The Centers for Medicare & Medicaid Services (CMS) has released its 2015 rate announcement and final call letter for Medicare Advantage (MA) and Part D prescription drug plans. Notably, the final rate announcement increases 2015 MA rates by 0.4% compared to 2014 levels and compared to an estimated 1.9% reduction anticipated in the advance notice released in February 2014. Factors contributing to the rate boost include a modified phase-in schedule for a new risk-adjustment model, a refined risk adjustment methodology to account for the impact of baby boomers, and CMS’s decision not to finalize a proposal to exclude diagnoses from enrollee risk assessments. CMS also is not adopting at this time earlier proposals to implement a new Part D risk adjustment model; make changes to star ratings; or require additional coverage in the gap for generic and brand drugs in Enhanced Alternative plans. On the other hand, CMS is adopting a number of policies intended to strengthen beneficiary protections when MA plans make significant changes to their provider networks. Beginning in 2015, CMS will require MA organizations to provide CMS with 90 days notice of any significant changes to their provider networks. CMS also will allow enrollees to switch plans when they are affected by significant mid-year provider network terminations initiated by their MA plan without cause. In addition, the call letter establishes “best practices” for MA organizations to follow when they make significant changes to provider networks.
The OIG has released its “Compendium of Priority Recommendations,” which lists 25 priority issues for which the OIG has open recommendation and that, if implemented, would best protect the integrity of HHS programs. The 25 top priorities are as follows:
- Medicare Policies and Payments: address wasteful Medicare policies and payment rates for clinical laboratories, hospitals, and hospices; improve controls to address improper Medicare billings by community mental health centers, home health agencies, and skilled nursing facilities; detect and recover improper Medicare payments for services to incarcerated, unlawfully present, or deceased individuals; maximize recovery of Medicare overpayments; improve monitoring and reconciliation of Medicare hospital outlier payments; ensure that Medicare Advantage Organizations are implementing programs to prevent and detect waste, fraud, and abuse; and improve controls to address questionable billing and prescribing practices for Part D prescription drugs.
- Medicare Quality of Care and Safety Issues: address adverse events in hospital settings; improve care planning and discharge planning for beneficiaries in nursing home settings; address harm to patients, questionable resident hospitalizations, and inappropriate drug use in nursing homes; improve nursing home emergency preparedness and response; and ensure hospice compliance with Medicare conditions of participation.
- Medicaid Program Policies and Payments: ensure that state claims and practices do not inappropriately inflate federal reimbursements; ensure that states prevent, detect, and recover improper payments and return the federal share of recoveries to the federal government; assist states to better align Medicaid drug reimbursements with pharmacy acquisition costs; ensure that Medicaid Information Systems are fully functional; and address Medicaid managed care fraud and abuse concerns.
- Medicaid Quality of Care and Safety Issues: ensure that Medicaid home- and community-based care service providers comply with quality and safety requirements; and ensure that States improve utilization of preventive screening services for eligible children.
- Oversight of Food Safety: improve oversight of dietary supplements; and improve oversight of food inspections and traceability.
- HHS Grants and Contracts: improve oversight of grantee compliance, quality assurance, and conflicts of interest; and improve oversight of Medicare contractor performance and conflicts of interest.
- HHS Financial Stewardship: reduce improper payments and fraud; and correct deficiencies found in financial statement audits.
Note that some of these recommendations would require additional authority or other legislative change.
The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on Medicare payment policy, including payment update recommendations for all the major Medicare fee-for-service payment (FFS) systems, limited recommendations related to the Medicare Advantage (MA) program, and a status report on the Medicare Part D program. The following are highlights of the recommendations for 2015 (many of which were recommended previously):
- MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates, concurrent with two changes that would institute site-neutral payments among settings. First, Congress should direct the HHS Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for long-term care hospital (LTCH) services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients.
- Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory updates that includes a higher update for primary care services than for specialty care services. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments from overpriced to underpriced services; and relative value unit reductions to achieve fee schedule savings.
