MedPAC Considers Updates for March 2016 Report - McDermott+Consulting

MedPAC Considers Updates for March 2016 Report

The Medicare Payment Advisory Commission (MedPAC) met in Washington DC on December 10, 2015, to consider the status of the Medicare Advantage (MA) program, and to assess the adequacy of Medicare payments for hospital inpatient and outpatient services as well as ambulatory surgical center (ASCs) and physician services. By law, each year, the Commission is required to review Medicare payment policies and make recommendations to Congress on needed changes. MedPAC is expected to release a report with its findings and recommendations in March 2016, but the panel telegraphs its leanings through discussions at public meetings where the subjects of the report are discussed. Highlights from the first day of the meeting follow.

Prior to beginning the discussion on the various updates, Chairman Crosson reminded the audience that when MedPAC considers whether to recommend a positive update, their assumption is that if access is determined to be good, a positive update is not warranted. Departing from previous meetings, while the Commissioners considered draft recommendations, no formal votes were taken. Instead, expedited voting is expected to take place during the January 2016 meeting on those draft recommendations where there is general support and consensus.

Medicare Advantage Update

Staff presented an update on enrollment, availability, benchmarks, bids and payment. Data presented by MedPAC staff indicates that MA enrollment continues to grow faster than Medicare fee-for-service (FFS) participation. Currently, 30 percent of Medicare beneficiaries are enrolled in an MA plan, and access to MA plans seems to be adequate, according to MedPAC staff, with 99 percent of beneficiaries having an option of at least one type of MA plan in their region. Data also indicated that there was some progress towards financial neutrality with Medicare FFS. MedPAC supports the concept of financial neutrality, where the Medicare program pays the same amount, adjusting for the risk status of each benchmark, regardless of which Medicare option (FFS or MA) a beneficiary chooses.

The first recommendation considered by MedPAC dealt with MA benchmarks, the maximum amount Medicare will pay a plan in each county within an MA plan’s service area. County benchmarks are capped at the county’s FFS spending. MedPAC is concerned that benchmark caps create inequities, perpetuate outdated spending patterns, and mostly result in cuts to quality bonuses. Commissioners considered the following recommendation:

The Congress should eliminate the Section 1853(n)(4) cap on the benchmark amounts and the doubling of the quality increases in specified counties.

The implication of this recommendation would be redistribution of plan payments. As a result, some plans would experience increases and others decreases. While there was general support for the recommendation, Commissioners requested more analysis on how this recommendation would impact individual plans. Staff is expected to provide more information at the next meeting.

The Commissioners also evaluated risk adjustments within the MA program. CMS pays MA plans a risk-adjusted capitated rate for each enrollee. Because there is a difference in coding intensity between MA plans and FFS, by law CMS must make adjustments for this difference in coding intensity. The Commissioners considered whether to eliminate for scoring purposes diagnoses made during Health Risk Assessments (HRAs) conducted by MA plans where there is no encounter associated with the HRA. MedPAC believes this change would make the adjustment more equitable because Medicare payments to MA plans aim to cover the plan’s cost to treat a patient. MedPAC has suggested that if diagnosis is captured through an HRA, and there is no service being provided to treat it, the diagnosis should not be included for risk adjustment purposes. MedPAC considered the following draft recommendation:

The Congress should direct the Secretary to

  • Develop a risk adjustment model that uses two years of FFS and MA diagnostic data and does not include diagnoses from health risk assessments from either FFS or MA, and
  • Then apply a coding adjustment that fully accounts for the remaining differences in coding between FFS Medicare and Medicare Advantage plans.

Generally, Commissioners supported the recommendation. It is anticipated that MedPAC will conduct an expedited vote on this draft recommendation during the January 2016 meeting.

Hospital Inpatient and Outpatient Services Update

MedPAC Commissioners also considered payment updates for Medicare hospital inpatient and outpatient services. Staff presented data on beneficiary access to care, provider access to capital, quality of care and cost growth margins.

Overall, MedPAC found that access to hospital care is good. According to MedPAC, data indicate the following:

  • Overall use of hospital services is stable;
  • Hospital occupancy rate data indicate excess inpatient capacity;
  • Access to capital, construction spending, and hospital employment are strong; and
  • A larger share of payments are subject to quality performance incentives.

MedPAC staff introduced this year a new measure to analyze hospital services: marginal profit. Marginal profit compares Medicare FFS payment rates to the marginal costs of providing those services. According to MedPAC staff, hospital marginal profit was 10 percent in 2014, which MedPAC staff concluded would incentivize hospitals with excess capacity to take on additional Medicare patients.

The issue of 340B drugs also was addressed. The acquisition costs of Part B drugs for hospitals participating in the 340B program are much lower than the amount Medicare pays for those drugs. As a result, 340B participating hospitals realize substantial margins from Part B drugs. In recent meetings, Commissioners discussed whether Medicare payment rates for Part B drugs purchased through the 340B program should be reduced. Such a change would reduce the hospitals’ margin from the drug purchase, but it would allow taxpayers and beneficiaries to share in 340B savings. The Inspector General for the US Department of Health and Human Services recently made similar recommendations.  MedPAC considered the following draft recommendations:

Congress should direct the Secretary to:

  • Update inpatient and outpatient payments by the amount specified in current law (projected to be 1.65%),
  • Reduce payment rates for 340B hospitals’ Part B drugs by 10 percent of the Average Sales Price (ASP),
  • Direct the program’s savings from reducing Part B drug payment rates to the Medicare-funded uncompensated care pool, and
  • Distribute uncompensated care payments using data from the Medicare cost reports schedule S-10. The use of S-10 uncompensated care data should be phased in over three years.

Commissioners generally supported the first recommendation related to the payment update. The latter three recommendations related to the 340B program raised a number of technical questions and philosophical concerns. For example, multiple Commissioners queried whether MedPAC’s recommendations would confront the intent of the 340B program, and whether that would be an appropriate recommendation for the Commission. This topic will be debated further at the next meeting.

Physician Services Update

Data provided by MedPAC staff indicate that payments for physician and other health professional services continue to be adequate: access indicators are stable, small increase in volume of services, ratio of Medicare payments to private payments is stable, and rates of potentially-avoidable hospitalizations declined. Surveys conducted by MedPAC staff did find one issue that caused some concern – minority beneficiaries had more trouble accessing services than their white counterparts. MedPAC staff said they would continue to monitor these trends. Commissioners considered the following draft recommendation:

The Congress should increase payment rates for physician and other health professional services by the amount specified in current law for CY 2017.

Overall Commissioners supported this recommendation, and it is expected that there will be an expedited vote on it during the January 2016 MedPAC meeting.

ASC Services Update

Data provided by MedPAC staff indicated that in 2014, access to ASC services was stable, access to capital was adequate and revenue per FFS beneficiary increased. Commissioners considered the following draft recommendation, which is similar to the position adopted by MedPAC in recent years:

Congress should eliminate the update to the payment rates for ambulatory surgical centers for calendar year 2017. The Congress should also require ambulatory surgical centers to submit cost data.

Overall Commissioners supported this draft recommendation, agreeing that since access appears stable, it would not be necessary to recommend a positive update.

Commissioners also revived the hotly debated topic of whether ASCs should submit cost data. After a fairly robust discussion, it was concluded that MedPAC would look more deeply into the ASC cost reporting issue next year.