The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on March 2-3, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

Our five biggest takeaways from the March meeting are as follows:

1. MedPAC proposes a draft recommendation for the implementation of a prospective payment system for post-acute care settings.

MedPAC determines a PAC PPS could be implemented as soon as 2021. In considering the various factors, MedPAC proposes a draft recommendation for a PAC PPS. Recommendations include a 3 year transition period for implementation, a 3% reduction in aggregate payments, granting the Secretary the authority for periodic revisions and rebasing of payments to align with the current cost of care, and the incorporation of uniform functional assessment data into the risk adjustment method, when such data is available. MedPAC created the recommendations with the goals of lowering spending, correcting inequities in current payments that favor certain patients and providers over others, redistributing payments across providers to narrow disparities in profitability, and increasing the willingness of providers to treat all types of patients so they will be easier to place upon discharge. These recommendations are only a draft, and particularly the percent of the reduction in payments seems subject to increase. MedPAC will discuss and vote on these recommendations at the April meeting.

2. MedPAC discusses proposed recommendations to address the rapid growth in Part B drug spending.

MedPAC discusses the package of policy reforms developed over the last few years that have been refined following feedback in the January meeting. The draft recommendations are comprised of both short-term and long-term strategies to reduce Part B drug spending. The short-term strategies including requiring manufacturers paid under Part B to submit ASP data, with a civil monetary penalty for failure to report, reducing wholesale acquisition cost-based payment to ASP plus 3 percentage points, requiring manufacturers to pay a rebate to Medicare when the ASP for a product exceeds an inflation benchmark, and requiring the Secretary to use a common billing code to pay for a reference biologic and its biosimilars. The first long-term strategy proposed is the creation and implementation of a new alternative, voluntary program called the “Drug Value Program” no later than 2022. Under this system, Medicare would contract with private vendors to negotiate prices for Part B products, not to exceed 100% ASP. Providers would pay negotiated prices for DVP products and Medicare would pay providers the negotiated price plus an administrative fee, with the opportunity for shared savings. The second long-term strategy, also to be completed no later than 2022 or upon implementation of the DVP, is to reduce the ASP add-on under the ASP System. MedPAC will discuss and vote on these recommendations at the April meeting.

3. MedPAC considers proposals to refine MIPS and A-APM’s and to encourage primary care.

MedPAC reviews proposals for two issues related to clinician payments: 1) refining MACRA and 2) finding better methods to support primary care.  MedPAC considers the MIPS system under MACRA to be inadequate at identifying high value physicians, and thus contemplates a series of ideas designed to remedy this problem, including replacing all measure reporting by clinicians with patient experience measures, designing policies to move clinicians from MIPs to A-APMs, and making A-APMs relatively more attractive for clinicians. MedPAC also discusses ways to better support primary care, including upfront payments for primary care providers in two-sided ACOs and providing all primary care providers with a per beneficiary payment.

4. MedPAC continues its discussion regarding issues in designing a premium support system for Medicare.

MedPAC discusses the extent to which a premium support system in Medicare should have standardization in benefits, cost sharing, and other features.  One premium support model discussed, which is modeled after how Medicare Parts C and D currently function, would involve a standardized benefit package, with cost sharing that is standardized or actuarially equivalent across plans, and a standard option would be available for beneficiaries to buy. Similar to Part C, plan bids will determine the government contribution towards a beneficiary’s choice, and fee-for-service Medicare is treated as a bidding plan. MedPAC also discusses how supplemental Medicare plan could be integrated into a premium support system and how the benchmark plan should be determined.

5. MedPAC is contemplating both the financial and the quality-related impacts of shifting Medicare to a premium support system.

MedPAC discusses the impact of implementing a premium support system on plan participation.  MedPAC also reviews potential distributional impacts of using premium supports.  MedPAC’s rough analysis shows that premium supports may lead to more than half of Medicare beneficiaries being enrolled in managed care plans due to shifts in the premiums in fee for service plans.  While the financial implications of premium support is the primary focus of the discussion, MedPAC also addresses how to manage and maintain quality standards under premium support, including through the establishment of minimum standards for plans, provider network adequacy, and plan data disclosure requirements that could aid in setting the performance standards and payment adjustments.  MedPAC also discussed promoting higher quality plans through more direct financial incentives, such as allowing a higher contribution from the government towards high-quality plans to incentivize enrollment in these plans.