- Congress should eliminate the ambulatory surgical center (ASC) payment update for 2015, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
- Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs. Moreover, Congress should direct the Secretary to reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization during Medicare-covered stays.
- MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use. In addition, Congress should direct the Secretary to reduce payments to home health agencies with relatively high risk-adjusted rates of hospital readmission.
- Congress should eliminate the update to hospice rates for FY 2015 and adopt a series of previous MedPAC payment reform recommendations.
- Congress should eliminate the 2015 updates for outpatient dialysis services and direct the Secretary to establish a quality measure that assesses poor outcomes related to anemia in the End-Stage Renal Disease Quality Incentive Program, revise the low-volume adjustment, and audit dialysis facilities’ cost reports.
- Congress should eliminate the FY 2015 payment updates for inpatient rehabilitation facilities and LTCHs.
- With regard to Medicare Advantage (MA), MedPAC recommends that Congress: (1) direct the Secretary to determine payments for employer-group MA plans in a manner more consistent with the determination of payments for comparable non-employer group plans; and (2) include the Medicare hospice benefit in the MA benefits package beginning 2016.
Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.
Congressional panels continue to hold hearings to address various health policy issues, including the following:
- The House Energy and Commerce Committee held a hearing on “Allowing Seniors to Keep Their Medicare Advantage Plans If They Like Them." In addition, on March 26, the panel is holding a hearing entitled “Where Have All the Patients Gone? Examining the Psychiatric Bed Shortage,” and on April 1, the Committee will focus on the Food and Drug Administration’s (FDA) proposed changes to generic drug labeling.
- The Obama Administration’s proposed FY 2015 budget for HHS was the subject of hearings by the House Appropriations Committee and the House Ways and Means Committee.
- The Senate Health, Education, Labor and Pensions Committee held hearings on FDA initiatives and priorities, and what the U.S. health care system can learn from other countries.
- On March 26, the Senate Special Committee on Aging is holding a hearing on “Preventing Medicare Fraud: How Can We Best Protect Seniors and Taxpayers?”
On March 18, 2014, CMS published an interim final rule with comment period that implements changes to the payment adjustment for low-volume hospitals and to the Medicare-dependent hospital (MDH) program for fiscal year 2014 in accordance with the Pathway for SGR Reform Act of 2013. The rule, which applies to discharges on October 1, 2013 through March 31, 2014, is estimated to increase Medicare inpatient prospective payment systems (IPPS) payments to these hospitals by an additional 0.24%, or $227 million. Comments on the rule will be accepted until May 13, 2014.
On March 6-7, 2014, the Medicare Payment Advisory Commission (MedPAC) is meeting to discuss a number of Medicare payment and policy issues, including: site-neutral payments for select conditions treated in inpatient rehabilitation facilities and skilled nursing facilities; developing payment policies to promote the use of services based on clinical evidence; measuring quality in Medicare delivery systems; payment for primary care; aligning Medicare benchmarks across payment models; and Medicare Advantage risk adjustment.
CMS has posted its advance rate announcement and draft call letter for Medicare Advantage (MA) and Part D prescription drug plans for 2015. These documents detail updates to payment methodologies, other policies, and program operations for MA organizations and Part D drug plan sponsors. While the factors that impact 2015 rates are complex, CMS generally intends to more closely align MA payments with fee-for-service (FFS) Medicare and improve payment accuracy through a series of rate adjustments. Among other things, CMS notes that its preliminary estimate of the combined effect of the MA growth percentage and the FFS growth percentage is -1.9%. CMS also proposes to apply a -5.16% adjustment to MA plan payments to account for diagnostic coding differences between MA and FFS providers. The call letter addresses numerous policy issues, including encouraging MA organizations to adopt best practices that improve enrollee notification of significant changes in the MA’s provider network (CMS indicates it will consider rulemaking that could limit the timing of such network changes). Comments on the documents will be accepted until March 7, 2014, and the final rate announcement and call letter will be published on April 7, 2014. Also looking ahead, CMS announced in the call letter that it intends to issue a request for information in the coming months about an initiative to partner with private payers to test innovations in health plan design for CMS beneficiaries, including to value-based arrangements, beneficiary engagement and incentives, and/or care coordination.
