The Medicare Payment Advisory Commission (MedPAC) met on January 16 and 17 to vote on payment update recommendations and to discuss other recommendations to update the Medicare program. The Commission will include payment updates and other recommendations in their March 2020 Report to Congress.

Assessing Payment Adequacy: Hospital Inpatient and Outpatient Services

MedPAC staff presented a recommendation to increase the update for hospital payments from 2.8%, under current law, to 3.3%. However, the update would be contingent on the implementation of the MedPAC hospital value incentive program (HVIP). The HVIP would merge the current Medicare quality programs, creating a simplified quality reporting system that reduces physician burden and more adequately rewards high performing hospitals. A portion of the 3.3% increase in payment would be distributed to hospitals who were high performers in defined quality metrics.

The Commission unanimously approved this recommendation to Congress.

Assessing Payment Adequacy: Physician and Other Health Professional Services

MedPAC staff presented a recommendation to maintain the current update for physician services. The rationale for this recommendation is based on the additional bonuses physicians can receive through the Merit-based Incentive Program System (MIPS) and Advanced Alternative Payment Models. The Commission discussed the need to evaluate how bonus payments compare to overall costs physicians face.

The Commission unanimously approved this recommendation to Congress.

The Medicare Prescription Drug Program (Part D): Status Report and Options for Restructuring

MedPAC staff presented an option for restructuring the Part D benefit to better protect beneficiaries from high costs, lower Medicare spending, and shift risk toward plans and manufacturers to incentivize utilization management. This new benefit design would also eliminate the coverage gap, establish an out-of-pocket cap for beneficiary spending and redistribute risk in the catastrophic phase of coverage.

The Commission was supportive of providing Congress with a restructured benefit design. Several Commissioners recommended MedPAC staff evaluate other utilization management tools plans that could be implemented to control costs, such as lower cost-sharing for generics as alternatives to higher cost brand name drugs.

Redesigning the Medicare Advantage Quality Bonus Program: Initial Modeling of a Value Incentive Program

One-third of Medicare beneficiaries are enrolled in a Medicare Advantage (MA) plan. There have been concerns that the current Quality Bonus Program (QBP) does not adequately evaluate MA plans or provide beneficiaries with information to appropriately decide between MA and fee-for-service enrollment. MedPAC staff presented an alternative MA Value Incentive Program (MA-VIP). This new program would be based on market-level comparisons between MA plans and rewards and penalties would also be distributed at the local level. The Commission believes this new program would help beneficiaries make better informed choices between MA plans and FFS. Discussions and draft recommendations will continue to be discussed during future public meetings.

Congressional Request on Health Care Provider Consolidation: Does the 340B program create incentives for participating hospitals to use more expensive drugs?

In August 2018, the House Energy and Commerce Committee requested MedPAC evaluate the incentives within the 340B program. 340B entities purchase drugs below the payment amount they receive from Medicare resulting in higher margins compared to non-340B entities. MedPAC found 340B hospitals spent more on certain types of cancer drugs. However, MedPAC could not attribute these differences in spending between 340B and non-340B hospitals to incentives within the discount program because 340B ceiling prices for acquisition are confidential.

This analysis will be included in the March 2020 Report to Congress.

Improving Accountable Care Organization (ACO) Beneficiary Assignment

The Commission considered recommended changes to the Medicare Shared Savings Program (MSSP) physician identification and beneficiary assignment methodology. MedPAC staff presented alternative ways to identify physicians within an ACO. The Commission agreed identifying clinicians based on National Provider Identifiers (NPIs) is an appropriate recommendation. This would require that physicians only be associated with one ACO. ACOs receive shared savings based on costs for an assigned beneficiary population. The Commission discussed the strengths and weaknesses of assigning beneficiaries to ACOs prospectively and retrospectively. As no consensus was made, the Commission will continue to discuss beneficiary assignment at future meetings.

MedPAC recommendations require Congressional action for implementation. The next MedPAC public meeting is scheduled for March 5-6, 2020. More information, previous reports, and information about past and future public meetings can be found on the MedPAC webpage.