Top Five Takeaways from MedPAC’s Meeting on Medicare Issues and Policy Developments – March 2018
The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on March 1-2, 2018. 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.
As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the March meeting are as follows:
- MedPAC gives an update on CMS’s financial alignment demonstration for dual-eligible beneficiaries
MedPAC provided an update to CMS’s demonstration for dual-eligible beneficiaries. The purpose of the demonstration is to improve the quality of care in the dual-eligible program and reduce costs in both Medicare and Medicaid programs. MedPAC briefly reported on the two demonstration models tested among 13 states: (1) Medicare-Medicaid Plans (“MMPs”) and (2) Managed Fee-for-Services (“FFS”).
For MMPs, the rates appeared to be adequate following a 2016 increase in the Part A/B rates (5-10%). Enrollment has been lower than expected because many beneficiaries chose to either opt out before passive enrollment took effect or disenroll from their MMP. Although overall participation rate was 29 percent of eligible participants, the total MMP enrollment has been stable since mid-2015. Plan participation in MMPs has decreased. Eighteen MMPs have left the demonstration largely because participation and enrollment were very low. Regarding the effects of MMPs on service use, quality, and cost, CMS is still collecting reports and data. However, MedPAC expects that the reports from the first and second year of the demonstration will provide little insight since implementing the demonstrations were challenging. Some MMPs reported that it took 18 to 24 months before they could see changes in patterns of service use among their enrollees.
For Managed FFS, CMS estimated that there was a reduction in Medicare spending by $67 million during its first 2.5 years of operation in Washington state. But MedPAC believed that the savings was inflated because the savings figure is based on an estimate of what Medicare would have otherwise spent on roughly 20,000 dual eligibles enrolled, while actual numbers of enrolled dual eligibles was closer to 3,000. MedPAC recalculated the total savings to be approximately $9,000 per year. In contrast, CMS found that Colorado state’s demonstration increased Medicare Part A/B spending.
Overall, MedPAC thought that the limited data showed that the demonstrations were going well despite the challenges at the start of the programs.
- MedPAC’s mandated report regarding the effects of the Hospital Readmissions Reduction Program
As part of the 21st Century Cures Act mandate, MedPAC provided a report on whether the Hospital Readmission Reduction Program (“HRRP”) had any effect on readmission rates. MedPAC found that readmission rates declined faster after the program was enacted. Although some critics of the program suggested that HRRP only shifted patients from readmission hospital stays to observation stays and emergency department (“ED”) visits. However, MedPAC stated that its analysis showed rapid growth in use of observation and ED with and without an inpatient stay, suggesting that HRRP did not drive the increase. Additionally, MedPAC also reported that overall, HRRP decreased mortality rates. The one mortality that increased was heart failure, but MedPAC explained that the reason for the increased heart failure mortality was probably because of the decline in initial admissions (easier cases being treated on an outpatient basis), thereby increasing the raw readmission rates for more complicated conditions (e.g., heart failure).
- MedPAC discusses modifying Medicare rules to allow Discharge Planners to recommend higher-quality PAC providers
MedPAC discussed the possibility of modifying Medicare’s rules to permit discharge planners, under some circumstances, to recommend certain Post-Acute Care (“PAC”) providers. Beneficiaries served by low-quality providers are at an increased risk of re-hospitalization and more likely to experience negative clinical outcomes than beneficiaries served by higher quality providers. As such, it is central to both the integrity of the Medicare program and wellbeing of the beneficiaries that the value of the dollars spent on PAC is maximized.
Although the IMPACT Act required hospitals to use quality data during the discharge process and provide it to beneficiaries with the hopes that they would choose higher-quality PAC providers, preliminary reviews and data have shown that this method has failed to gain traction. MedPAC found that beneficiaries prefer to rely on information from trusted sources, such as their health care provider, families and friends over the reported quality data when it comes to choosing a PAC provider. This can be partially attributed to the fact that, as it stands, a discharge planner cannot recommend a specific PAC provider, but can only present the data to the beneficiary.
Thus, by modifying the rules to permit discharge planners to proactively recommend “higher-performing” PAC providers, discharge planners could assist beneficiaries in understanding the extent to which the quality of care varies among PAC providers within the beneficiary’s geographical area. Along with such a policy, the definition of “higher-quality” or “higher-performing” PAC would have to be established and quantified. MedPAC proposed both a “flexible” and “prescriptive” approach to defining a “higher-quality” PAC provider, and is awaiting Commissioner reaction to the different approaches or any other models that should be further considered.
- MedPAC discusses payment accuracy for sequential PAC stays
The Commission has long advocated for implementing a unified prospective payment system (“PPS”) for all four settings of post-acute care (“PAC”). Under such a system, each stay is considered an independent event, and payment is based on the average cost of stays. To reflect their much lower cost, the unified PPS would have a large adjustment for home health agencies. However, sequential stays, defined as a PAC stay within 7 days of a previous PAC stay, pose two challenges to payment accuracy. First, payments should track the cost of each stay in a sequence of care. Over the course of care, a beneficiary’s care needs are likely to fluctuate, with initial stays having different average costs than later stays. MedPAC found that the cost per stay for home health agencies are much lower for later stays in a sequence than the earlier stays. Thus, without some sort of an adjustment, profitability under a PAC PPS would be higher for later home health stays. If payments do not accurately reflect these fluctuations in care, providers may base their care on financial reasons rather than on the best course of care for the patient. Second, as regulations are aligned, some providers may opt to treat patients over a continuum of care, which makes it difficult to ensure that providers are accurately paid for each phase of care without improperly inducing volume of PAC admission. MedPAC discussed various strategies to counter the incentive to increase subsequent PAC stays, including redefining a “stay” as a long duration, requiring physician attestation of continued need of care, and implementing value-based purchasing that would include a resource use measure.
- MedPAC proposes two draft recommendations related to Emergency Department Use
MedPAC presented two draft recommendations related to improving efficiency and preserving access to emergency department (“ED”) care in both rural and urban areas. The primary objective has long been to preserve access to care in rural areas, by providing for higher inpatient rates to providers for rural PPS hospitals, and implementing a cost-based payment for critical access hospitals. However, these strategies have become increasingly inefficient and do not always preserve emergency access, as seen by declining admissions at critical access hospitals over the last 12 years. Thus, MedPAC proposed establishing a 24/7 ED in outpatient-only hospitals for isolated hospitals (those more than 35 miles from other hospitals). Such a program would be funded by outpatient PPS rates per service, as well as Medicare fixed subsidies to fund standby costs, emergency services, and physician recruitment. Such a policy would maintain emergency access in isolated areas and offset the cost of the additional ED payments with efficiency gains from consolidating inpatient services.
MedPAC’s second policy option addresses urban stand-alone EDs, where MedPAC is concerned that Medicare is encouraging overuse of ED services. MedPAC found that urban stand-alone EDs appear to have lower patient severity and lower standby costs than on-campus EDs (“OCEDs”) even though they are paid on the same basis as OCEDs. Thus, MedPAC recommended that policymakers consider either of two options for urban OCEDs in close proximity to on-campus hospital EDs (within six miles). One option would be to have Medicare pay OCEDs a reduced Type A payment rate by using a fixed percentage across each of the five levels of ED service. The second option would be to pay these facilities Type B rates, which would lower ED payments, on average, by 28% across all five ED levels. For urban OCEDs that are more isolated from on-campus hospital EDs, MedPAC suggested permitting them to receive the higher-paying Type A rates as they currently do. The rationale for these policies would be to better align payments with the cost of care, to reduce incentives to build new EDs near existing sources of emergency care, and to preserve access to ED services where they are truly needed.