization management tools to 28% of the unique drugs reviewed in 2013, compared to 24% in 2012 (mainly attributable to an increase in the use of quantity limits). 

MACPAC 2013 Report to Congress on Medicaid/CHIP

The Medicaid and CHIP Payment and Access Commission (MACPAC) has released its “March 2013 Report to the Congress on Medicaid and CHIP,” including both policy recommendations and data updates. The policy recommendations address implementation of ACA provisions designed to expand health insurance coverage. First, MACPAC recommends that Congress create a statutory option for states to implement 12-month continuous eligibility for children enrolled in CHIP and adults enrolled in Medicaid, in conformance with policies in effect for children in Medicaid (the report notes that the option will otherwise be removed under new income-counting eligibility standards). Second, MACPAC recommends that Congress permanently fund Transitional Medical Assistance (TMA), while allowing states to opt out of the program if they expand to the new adult group added by the ACA. The report also includes a discussion of various policy issues involving the dually eligible Medicare and Medicaid population, and it provides an update to its MACStats data supplement.

GAO Examines Consumer Protections for Medicare/Medicaid Dual Eligibles

The GAO has issued a report examining selected consumer protection requirements for dual eligible beneficiaries -- low-income seniors and individuals with disabilities enrolled in both Medicare and Medicaid. The report summarizes such consumer protections for dual eligible beneficiaries (e.g., access to primary care providers, appeals processes) in the Medicare fee-for-service (FFS) and Medicare Advantage programs, along with Medicaid FFS and managed care plans. The report also highlights compliance and enforcement actions taken by CMS and selected states against managed care plans to help ensure that MA and Medicaid managed care organizations complied with relevant consumer protection requirements. For details, see the complete report, “Medicare and Medicaid: Consumer Protection Requirements Affecting Dual-Eligible Beneficiaries Vary across Programs, Payment Systems, and States.”

December Congressional Hearings and Markups

On December 13, 2012, the Senate Finance Committee held a hearing to focus on improving care for beneficiaries dually eligible for Medicare and Medicaid. In addition, the House Energy and Commerce Subcommittee held a hearing entitled "State of Uncertainty: Implementation of Patient Protection and Affordable Care Act Exchanges and Medicaid Expansion." On December 20, 2012, the Senate Judiciary Committee was scheduled to consider S. 1560, the Nursing Home Resident Pain Relief Act of 2011, which would make amendments to the Controlled Substances Act that are intended to help ensure that nursing home residents have timely access to pain medication in emergency situations.  Note that the markup has been postponed and not rescheduled at this time.

MACPAC Meeting on Medicaid Policy Issues (Nov. 15)

The Medicaid and CHIP Payment and Access Commission (MACPAC) is meeting November 15, 2012 to discuss a variety of Medicaid policy issues, including:  health care delivery system issues for Medicaid beneficiaries with disabilities; Medicaid primary care physician payments; Medicaid/CHIP Exchange interactions; the Medicaid/Medicare dually eligible population; and state Medicaid payment policies for Medicare cost sharing.

GAO Reviews Medicare Special Needs Plans for Dual-Eligible Beneficiaries

The Government Accountability Office (GAO) has issued a report entitled “Medicare Special Needs Plans: CMS Should Improve Information Available about Dual-Eligible Plans' Performance.” The report examines the characteristics of dual-eligible beneficiaries enrolled in Medicare Advantage plans known as dual-eligible special needs plans (D-SNPs), which serve Medicare beneficiaries who also are eligible for Medicaid because they meet income and other criteria. About 9% of the dual-eligible population is enrolled in 322 Medicare D-SNPs, and they were more frequently under age 65 and disabled, more likely to be eligible for full Medicaid benefits, and more frequently diagnosed with a chronic or disabling mental health condition than beneficiaries in other MA plans. The GAO found that D-SNPs provide fewer supplemental benefits on average than other MA plans, yet spend proportionately more of their rebate to fund supplemental benefits and less to reduce Medicare cost-sharing. The GAO recommends a number of steps CMS should take to increase D-SNPs' accountability, including: requiring D-SNPs to state explicitly in their models of care the extent of services they expect to provide; requiring D-SNPs to collect and report to CMS standard performance and outcome measures; and analyzing and publicizing the performance and outcomes data. 

MedPAC Issues 2012 Data Book

MedPAC has released its 2012 Data Book on “Health Care Spending and the Medicare Program.” The publication provides information on national health care and Medicare spending, Medicare and dual-eligible beneficiary demographics, Medicare quality, and Medicare beneficiary and other payer liability. It also includes data regarding various provider types, such as data on Medicare spending, beneficiary utilization of the service, number of providers, volume, length of stay, and Medicare profit margins. The Data Book also covers the Medicare Advantage and Part D drug programs.

July Congressional Hearings

Congressional panels have examined a number of health policy issues recently, including:

  • ACA Hearings: The House Ways and Means Committee held a hearing on the implications of the Supreme Court's ruling that the individual mandate in the ACA is constitutional, particularly as it relates to Congress' taxing authority.  The House Oversight and Government Reform Committee held separate hearings on the ACA’s impact on doctors and patients, and on job creators and the economy.
  • Medicare Physician Payments: The Senate Finance Committee held a hearing on “Medicare Physician Payments: Perspectives from Physicians,” while the House Energy and Commerce Health Subcommittee examined “Using Innovation to Reform Medicare Physician Payment.” (
  • Dual Eligibles: The Senate Aging Committee held a hearing on Medicare and Medicaid coordination for dual-eligibles.

