MedPAC assesses Medicare payment adequacy, makes 2017 recommendations
The Medicare Payment Advisory Committee (MedPAC) March 2016 report to Congress recommends an elimination of payment update increases in 2017 for six Medicare fee-for-service (FFS) payment systems (long-term care hospital, hospice, ambulatory surgical center, skilled nursing facility, home health, and inpatient rehabilitation facilities). However, for four of these six FFS systems, MedPAC makes recommendations to improve payment accuracy. For the other FFS systems (hospital inpatient and outpatient, physician and other health professionals, and outpatient dialysis) MedPAC recommends the 2017 payment updates under the current law. The report also makes two recommendations to improve payments in the Medicare Advantage (MA) program.
FFS payment accuracy recommendations. MedPAC makes the following recommendations to improve payment accuracy in four FFS systems:
Require ambulatory surgical centers to submit cost data.
Freeze skilled nursing facility payment rates for two years while the payment system is revised and then have the HHS Secretary decide whether additional adjustments are needed.
Rebase the home health payment system and eliminate therapy visits as a payment factor.
Conduct focused medical reviews of inpatient rehabilitation facilities with unusual patterns of case mix and coding, and expand the outlier pool to redistribute payments more equitably across cases and providers.
2017 payments under current law. For inpatient and outpatient hospitals, outpatient dialysis facilities, and physicians and other health professionals, MedPAC recommends that Congress increase payment rates by the amount specified in current law for calendar year 2017.
For the inpatient and outpatient hospital payment systems, the recommendations under the current law include reducing Medicare payment rates for section 340B hospitals’ separately payable Part B drugs by 10 percent of the average sales price and directing those savings to Medicare beneficiaries and the uncompensated care pool. MedPAC further recommends that uncompensated care payments be distributed using specific data from the Medicare cost reports’ Worksheet S-10. The use of S-10 uncompensated care data would be phased in over three years.
MA program. MedPAC makes two recommendations to improve payments under the MA program. First, eliminate the cap on benchmark amounts and the doubling of quality increases in specified counties. Second, develop a revised risk adjustment model that uses two years of FFS and MA diagnostic data and apply a coding adjustment that fully accounts for the difference in coding in FFS and MA plans.
Part D program. MedPAC makes no specific recommendation regard the Part D prescription drug program. However, it described the status of the program by offering the following observations:
There are three types of payments Medicare makes to plan sponsors: (1) direct subsidy payments (which provide the resources for plans to pay for enrollees’ care before they reach the catastrophic limit); (2) low income cost sharing payments (which subsidize cost sharing for low income subsidy enrollees); and (3) reinsurance payments (which subsidize spending in the catastrophic portion of the benefit).
Between 2007 and 2014, spending on the direct subsidy grew by only 1.5 percent annually, while spending on low-income cost sharing and reinsurance grew by 5.5 and 19.5 percent annually, respectively.
In 2014, Medicare spent $78 billion for the Part D benefit. Program expenditures increased by nearly 15 percent from the year before, with much of that increase due to spending for new hepatitis C drugs.
Between December 2012 and December 2013, the index of Part D prices that accounts for generic substitution grew by 6.6 percent, the highest one-year growth rate observed since the program began.
MedPAC notes that the 2013 increase in the average price index occurred even as the share of generic prescriptions in Part D rose from 81 percent in 2012 to 84 percent in 2013. As such, MedPAC concludes that while generics have played an important role in constraining overall price growth, brand price growth has begun to have a more dominating effect.
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