The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, D.C., on September 6-7, 2018. The purpose of this and other public meetings of MedPAC is for the commissioners to analyze existing challenges and issues within the Medicare program and to provide future policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. These meetings offer a comprehensive perspective on the current state of Medicare as well as future outlooks for the program.

As thought leaders in healthcare law, Epstein Becker Green monitors MedPAC developments to determine how regulations and policies will impact the health care marketplace. Here are our five biggest takeaways from the September meeting:

1. MedPAC Discusses Trends in the Growth of Medicare and Total Healthcare Spending

MedPAC examined recent growth trends in Medicare and total healthcare spending in order to determine the budgetary impact of its recommendations. As part of their analysis, MedPAC reviewed the effects of healthcare spending on Medicare beneficiaries, households, and federal and state budgets as well as discussed evidence on ineffective spending and the opportunities it presents to lower health care spending without adversely impacting health outcomes.

MedPAC projects that the Medicare program will nearly double in size over the next decade, rising from “about $700 billion in total spending to 2017 to $1.3 trillion 2026.” At the same time, MedPAC expects that Medicare’s financing will become increasingly strained. Indeed, MedPAC projects that Medicare spending could rise from roughly 3 percent of our economy today to about 6 percent by 2048. The Commission estimates that Medicare, Medicaid, Social Security, and other major health program spending as well as net interest will reach nearly 20 percent of the economy and exceed total federal revenues by themselves.

Finally, the Commission found that Medicare may face a number of challenges in achieving savings down the road. The Commission points to Medicare’s fragmented payment systems across multiple health care settings, which the Commission believes contributes to a reduction in incentives to provide patient-centered coordinated care. Furthermore, Medicare’s benefit design is comprised of several parts, each of which cover different services and require different levels of cost sharing.

2. MedPAC Provides Recommendations to Revise Statutory and Regulatory Requirements for PAC Providers

MedPAC presented recommendations for adopting a more unified payment system as well as ideas for creating common requirements for all Post-Acute Care (“PAC”) providers that would align the proposed system goals. The current system is comprised of four prospective payment systems (“PPS”). MedPAC’s concerns with the existing system is relative to differences in statutory and regulatory requirements for each. MedPAC found the requirements to be quite different across the four PPS settings while relatively similar in other cases. MedPAC also referenced other differences among PPSs relative to setting-specific and nursing requirements as well as Inpatient Rehabilitation Facilities (“IRF”) and Long-term Care Hospitals (“LTCH”). MedPAC’s theory rested on the idea that a unified PAC PPS would determine payments based “solely on patient characteristics and minimize the role of site of care in setting payments.”

MedPAC proposed establishing new requirements that could establish “separate categories to acknowledge that delivering care in the institution has some responsibilities that care in the home does not have . . . .” The proposed requirements were split into two tiers: (1) the first tier forming general requirements for services necessary to serve the majority of Medicare PAC patients and (2) the second tier for patients requiring more specialized care. Altogether, MedPAC believed that such a system could enhance the possibility of creating a more cohesive, unified payment system that could best determine patient payments.

3. MedPAC Expresses Concerns Regarding Spending and Utilization of Long-term Care Hospitals

Congress mandated MedPAC to examine the effect of the LTCH dual-payment policy on the following issues:

• The quality of care provided in long-term hospitals

• The use of hospice care and post-acute-care settings

• The effect on different types of LTCH, and

• The growth in Medicare spending for services in LTCHs

MedPAC expressed concerns relative to LTCH spending and use over the past two decades as more than one LTCH would be located in one region of the country whereas some areas had none. Further concerns focused on research findings that failed to show a clear advantage in terms of outcomes or episode spending for LTCH users compared to those who used other PAC provider types. LTCHs are quite expensive—total Medicare spending totaled “just over $5.1 billion for about 126,000 cases in 2016.” Thus, due to the high expenses and unclear health outcome advantage of LTCHs, MedPAC suggested Medicare payers should better define the appropriate patients for LTCH care.

The Commission also expressed concerns relative to the growth of LTCHs. Though spending began to decrease after 2012, CMS never fully implemented policies to set limits on the share of cases being admitted to LTCHs from single referring acute-care hospitals. Thus, MedPAC is concerned as to whether the most appropriate patients are receiving care in LTCHs given that policymakers have failed to define this class of patients.

MedPAC plans to analyze new measures to determine quality of care in LTCHs, the use of hospice and other post-acute-care settings, use and spending data across different types of LTCHs, and the impact of the elimination of threshold policies in order to address these issues.