Recent Congressional hearings have addressed a number of health policy issues, including the following:
- House Science, Space, and Technology Committee hearing entitled “Healthcare.gov: Consequences of Stolen Identity”;
- A House Energy and Commerce Oversight Subcommittee hearing on implementation of the ACA, including a discussion of insurance exchange issues;
- Two House Oversight and Government Reform Committee hearings on HealthCare.gov information security issues;
- A Senate Aging Committee hearing on “Medicare Advantage: Changing Networks and Effects on Consumers”; and
- A House Ways and Means Committee hearing on the impact of the ACA’s employer insurance mandate’s definition of full-time employee on jobs.
On January 6, 2014, CMS released a proposed rule that would revise the Medicare Advantage (MA) and Part D prescription drug program regulations to implement various statutory requirements, strengthen beneficiary protections, improve program efficiencies and payment accuracy; and clarify program requirements. CMS estimates that the proposed rule would reduce Medicare spending by $1.3 billion between 2015 and 2019. The sweeping proposed rule is summarized after the jump.
Among many other things, the proposed rule would:
- Revise the definition of “negotiated prices” to require that all price concessions from pharmacies are reflected in these prices. Under the proposed rule, negotiated prices would mean prices for covered Part D drugs that: (1) the Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the amount such network entity will receive, in total, for a particular drug; and (2) are inclusive of all price concessions and any other fees charged to network pharmacies; and (3) include any dispensing fees; but (4) exclude additional contingent amounts, such as incentive fees, only if these amounts increase prices and cannot be predicted in advance; and (5) may not be rebated back to the Part D sponsor (or other intermediary contracting organization) in whole or in part.
- Modify CMS’s interpretation of the Affordable Care Act’s (ACA) “drug categories or classes of clinical concern” requirement. Instead of mandating coverage of all drug products in a particular class on all Part D formularies, CMS generally would limit protected classes to those meeting criteria established under the regulation. The proposed criteria generally would result in formulary inclusion of all drugs within the antineoplastic, anticonvulsant, and antiretroviral drug classes (subject to proposed exceptions), but the rule would not require all drugs from the antidepressant and immunosuppressant drug classes to be included on all Part D formularies. While antipsychotics would not meet the criteria, CMS proposes that they remain protected at least through 2015 to ensure that CMS has “not overlooked a need for any transitional consideration.”
- Modify rules for “preferred pharmacies” within Part D plans’ pharmacy networks, so as to allow Part D sponsors to reduce copayments or coinsurance at such pharmacies only if they offer consistently lower negotiated prices than are available from other pharmacies in the pharmacy network.
- Modify the “any willing pharmacy” requirement to require plan sponsors to contract with any willing pharmacy able to meet one set of the terms and conditions offered by that plan for that type of pharmacy. CMS also would require that, in establishing its contracted pharmacy network, a Part D sponsor must offer and publicly post standard terms and conditions for network participation for each type of pharmacy in the network, and (1) may not require a pharmacy to accept insurance risk as a condition of participation in the PDP sponsor's contracted pharmacy network, and (2) must offer payment terms for every level of cost sharing offered under its plans (consistent with CMS limitations on the number and type of cost sharing levels) and for every type of similarly-situated pharmacy.
- Limit prescription drug plans sponsors to offering no more than two Part D plans in the same service area.
- Implement an ACA requirement that MA plans and Part D sponsors report and return identified Medicare overpayments.
