MedPAC Report Refuels the Need for Medicare Reforms

In its annual June report to Congress, the Medicare Payment Advisory Commission (MedPAC) explores a number of reforms that could help improve outcomes and reduce spending in Medicare. MedPAC’s recommendations and analysis have been used in the past to help provide policy ideas for much needed payment reforms and reductions, some of which have been used to pay for doc fixes. This year’s report provides lawmakers with yet another set of options as they work to address the long-term sustainability of the Medicare program. MedPAC’s recommendations include:

Equalizing Medicare Payment Across Sites of Care: Last year, MedPAC recommended that Medicare payment rates for office visits should be the same regardless of if care is provided in an outpatient department (OPD) or in a freestanding physician’s office. The new report identified 66 groups of services where OPD payment rates can be aligned with physician office rates, and 12 groups of services where OPD payment rates can be aligned with ambulatory surgical center (ASC) rates. The recommendation also includes a stop-loss policy to limit the loss of Medicare revenue for hospitals that provide services to a disproportionate share of low-income Medicare patients. Together, MedPAC estimates these reforms can provide $1.5 billion a year in savings to Medicare and beneficiaries. A recent New York Times article reported on this recommendation, explaining:

"When a Medicare beneficiary receives a certain type of echocardiogram in a doctor’s office, the government and the patient together pay a total of $188. They pay more than twice as much — $452 — for the same test in the outpatient department of a hospital. (The test is used to evaluate the functioning of the heart.) The commission urged Congress to “equalize payment rates” or at least reduce the disparities, for doctor’s office visits and hospital clinic visits in which similar patients receive the same or similar services."

Post-Acute Care Bundled Payment: To encourage accountability, care coordination, and efficiency in Medicare, MedPAC examined expanding current bundled payment reforms to post-acute care services. While they do not provide an official recommendation, the Commission discusses an illustrative model where a bundled payment could be given for services within 90 days of a triggering event. Under this approach, a value-based withhold could be designed where Medicare would continue FFS payments to participating providers, but would withhold a certain amount and return some portion of savings if average spending is below a spending target.

Reducing Hospital Readmissions: Building upon the Hospital Readmissions Reduction Program enacted under the ACA, MedPAC recommends several changes to improve the measurement of hospital readmissions. These recommendations include: establishing a fixed readmissions rate target; lowering penalties when industry-wide readmissions rates improve; using an all-condition readmission measure; comparing readmissions rates with peer hospitals; and possibly developing a joint readmission/mortality measure in the long run.

To inform future policy development, MedPAC’s report also provides information on the prevalence of long-stay patients and the use of hospice services among nursing home patients. Additionally, it studies care coordination for dual eligibles (beneficiaries eligible for both Medicare and Medicaid), noting that federally qualified health centers and community health centers may be uniquely positioned to coordinate care for these beneficiaries because they provide primary care, behavioral health services, and care management services, often at the same clinic site.

Finally, MedPAC discussed the potential for what they call “competitively-determined plan contributions,” but what is commonly referred to as premium support. MedPAC simply explores Medicare plan competitive bidding and does not recommend any specific policies. However, it is still significant in that it’s the first time they look at premium support and consider it worthwhile to discuss.

While most of these recommendations and policy issues have been discussed and debated before, MedPAC’s latest report helps to inject renewed support and analysis behind many of them at a time when momentum for Medicare reforms on Capitol Hill is critical. Lawmakers would be wise to take on these suggestions and restart the debate on how to put Medicare and overall federal health spending on a more sustainable path.