4. MedPAC begins review of Medicare clinician payment updates under MACRA mandate

In 2015, the Medicare Access and CHIP Reauthorization Act (“MACRA”) repealed the sustainable growth rate formula for Medicare clinician fees and created permanent statutory updates for such fees. MACRA required MedPAC to conduct a report on clinician payment that reviews these updates and considers their impact on four indicators: (1) the efficiency and economy of care, (2) supply, (3) access, and (4) quality.

MedPAC first examined the efficiency and economy of care by analyzing Medicare spending trends. It identified the payment updates as affecting Medicare spending—the payment updates apply to Medicare’s conversion factor for the clinician services fee schedule used by Medicare. However, MedPAC also acknowledged that other factors might impact spending in addition to the payment updates, including policy adjustments (e.g., converting payment incentive programs to penalty programs), site-of-service shifts (i.e., moving services from “the physician office setting to the hospital outpatient department” decreases Medicare physician fee schedule spending but still increases total Medicare spending), and clinician increases in volume and intensity of services provided.

MedPAC then reviewed the effect of the payment updates on supply, which it measured as the “number of clinicians billing Medicare.” It found that despite “relatively modest” payment updates (averaging about a half percent annually), supply has been steadily growing since 2009, from a 1.5% increase in specialty physicians billing Medicare per year to a robust 10.1% increase in advanced practice registered nurses and physician assistants billing per year.

In order to track access to care, MedPAC analyzed the results of its yearly telephone survey of Medicare beneficiaries and individuals with private insurance, closely tracking the ease of finding new primary care physicians as a key indicator of access to care. It found that “diverging payment rates” between Medicare and private insurance “have not appeared to have resulted in a difference in patient-reported access to care” based on MedPAC’s survey results.

Finally, MedPAC reviewed statutory updates and their impact on quality. MedPAC reported “little evidence” that higher payments translate to higher quality for clinician services. MedPAC also emphasized its recommendation to repeal Medicare’s current quality program for clinicians, the Merit-based Incentive Payment System (“MIPS”) since MIPS does not allow for comparison of quality performance across clinicians. Overall, MedPAC concluded that impact on quality is indeterminate.

MedPAC plans to revisit this review in the spring of 2019 with a presentation analyzing updated data and a “site-of-service adjusted volume analysis.”

5. MedPAC reviews its new Hospital Value Incentive Program and requests feedback regarding quality measures and monitoring hospital-acquired conditions

MedPAC was tasked with the potential redesign of the hospital quality and value program, which currently involves four complex and overlapping quality payment and reporting programs. Based on quality incentive principles laid out by the Commission, MedPAC created the Hospital Value Incentive Program (“HVIP”). MedPAC reviewed the design of its new clear and focused HVIP:

Combined

• Hospital Readmissions Reduction Program (“HRRP”) and
• Hospital Value-based Purchasing Program (“VBP”)

Eliminated

• Inpatient Quality Reporting Program (“IQRP”) and
• Hospital-Acquired Condition Reduction Program (“HACRP”)

MedPAC described four outcome, patient experience, and cost measures of quality in the HVIP: (1) readmissions, (2) mortality, (3) spending, and (4) patient experience. MedPAC also asserted the following characteristics of its HVIP:

• Translation of quality measure performance into payment by adhering to clear performance standards.
• “Peer grouping” to account for provider population differences (“Peers” are those providers that “treat a similar share of fully dual-eligible beneficiaries”)
• Redistribution of a budgeted amount based on the hospitals’ performance
• Public reporting of quality results

MedPAC explained that its model of the HVIP projected a 50:50 reward-penalty ratio. The model weighted each of the four measures of quality equally when determining a HVIP “score” for the hospital, but MedPAC reasoned that policymakers could prioritize certain measures to appropriately balance the interests of Medicare and its beneficiaries. MedPAC then offered suggestions for changing the withhold amount to align to the budget neutral goal of the HVIP, instead of the current maximum 3% reward and 6% penalty assessed to hospitals. MedPAC discussed the “patient experience” measure, which it stated would be based on the Hospital Consumer Assessment of Healthcare Providers and Systems (“HCAHPS”) national survey, which consists of ten core measures. MedPAC explained two alternatives for incorporating this survey data: (1) using the overall HCAHPS score or (2) scoring multiple select individual HCAHPS measures. MedPAC did caution that several hospital quality leaders favored the single overall HCAHPS rating due to better avoidance of bias. MedPAC subsequently requested the Commission’s thoughts on patient experience data to be used in the HVIP.

Finally, MedPAC expressed hospital quality leaders’ concern over Medicare’s hospital-acquired conditions (“HAC”) reduction program and its connection to payment. MedPAC suggested removing these financial incentives associated with limiting HACs and instead continue public reporting of results and allow financial incentives indirectly through HVIP’s readmissions measure. MedPAC requested feedback from the Commission on this issue.

Brian Hedgeman and Matthew Sprankle wrote this piece.