- Address prescription drug abuse by, among other things, authorizing CMS to revoke a physician’s or eligible professional’s Medicare enrollment if he or she has a pattern of prescribing Part D drugs that is abusive and represents a threat to beneficiary health and safety or otherwise fails to meet Medicare requirements, or if the prescriber’s Drug Enforcement Administration (DEA) certificate of registration or state license is suspended or revoked. The rule also would require that prescribers of Part D drugs enroll in Medicare as a condition of coverage for their prescriptions.
- Establish U.S. citizenship and lawful presence as an eligibility requirement for enrollment in MA and Part D plans.
The official version of the rule will be published on January 10, 2014. CMS will accept comments on the proposed rule until March 7, 2014.
Recent Congressional hearings on health policy issues have included the following, among others:
- A House Small Business Committee hearing focused on the ACA’s Small Business Health Options Program.
- A House Ways and Means Health Subcommittee hearing reviewed “the Challenges of the Affordable Care Act,” focusing on “immediate and long-term challenges Americans face in finding affordable, quality health coverage as a result of the ACA.”
- A December 11 House Energy and Commerce Health Subcommittee hearing is entitled “PPACA (Patient Protection and Affordable Care Act) Implementation Failures: What's Next?”
- A House Oversight and Government Reform Committee hearing was entitled “Roll Out of HealthCare.gov: The Limitations of Big Government,” while a December 12 hearing will focus on “ObamaCare’s Impact on Premiums and Provider Networks.”
- Earlier this month, a House Energy and Commerce Committee hearing reviewed the impact of the ACA on the Medicare Advantage program.
CMS published a final rule on May 23, 2013 that implements new medical loss ratio (MLR) requirements for the Medicare Advantage (MA) program and the Part D prescription drug program. Under the new requirements, which were mandated by the ACA, MA organizations and Part D plan sponsors are required to report their MLR (percentage of revenue used for patient care), and are subject to financial and other penalties for a failure to meet a new statutory requirement that they have an MLR of at least 85%. The rule is generally effective for contract years beginning on or after January 1, 2014.
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).
CMS has issued guidance to state survey agencies explaining adjustments CMS is making to survey and certification operations to "accommodate sequestration with as little impact on the public as possible." The guidance discusses revisions in the frequency and timelines for various surveys and other survey changes in light of a 5% reduction to the FY 2013 survey and certification Medicare budget. CMS also issued a May 1, 2013 memo to Part C and D plans on sequestration, covering rules regarding reducing payments to contracted and non-contract providers, beneficiary liability under sequestration, coverage gap discount program payments, Part D risk corridor reconciliation, and Electronic Health Records (EHR) Incentive Program payments, among other topics. In a related development, President Obama has signed the sequestration order for FY 2014, as required by law, although the Obama Administration's proposed FY 2014 budget, if adopted, would replace sequestration.
On April 1, 2013, CMS released the 2014 rate announcement and final call letter for Medicare Advantage (MA) and Part D prescription drug plans. Notably, under final rate announcement, CMS is forecasting that the final estimate of the combined effect of the Medicare Advantage (MA) growth percentage and the fee-for-service (FFS) growth percentage is 3.3%, compared to -2.2% in the advance call letter, which has the effect of increasing MA plan payment rates. This reversal is a result of CMS building into its spending forecast the assumption that Congress will once again override scheduled cuts in Medicare payments to physicians under the sustainable growth rate formula (thereby allowing MA plan payments to be compared to higher expected FFS spending levels). CMS also is phasing in the alignment of MA benchmarks with Medicare FFS costs and adjusting for diagnostic coding differences between MA plans and FFS providers, along with revising the risk adjustment model.
With regard to Part D, CMS notes that for the first time in the Part D program’s history, the costs of beneficiary coverage are falling, with the 2014 defined standard Part D prescription drug benefit having lower co-payments and deductible than in 2013. CMS also is adopting a number of policy changes for 2014, including requiring Part D plan retail and mail pharmacies to obtain patient consent to deliver a prescription, new or refill, prior to each delivery (CMS also encourages Part D plans to implement this consent requirement for the remainder of this year). While CMS had proposed requiring Part D sponsors to place beneficiary-level prior authorization requirements on certain categories of drugs which may be covered under the hospice or end stage renal disease (ESRD) benefits, so as to ensure that these drugs are appropriately payable under Part D before the prescriptions are filled, the final policy permits sponsors to use other approaches, such as pay-and-chase, to resolve payment responsibility in these situations.
