MedPAC Issues 2014 Report to Congress on Medicare Payment Policy

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.

MedPAC Meeting to Address Various Medicare Payment Policies (March 6-7)

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.

2013 MedPAC Data Book Released

The Medicare Payment Advisory Commission (MedPAC) has released its 2013 Data Book on Health Care Spending and the Medicare Program. The publication provides information on national health care and Medicare spending and utilization, Medicare and dual-eligible beneficiary demographics, Medicare quality, Medicare beneficiary and other payer liability, and related issues.

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.

MedPAC's March 2013 Report to Congress

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.

 

Congressional Hearings

There have been many Congressional health policy hearings recently, with more scheduled. Highlights include the following:

  • House Ways and Means Committee. Recent hearings have examined traditional Medicare’s benefit design and tax-related provisions in the ACA, and on March 15, the Health Subcommittee is holding a hearing on the Medicare Payment Advisory Commission's annual March Report to the Congress.
  • House Energy and Commerce Committee. The Health Subcommittee has reviewed innovative ways to fight health care fraud and abuse, and the panel has scheduled hearings on the impact of the ACA on jobs (March 13) and health insurance premiums (March 15). A March 18 hearing will focus on “Saving Seniors and Our Most Vulnerable Citizens from an Entitlement Crisis.”
  • Senate Hearings. The Finance Committee held a hearing on the status of CMS delivery reform efforts. A Health, Education, Labor and Pensions Committee hearing examined animal drug user fees. The Commerce Committee has reviewed transparency in the individual health insurance market. An Aging Committee hearing focused on ways to strengthen Medicare.

MedPAC Meeting on Medicare Policy Issues (Nov. 1-2)

MedPAC is meeting on November 1 -2, 2012 to discuss a variety of Medicare policy issues, including: Medicare payment for ambulance services, reducing the hospitalization rate for Medicare beneficiaries receiving home health care, Medicare payment for outpatient therapy services, geographic adjustment of payments for the work of physicians and other health professional, the role of provider prices in determining private-plan Medicare costs relative to fee-for-service Medicare, Medicare Advantage special needs plans, and Medicare payment differences for ambulatory care services across settings.

MedPAC Meeting on Medicare Policy Issues (Sept. 6-7)

On September 6 and 7, 2012, MedPAC is meeting to discuss a variety of Medicare issues, including reforming the traditional benefit package, bundling, readmissions, and physical therapy policy. More information, including issue briefs for each of the topics, is available on the MedPAC web site.

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.

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.

June Congressional Health Policy Hearings

Several Congressional committees have held hearings this month on health policy issues, including the following:

MedPAC Issues March 2012 Medicare Recommendations

On March 15, 2012, MedPAC released its annual report to Congress on Medicare payment policy.  Major recommendations for 2013 are highlighted after the jump.

  • Congress should increase acute care hospital inpatient and hospital outpatient payment rates by 1% in 2013; gradually recover past inpatient overpayments due to documentation and coding changes; and gradually reduce outpatient hospital payment rates for evaluation and management office visits to the rate of physician office visits for the same service.
  • 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. The proposal, first announced in October 2011, would freeze rates for primary care services for 10 years, while other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze. MedPAC also endorsed budget-neutral changes to improve data on which MPFS relative value unit (RVU) weights are based and to redistribute payments to underpriced services, and made recommendations regarding the structure of accountable care organization shared savings payments.
  • Congress should eliminate the 2013 update for skilled nursing facilities (SNFs), and direct the Secretary to revise the SNF payment system to redistribute payments away from intensive therapy care that is unrelated to patient care needs and toward medically complex care. The Secretary also should begin rebasing payments in 2014, with an initial reduction of 4% and additional reductions thereafter to align with providers’ costs. The Secretary also should reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization.
  • Congress should eliminate the 2013 market basket update for inpatient rehabilitation facilities and long-term care hospitals, and update the outpatient dialysis payment rate by 1%.
  • Congress should update payment rates for ambulatory surgical centers (ASCs) by 0.5% for 2013, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
  • Congress should direct the Secretary to: begin a two-year rebasing of home health rates in 2013; revise the case-mix system to rely on patient characteristics rather than therapy visits; establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use; and expand certain program integrity efforts.
  • Congress should increase hospice rates by 0.5% for FY 2013 and adopt a series of previous MedPAC recommendations addressing payment and program integrity reforms.
  • Congress should modify Part D low-income subsidy copayments for beneficiaries with incomes at or below 135% of poverty to encourage the use of generic drugs when available in selected therapeutic classes (with safeguards to prevent substitutions that are not clinically appropriate).