MedPAC Examines Medicare Benefit Redesign, Dual Eligible Policy Options

On June 15, 2012, MedPAC released its June 2012 Report to the Congress on “Medicare and the Health Care Delivery System.”  Unlike most MedPAC reports that focus on provider payments, this report examines the role of beneficiaries and their impact on the Medicare program. In particular, MedPAC recommends reforms to Medicare’s benefit design/cost-sharing structure to protect beneficiaries against high out-of-pocket spending while creating incentives for beneficiaries to make better decisions about discretionary care. The report also assesses different care coordination models, such as bundling and ACOs, and ways to reward outcomes resulting from coordinated care (or penalize fragmented care). In addition, MedPAC examines programs designed to integrate care for Medicare/Medicaid dual-eligible beneficiaries, including the Program of All-Inclusive Care for the Elderly and dual-eligible special needs plan. MedPAC also includes separate chapters on care for beneficiaries in rural areas and options for reforming Medicare coverage of home infusion service, as requested by Congress.

OIG Concludes Part D Plans Include Drugs Used by Dual Eligibles

As mandated by the ACA, the OIG has issued its annual report ("Part D Plans Generally Include Drugs Commonly Used by Dual Eligibles: 2012") assessing the extent to which Medicare Part D formularies include drugs commonly used by full-benefit, Medicare/Medicaid dual-eligible individuals. Based on a review of the 3,107 Part D plans operating in 2012, the OIG determined that 96% of the plans cover 191 drugs commonly used by dual eligibles, and 61% of these drugs are included by all Part D plan formularies. On average, 24% of the unique drugs were subjected to utilization management restrictions (i.e., prior authorization, step edits, or quantity limits) on Part D plan formularies, up from 19% in 2011; most of this increase is attributable to an increase in the use of quantity limits.

CMS Guidance to States on Capitated Financial Alignment Demonstration Plans

In July 2011, CMS announced it was allowing states to test two new financial models intended to improve care coordination and reduce costs for individuals enrolled in both Medicare and Medicaid (known as “dual eligibles” or “Medicare-Medicaid enrollees”). The models are designed to better align the financing of these two programs and integrate primary, acute, behavioral health, and long term services and supports for Medicare-Medicaid enrollee. Specifically, the two models are: (1) a Capitated Model, under which a state, CMS, and a health plan enter into a three-way contract, and the plan receives a prospective blended payment to provide comprehensive, coordinated care; and (2) a Managed Fee-for-Service Model, under which a state and CMS enter into an agreement allowing the state to benefit from savings resulting from initiatives designed to improve quality and reduce costs for both Medicare and Medicaid. CMS recently released additional guidance to states interested offering the first option – capitated financial alignment demonstration plans. Among other things, the guidance document addresses: how prospective capitated payment rates for health plans will be developed for the provision of an integrated benefit package for the full continuum of Medicare and Medicaid benefits; how savings will be achieved for both Medicare and Medicaid; standards in key programmatic areas (including specifying that Medicare Part D prescription drug requirements will be applicable under the demonstration); and key steps and dates in the approval process. Demonstrations under this program will last three years, and CMS intends to approve demonstration proposals to allow for enrollments in 2013.

CMS Guidance on Medicare Part D Coverage Gap Discount Program, Cost-Sharing for Dual Eligibles

CMS has provided updated information on certain Medicare Part D Coverage Gap Discount Program issues. Specifically, in an October 28, 2011 memo to plan sponsors and drug manufacturers, CMS discusses its policies regarding invoicing manufacturers for certain low-volume claims, Electronic Fund Transfer requirements for discount payments, and changes to the appeals timeline after an unfavorable third party administrator determination or expiration of the dispute resolution timeframe. Separately, CMS has issued a memo to states on implementation of section 3309 of the ACA, which eliminates Part D cost-sharing for full benefit dual eligible individuals receiving home and community-based services, effective January 1, 2012.  The CMS memo discusses the data that CMS needs from states regarding eligible individuals, and the process for beneficiaries to correct HBCS status.

Upcoming MedPAC Meeting (Nov. 3-4)

The Medicare Payment Advisory Commission (MedPAC) will be meeting November 3-4, 2011 to discuss a number of Medicare policy issues, including: reforming Medicare’s benefit design; Medicare Part D/beneficiaries with high drug spending; coordinating care for dual-eligible beneficiaries through the PACE program; reforming the Medicare SNF PPS; hospitals’ capacity to serve Medicare patients; payment rate differences across ambulatory sectors; and Medicare coverage of and payment for home infusion.

Congressional Hearings Examine Variety of Health Industry Issues

Recent Congressional hearings focusing on health policy issues include:

In addition, on October 4, the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management has scheduled a hearing on "Costs of Prescription Drug Abuse in the Medicare Part D Program."

CMS Guidance to States on Opportunities to Coordinate Care for Dual Eligibles

CMS is allowing states to test two new financial models intended to improve care coordination and reduce costs for individuals enrolled in both Medicare and Medicaid (known as “dual eligibles” or “Medicare-Medicaid enrollees”). The models are designed to better align the financing of these two programs and integrate primary, acute, behavioral health, and long term services and supports for Medicare-Medicaid enrollee. Specifically, the two models are: (1) a Capitated Model, under which a state, CMS, and a health plan enter into a three-way contract, and the plan receives a prospective blended payment to provide comprehensive, coordinated care; and (2) a Managed Fee-for-Service Model, under which a state and CMS enter into an agreement allowing the state to benefit from savings resulting from initiatives designed to improve quality and reduce costs for both Medicare and Medicaid. CMS will test these qualifying state plans serving collectively up to 2 million dual eligibles to determine whether the models save money while preserving or enhancing enrollee quality of care. 

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