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MedPAC calls for fewer pay models, cutting Medicare Advantage spending

The Medicare Payment Advisory Commission, at its meeting on Thursday, approved several Medicare policy recommendations that will appear in its June report to Congress.

Alternative Payment Models

The congressional advisory panel will recommend that CMS simplify its approach to alternative payment models. Commissioners approved an updated version of the recommendation presented by MedPAC’s staff at last month’s meeting.

CMS “should implement a more harmonized portfolio of fewer alternative payment models that are designed to work together to support the strategic objectives of reducing spending and improving quality,” the recommendation said.

MedPAC’s commissioners and staff in past meetings emphasized that CMS’ Center for Medicare and Medicaid Innovations should adjust its approach to testing new ways to pay providers because they haven’t lived up to their promise.

According to MedPAC’s research, clinicians often face weaker incentives to change how they deliver care when they participate in several models simultaneously, or beneficiaries are attributed to multiple alternative payment models. The crowded landscape of payment models can also make it tougher for policymakers and researchers to uncover any specific model’s effects, MedPAC said.

But some commissioners worried that the recommendation wouldn’t do enough to rein in healthcare spending or improve quality, even if it were put into practice, because only 20{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} of clinicians take part in multiple payment models.

“There’s a strained argument that the 20{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} overlap could have a significant effect on the disappointing results we’re seeing,” MedPAC commissioner Bruce Pyenson said. He supported the recommendation.

Pyenson blamed the modest success of alternative payment models on the continued viability of fee-for-service reimbursement in the U.S. healthcare system.

“It’s really important that we don’t lose sight of that,” he said. “We shouldn’t forget the kinds of expectations many of us had (for value-based care) over the past decade. I’m worried because this seems to be an example of lowered expectations.”

Medicare Advantage

MedPAC also voted for a new Medicare Advantage benchmark policy, which would cut federal spending on Medicare Advantage plans.

The changes would adjust how CMS ties Medicare Advantage payments to fee-for-service spending, increase the rebate to at least 75{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} and adopt a discount rate of at least 2{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4}. The recommendation would also apply earlier benchmark-related recommendations by the commission, like using geographic markets as payment areas and ending the pre-ACA cap on benchmarks. Some commission members said they would favor a discount rate significantly higher than the 2{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} cited in the recommendation.

Commissioners said that Medicare Advantage plans had some benefits for the Medicare program and its enrollees. But many were concerned about how the program financed supplemental benefits for Medicare Advantage plans, suggesting there were more efficient ways to do it.

MedPAC voted to recommend that Part B cover all vaccines and their administration with no beneficiary cost-sharing. It also approved modifying Medicare’s payment rate for Part B-covered preventative vaccines. Under the change, Medicare would pay 103{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} of the average wholesale price instead of 95{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4}, which is the current policy. It would also require vaccine makers to report average sales price data to CMS for analysis.

MedPAC said the policy would increase Medicare spending by $250 million to $750 million over one year and $1 billion to $5 billion over five years. The change would likely improve Medicare beneficiaries’ access to care since more of them have Part B coverage than Part D coverage. It would also lower cost-sharing for some enrollees. Likewise, by reimbursing more vaccines under Part B instead of Part D, more types of providers would be able to administer vaccines.

Outpatient Drugs
MedPAC also recommended that CMS change its pass-through drug policy for outpatient services to only cover drugs and biologics tied to a service and that are clinically superior. It also said that CMS should specify that its separately payable, non-pass-through policy for outpatient care only applies to drugs and biologics that meet a cost target and are related to the reason for a visit.

The commission said the recommendation would have no short-term effect on Medicare spending but could create savings in the longer term. MedPAC thinks the changes would encourage providers to use more cost-effective drugs with no impact on beneficiaries’ access to care.

MedPAC thinks the changes are necessary to rein in outpatient drug spending. Currently, both pass-through and separately payable, non-pass-through policies include drugs related to the reason for a visit. But there is a financial advantage for 340B providers to use pass-through drugs instead of similar separately payable, non-pass-through drugs because Medicare reimburses them at a higher rate.

Skilled Nursing Facilities
The congressional advisory panel also approved two recommendations for Medicare’s skilled nursing facility value-based purchasing program.

It recommended that Congress replace the current program with a new one that scores a small set of performance measures; ensures reliable measure results; minimizes cliff effects; uses peer grouping to account for differences in social risk factors; and completely distributes a provider-funded pool of dollars as rewards and penalties.

According to the commission, the policy would not affect program spending and stay budget neutral. It may improve access to care for beneficiaries with high social risk or medically complex and boost quality. The change could also improve equity across skilled nursing facilities with different patient mixes and encourage them to improve their performance.

In addition, MedPAC will recommend that CMS start reporting patient experience measures for skilled nursing facilities, an initiative that’s currently in development. The commission said the recommendation wouldn’t affect Medicare spending but could increase CMS’ administrative costs. It shouldn’t affect beneficiaries’ access to care, but it could improve quality and raise administrative expenses for skilled nursing facilities.

CMS should combine the new payment model with other tools to boost performance among skilled nursing facilities, MedPAC said. Those tools include public reporting of provider performance, targeting technical assistance to low-performing providers and changing CMS’ requirements of participation and special focus facility program to include performance under the new model.

Graduate Medical Education

MedPAC recommended that CMS take an evidence-based approach to indirect medical education adjustments for inpatient and outpatient Medicare payments, saying it would better reflect teaching hospitals’ additional costs by redistributing some payments to outpatient care. According to the congressional advisory panel, the changes would reflect: the range of settings that residents train in; the effects of residents on costs; and the costs of treating Medicare Advantage beneficiaries. It would also encourage teaching hospitals to deliver care in outpatient settings if it could be done safely, unlike the current policy.

The policy would give CMS the ability to implement more reforms with stakeholder input, MedPAC said. For example, the agency could waive beneficiary cost-sharing on outpatient indirect medical education payments to encourage beneficiaries to get care in lower-cost settings.

According to MedPAC, the changes would not affect spending over a one- or five-year period. But it could encourage more outpatient care, which would increase spending on indirect medical education and lower spending on inpatient services. The commission doesn’t expect the changes to affect care access but could cause a slight increase in Part B cost-sharing and premiums.

A number of commissioners hoped MedPAC would continue to study and refine graduate medical education, noting that the current system doesn’t sufficiently address critical issues like a lack of rural clinicians or the growth of non-physician providers.

“This is actually an enormous subsidy to educate a particular type of provider in a particular type of setting,” MedPAC commissioner Betty Rambur said. “The policies were developed initially in a physician-centric, hospital-centric world that no longer exists.”

Pyenson worried that the policy change might incentivize teaching hospitals to buy up physician practices they otherwise wouldn’t acquire. But MedPAC commissioner Dr. Wayne Riley said that shouldn’t be a concern because teaching hospitals don’t decide residencies based on reimbursement.

“Throughout my whole career, I’ve never made a decision, nor have I ever seen a decision made about residents’ slots, based on GME funding,” he said. “The biggest headwind we’ve all had as medical educators to put more residents in outpatient settings is the residency review committees and the … very strict guidelines.”


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