While MedPAC recommendations are not binding, they are often considered by lawmakers in developing Medicare legislation.

MedPAC to Discuss Medicare Payment Policies (Dec. 15 & 16)

MedPAC is meeting on December 15 and 16, 2011 to discuss payment adequacy of Medicare payment for a variety of provider types, along with ways to encourage the use of lower-cost medications by Medicare Part D low-income subsidy beneficiaries.

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.

MedPAC Endorses Medicare SGR Proposal, With Offsetting Medicare Cuts

On October 6, 2011, the Medicare Payment Advisory Commission (MedPAC) voted to recommend that Congress repeal and replace the statutory sustainable growth rate (SGR) formula for updating the Medicare physician fee schedule (MPFS). Without legislative action, CMS estimates that the SGR formula would result in an almost 30% MPFS cut in 2012. As discussed in a previous blog posting, the controversial MedPAC plan – which would require Congressional approval -- would freeze current Medicare MPFS rates for primary care services for 10 years, while other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze. MedPAC offered a list of options for Congress to consider if it decides to offset SGR repeal costs (estimated at about $200 billion over 10 years) within the Medicare program. In addition to the SGR proposal, MedPAC endorsed budget-neutral changes to improve data on which MPFS relative value unit (RVU) weights are based and to redistribute payments to underpriced services. MedPAC also recommended that CMS increase the shared savings opportunity for physicians and health professionals who join or lead “two-sided” risk ACOs (where providers can receive bonuses or financial penalties based on performance).

MedPAC Offers Medicare SGR Proposal, With Offsetting Medicare Cuts

At a recent meeting, the Medicare Payment Advisory Commission (MedPAC) discussed a recommendation to repeal and replace the statutory sustainable growth rate (SGR) formula for updating the Medicare physician fee schedule (MPFS). In recent years, the SGR formula has produced steep cuts in the MPFS update, which Congress has repeatedly blocked through legislation, For 2012, CMS estimates that the SGR formula would result in an almost 30% MPFS cut in the absence of Congressional action. MedPAC is considering an SGR reform proposal that would repeal the SGR and replace it with 10-years of statutory fee schedule updates. The plan would freeze current Medicare payment levels for primary care services, and all other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze.  MedPAC also has released a list of potential offsetting Medicare cuts that would raise $235 billion over 10 years to finance the reforms.  The proposals include, among others: reduced Medicare payments for many Medicare provider types and services; expanded DMEPOS competitive bidding; various reductions in payments to Medicare Advantage plans; prior authorization for certain imaging services; changes to certain Part D cost sharing; prepayment review of power wheelchairs; drug manufacturer rebates for dual eligibles; bundled payments for hospitals and physicians; payment of hospital outpatient evaluation and management visits at MPFS rates; establishment of least costly alternative authority; expansion of readmissions policies for additional provider types, and validation of physician orders for high cost services.

MedPAC 2011 Data Book Released

MedPAC has released its 2011 Data Book on “Healthcare Spending and the Medicare Program.” The Data Book provides information on national health care and Medicare spending, Medicare beneficiary demographics, Medicare quality and access, and Medicare beneficiary and other payer liability. It also includes data on various provider types, such as data on Medicare spending, beneficiary utilization of the service, number of providers, volume, length of stay, and margins.