Today, the Obama Administration released its proposed federal budget for fiscal year 2014. As widely reported, the budget incorporates an offer the President made to Congress in December 2012 to achieve nearly $1.8 trillion in additional deficit reduction over the next 10 years, including $401 billion in health savings (the Administration observes that this level of cuts would “provide more than enough deficit reduction to replace the damaging cuts required by the Joint Committee sequestration”).
Virtually all provider types – and drug manufacturers – would be impacted by the budget provisions, if adopted as proposed. The budget proposal is certainly subject to change during the legislative process, particularly as the House and Senate leadership pursue alternative budget frameworks, and indeed, gridlock could prevent significant action on entitlement reform this year. Nevertheless, the proposals bear careful monitoring because they could eventually be included in any long-elusive “grand bargain” to reform the Medicare program and reduce the federal debt.
Highlights of the Administration’s Medicare and Medicaid proposals include the following:
Medicare Provider Payments
- Reform the Medicare physician fee schedule/sustainable growth rate (SGR) formula to provide stable payments followed by payment linked to participation in an “accountable payment model.”
- Reduce Medicare coverage of bad debts from 65% generally to 25% over three years starting in 2014.
- Reduce Medicare indirect medical education add-on payments by $11 billion over 10 years.
- Reduce payment for post-acute care services in several ways.
- Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points, beginning in 2014 through 2023 (the update could not fall below 0%). This provision would save $79 billion over 10 years.
- Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated severity conditions), saving about $2.5 billion over 10 years.
- Equalize IRF and SNF payments for three conditions involving hips and knees, pulmonary conditions, as well as other conditions selected by the Secretary, saving $2.0 billion over 10 years.
- Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2017, saving $2.2 billion over 10 years.
- Implement bundled payments for post-acute care providers (LTCHs, IRFs, SNFs, and HHAs) beginning in 2018. Payments would be bundled for at least half of the total payments for post-acute care providers. Rates based on patient characteristics and other factors would be set to produce a permanent and total cumulative adjustment of -2.85% by 2020. Beneficiary coinsurance would equal levels under current law. This provision would save $8.2 billion over 10 years.
- Align Medicare payments to rural providers with the cost of care, saving $2 billion over 10 years.
- Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results.
Prescription Drug Provisions
- Reduce payment for physician-administered Medicare Part B drugs from 106% of average sales price to 103% of average sales price. Manufacturers would be required to provide a specified rebate in certain instances as determined by the Secretary “to preserve access to care.”
- Provide Medicaid-level drug rebates for brand name and generic drugs provided to beneficiaries who receive Part D low-income subsidies, saving $123 billion over 10 years.
- Close the Medicare Part D donut hole by 2015, rather than 2020, by increasing manufacturer discounts to from 50% to 75% beginning in plan year 2015.
- Lower Medicaid drug costs by clarifying the definition of brand drugs, excluding authorized generic drugs from average manufacturer price calculations for determining manufacturer rebate obligations for brand drugs, making a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, and calculating Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.8 billion over 10 years.
- Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments, saving approximately $7 billion over 10 years.
- Improve program integrity for Medicaid drug coverage by directing states to track high prescribers and utilizers of Medicaid prescription drugs; requiring manufacturers to make full restitution to states for any covered drug improperly reported by the manufacturer on the Medicaid drug coverage list; allowing more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; requiring drugs to be electronically listed with the FDA to receive Medicaid coverage; and expanding penalties for reporting false information for the calculation of Medicaid rebates.
- Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission to stop companies from entering into “pay for delay” agreements and modifying the length of exclusivity on brand name biologics.
