The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on April 6-7, 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.

We monitor MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the April meeting are as follows:

1. MedPAC unanimously passes a draft recommendation aimed at improving the current ASP payment system and developing the Drug Value Program as an alternative, voluntary program. 

In the March meeting, MedPAC discussed a proposed recommendation to address the rapid growth in Part B drug spending. The short-term policy reforms for the current ASP payment system would be made in 2018, while the Drug Value Program would be created and phased in no later than 2022. MedPAC passes this draft recommendation unanimously with no changes. In the June report to Congress, MedPAC intends to add text to reflect more detail on certain issues, as well as other approaches and ideas for reducing Part B drug spending.

2. MedPAC discusses key issues addressed in a draft chapter on premium support in Medicare to appear in MedPAC’s June report.

MedPAC has developed a draft chapter on premium support in Medicare to serve as guidance if such a model were to be adopted. MedPAC does not take a position on whether such a model should be adopted for Medicare. A premium support model would include Medicare making a fixed payment for each beneficiary’s Part A and Part B coverage, regardless of whether the beneficiary enrolls in fee-for-service or a managed care plan. The beneficiary premium for each option would reflect the difference between its total cost and the Medicare contribution. The draft chapter addresses key issues for this model from previous MedPAC sessions, including the treatment of the fee-for-service program, standardization of coverage options, the calculation of benchmarks and beneficiary premiums, as well as a new proposal regarding premium subsidies for low-income beneficiaries. The draft chapter will be included in MedPAC’s June report to Congress.

3. MedPAC unanimously passes a draft recommendation for the implementation of a unified prospective payment system for post-acute care. 

In the March meeting, MedPAC proposed a draft recommendation regarding a PAC PPS. During the discussion in the previous meeting, the percent of the reduction in aggregate payments was the largest point of contention. MedPAC decided the proposed 3% reduction was too low, and increased the reduction to aggregate payments to 5% for the finalized draft recommendation. MedPAC passes this draft recommendation unanimously with the change to the reduction of aggregate payments.

4. Regional variation in Medicare Part A, Part B, and Part D spending and service use

MedPAC compared its most current evaluation of geographic differences in Medicare Program spending and service use with calculations from previous years. The primary takeaway from the current data was that there was much less variation in service use relative to variation in spending.  Most of the service use variation in Part A and B services came from post-acute care.  Among Prescription Drug Plan (PDP) enrollees, drug use also varied less than drug spending.

5. Measuring low-value care in Medicare

MedPAC has been measuring the issue of low-value care, meaning services considered to have little or no clinical benefit, for the last three years. In June 2012, MedPAC had also recommended value-based insurance design, in which the Secretary could alter cost-sharing based on evidence of the value of services. In order to do so, however, CMS would first need information on how to define and measure low-value care.  MedPAC has been using 31 claims-based measures for low value care developed by researchers and published in JAMA. For 2014, MedPAC’s analysis found that 37% of beneficiaries received at least one low-value service.  Medicare spending for these services was estimated to be $6.5 billion.  MedPAC acknowledges that this estimate is conservative because the measures used do not also include downstream services that may result from the initial low-value service.  MedPAC also briefly discussed the issues associated with formulating performance measures in general, including for the merit-based incentive payment system (MIPS) included in Medicare Access and CHIP Reauthorization Act.