MedPAC Recommends Changes to Medicare Ancillary Services Policies

The Medicare Payment Advisory Commission (MedPAC) has released its June 2011 "Report to the Congress: Medicare and the Health Care Delivery System." Most notably, the report includes a number of recommendations that have generated much controversy to address the growing use of ancillary services, particularly non-hospital diagnostic imaging services. According to the report, MedPAC seeks to “improve payment accuracy to reduce providers’ financial incentives to order more ancillary services, while strengthening clinical support tools to improve appropriate use of these services.” Recommendations in this area include the following: (1) the Secretary should accelerate and expand efforts to package discrete services in the physician fee schedule into larger units for payment; (2) Congress should direct the Secretary to apply a multiple procedure payment reduction to the professional component of diagnostic imaging services provided by the same practitioner in the same session; (3) Congress should direct the Secretary to reduce the physician work component of imaging and other diagnostic tests that are ordered and performed by the same practitioner; and (4) Congress should direct the Secretary to establish a prior authorization program for practitioners who order substantially more advanced diagnostic imaging services than their peers. In addition to the ancillary services recommendations, the report includes chapters examining: the Medicare physician fee schedule Sustainable Growth Rate formula; Medicare's fee-for-service benefit design; enhancing Medicare's technical assistance to and oversight of providers; coordinating care for dual-eligible beneficiaries; federally-qualified health centers; and variation in private-sector payment rates. Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.  

MedPAC Issues Recommendations on the Use of Diagnostic Services

This post was written by Paul Pitts.

On April 7, 2011, the Medicare Payment Advisory Commission (MedPAC) approved new recommendations to Congress regarding Medicare payment for imaging and other diagnostic tests. The recommendations reflect a shift in MedPAC’s policies from advocating for tighter controls on physician in-office services to addressing what MedPAC views as inaccuracies in payment and inappropriate use of diagnostic imaging. MedPAC approved the following recommendations: (1) the Secretary should accelerate and expand efforts to package discrete services in the physician fee schedule into larger units for payment; (2) the Congress should direct the Secretary to apply a multiple procedure payment reduction to the professional component of diagnostic imaging services provided by the same practitioner in the same session; (3) the Congress should direct the Secretary to reduce the physician work component of imaging and other diagnostic tests that are ordered and performed by the same practitioner; and (4) the Congress should direct the Secretary to establish a prior authorization program for practitioners who order substantially more advanced diagnostic imaging services than their peers. The recommendations will appear in MedPAC’s June report to Congress.

Congressional Hearings on ACA, Medicare & Other Health Policies

Several Congressional committees have held hearings on various aspects of the ACA, including: A House Oversight Health Care Subcommittee hearing on “Obamacare: Why The Need For Waivers?"; a Senate Finance Committee hearing on "Health Reform: Lessons Learned During the First Year"; a Senate Health, Education, Labor and Pensions Committee hearing examining "Health Insurance Exchanges and Ongoing State Implementation of the Affordable Care Act” and House Energy and Commerce Health Subcommittee hearings on "The Implementation and Sustainability of the New, Government-Administered Community Living Assistance Services and Supports (CLASS) Program" and on the "Patient Protection and Affordable Care Act in Pennsylvania: One Year of Broken Promises." Looking ahead, the Energy and Commerce Committee has scheduled a March 30 hearing on the ACA’s impact on budget and jobs, and an April 1 hearing on the ACA’s “High Risk Pool Regime: High Cost, Low Participation," and the House Appropriations Committee is holding a hearing on April 1 to discuss health reform fundingIn other areas, the House Homeland Security Emergency Preparedness Subcommittee held a hearing on "Ensuring Effective Preparedness, Response, and Recovery for Events Impacting Health Security." The House Ways and Means Committee held a hearing to examine the Medicare Payment Advisory Commission's (MedPAC) annual report to Congress on Medicare payment policies (discussed in greater detail below). The House Budget Committee held a hearing on "Fulfilling the Mission of Health and Retirement Security."