Program Integrity/Efficiency Provisions
- Provide $640 million in combined mandatory and discretionary program integrity funding to implement activities that reduce payment error rates, prevent fraud and abuse, target high-risk services and supplies, and enhance civil and criminal enforcement for Medicare, Medicaid, and CHIP.
- Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records and permit exclusion of individuals affiliated with entities sanctioned for fraudulent or other prohibited actions from federal health care programs.
- Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in additional health care settings.
- Exclude radiation therapy, therapy services, and advanced imaging from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary.
- Require prior authorization of advance imaging services.
- Require prepayment review or prior authorization for power mobility devices.
- Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
Other Medicare Provisions
- Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
- Increase the minimum Medicare Advantage (MA) coding intensity adjustment (which decreases MA plan payments to reflect differences in coding practices between Medicare fee-for-service and MA) and align employer group waiver plan payments with MA bids, saving $19 billion over 10 years.
- Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point.
- Expand the availability of Medicare data released to physicians and other providers for performance improvement, fraud prevention, value-added analysis, and other purposes.
- Base Medicaid rates for durable medical equipment on Medicare rates to save $4.5 billion over 10 years.
- Align Medicaid Disproportionate Share Hospital (DSH) payments with expected levels of uncompensated care to save $3.6 billion over 10 years.
- Affirm Medicaid’s position as a payer of last resort when another entity is legally liable to pay claims.
A 131-page Department of Health and Human Services (HHS) “Budget in Brief” summary discusses these provisions in greater detail, and also addresses other HHS agency budget proposals and discusses HHS’s implementation of private health insurance protections and programs under the ACA.
MedPAC has released its annual report to Congress on Medicare Payment Policy, including payment update recommendations for all the major Medicare FFS payment systems and limited Medicare Advantage (MA) recommendations. The report also includes data on the status of the MA and Medicare Part D programs, including information about enrollment, plan options, and beneficiary cost-sharing. Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies. Major recommendations include the following (many of which were included in previous reports):
- Congress should increase payment rates for inpatient and outpatient hospital prospective payment systems by 1%, and require the difference between the statutory update and the recommended 1% update be used to offset payment increases due to documentation and coding changes and to recover past overpayments.
- Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory fee-schedule updates. This proposal, first offered in October 2011, would combine a freeze in payment levels for primary care and, for all other services, annual payment reductions followed by a freeze. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments to underpriced services, and changes to the structure of accountable care organization shared savings payments.
- Congress should eliminate the ambulatory surgical center (ASC) payment update for 2014, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
- Congress should eliminate the skilled nursing facility market basket update, and direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing payment as soon as practicable.
- MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use, and expand program integrity efforts.
- Congress should eliminate the update to hospice rates for FY 2014 and adopt a series of previous MedPAC recommendations addressing payment and program integrity reforms.
- Congress should eliminate the 2014 updates for outpatient dialysis services, inpatient rehabilitation facilities, and long-term care hospitals.
- With regard to Medicare Advantage, Congress should allow the authority for most MA chronic care special needs plans (SNPs) to expire (with certain exceptions) and allow MA plans to enhance benefit designs for individuals with specific chronic or disabling conditions. MedPAC also recommends that Congress permanently reauthorize dual-eligible special needs plans (D–SNPs) that assume clinical and financial responsibility for Medicare and Medicaid benefits (with certain changes) and allow the authority for all other D–SNPs to expire.
The GAO has issued a report on the methodology CMS uses to calculate a risk adjustment for Medicare Advantage (MA) plans, updating an analysis in provided in January 2012. The GAO previously reported that differences in diagnostic coding between MA plans and Medicare FFS resulted in inaccurately-high MA risk scores and excessive payments to MA plans. While CMS made an adjustment for coding differences in 2010, the GAO concluded that the adjustments were insufficient. Based on an analysis of two years of data available since the GAO completed its analysis for the January 2012 report, the GAO found that the cumulative impact of coding differences on risk scores increased from 2010 through 2012, and that CMS's adjustment to risk scores to account for diagnostic coding differences was too low. The GAO estimates that as a result, at least $3.2 billion in excess payments were made to MA plans over three years. The GAO continues to recommend that CMS update its methodology to more accurately account for differences in diagnostic coding between MA plans and Medicare FFS.
Due to continuing budget gridlock in Washington, sequestration has been triggered – meaning automatic cuts to a wide range of federal programs, including Medicare payments to providers and health plans. While the Centers for Medicare & Medicaid Services has not yet announced detailed plans for implementing the sequester requirements for its programs, this Alert answers some basic questions about sequestration and how it will impact the Medicare program. Among other things, the Alert addresses what Medicare spending is impacted by sequestration, when the Medicare cuts start, and how long sequestration will last.
CMS Proposes Medicare Advantage, Part D Drug Plan Medical Loss Ratio Rule and Advance 2014 Rate Information
On February 15, 2013, CMS released a proposed rule implementing the ACA’s medical loss ratio (MLR) requirements for Medicare Advantage (MA) and prescription drug (Part C and Part D) plans. Under these provisions, which are intended to limit plan spending on marketing, overhead, and profit, MA organizations and Part D plan sponsors will be required to report their MLR, reflecting the percentage of contract revenue spent on clinical services, prescription drugs, quality improving activities, and direct benefits to beneficiaries in the form of reduced Part B premiums. CMS has generally aligned the Medicare MLR rules with commercial MLR regulations that went into effect January 1, 2011. Plan sponsors that do not have an MLR of at least 85% will be subject to payment remittance; if a plan sponsor fails to meet MLR requirements for more than 3 consecutive years, it also will be subject to enrollment sanctions and, after 5 consecutive years, to contract termination. CMS expects the first year of MLR reporting to occur in 2015 for the 2014 contract year. Comments on the proposed rule will be accepted for 60 days. The official version of the proposed rule will be published in the Federal Register on February 22, 2013.
CMS also has released the 2014 Advance Notice and draft Call Letter, which detail updates to payment methodologies, other policies, and program operations for MA organizations and Part D drug plan sponsors. CMS notes that for the first time in the Part D program’s history, the costs of beneficiary coverage are falling, with 2014 defined standard Part D prescription drug benefit having lower co-payments and deductible than in 2013. CMS also is proposing a number of policy changes for 2014, including requiring Part D plan retail and mail pharmacies to obtain patient consent to deliver a prescription, new or refill, prior to each delivery. In addition, CMS proposes to require that Part D sponsors place beneficiary-level prior authorization requirements on certain categories of drugs which may be covered under the hospice or end stage renal disease (ESRD) benefits, so as to ensure that these drugs are appropriately payable under Part D before the prescriptions are filled. Comments will be accepted until March 1, 2013. The final 2014 Rate Announcement and Call Letter will be published on April 1, 2013.
The OIG recently identified barriers to the effectiveness of the Medicare Drug Integrity Contractor (MEDIC) in performing Medicare Parts C and D benefit integrity activities between April 2010 and March 2011. For instance, the MEDIC reported that it does not have access to centralized Part C data, it lacks access to certain prescription drug event data, and there is no mechanism to recover payments from Part C or Part D plan sponsors when law enforcement agencies do not accept these cases for further action. Moreover, while the MEDIC has benefit integrity responsibility for both Medicare Parts C and D, the OIG determined that Part C investigations and case referrals represented a small percentage of its activities (only 8% of investigations and referrals involved Part C only; the majority were Part D only). The OIG makes a series of recommendations to, among other things: improve the data available to the MEDIC (including information from pharmacies, physicians, and pharmacy benefit managers); expand the ability of the MEDIC to recover payments from Part C and Part D plan sponsors; and require Part C and Part D plan sponsors to refer potential fraud and abuse incidents to the MEDIC. For details, see the full report, MEDIC Benefit Integrity Activities in Medicare Parts C and D.