The Medicare Payment Advisory Commission (MedPAC), an independent Congressional advisory group, this month released a 251-page report to Congress addressing a number of key issues in the implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The report also examines how the Medicare program can pay for services more accurately and maintain neutrality across settings. Several other important issues mandated by the MMA are covered as well.
Meanwhile, the Health and Human Services Office of Inspector General (HHS OIG) is preparing to release a separate report to the Senate Finance Committee this week that will encompass a broad array of Medicaid drug pricing issues.
The MedPAC report, issued June 15, 2005—"Issues in a Modernized Medicare Program"—reviews measures the Centers for Medicare and Medicaid Services (CMS) could use to assess plan performance and monitor Part D. It calls for the HHS Secretary to develop a plan for "the timely delivery of Part D data" to congressional agencies so they can better inform Congress about the drug benefit’s impact on cost, quality, and access.
The report also evaluates techniques developed in the commercial market to help manage utilization and ensure access to needed drugs, and considers experience in enrollment issues gained from the Medicare discount drug card program.
MedPAC endorses private plans
The Commission strongly supports giving Medicare beneficiaries a choice to join private plans because these plans have "greater flexibility" to improve the efficiency and quality of health care services. However, the Commission seeks to preserve its "long-standing principle" of financial neutrality between private plans and fee-forservice (FFS) Medicare to encourage efficiency and promote the entry of plans that will remain in markets long term.
The report makes several recommendations aimed at maintaining neutrality between private plans and FFS Medicare, as well as among private plans. These include:
- Collecting quality measures for the FFS program that would enable comparison with the Medicare advantage (MA) program;
- Eliminating the preferred provider organization stabilization fund;
- Clarifying that regional plans should submit bids that are standardized for the region’s eligible population;
- Putting in law the scheduled phase-out of the hold-harmless policy for risk adjustment;
- Removing the effect of payments for indirect medical education from the MA plan benchmarks; and
- Linking payment benchmarks for MA plans to 100 percent of FFS costs, while returning savings from bidding to plans by rewarding quality performance. The benchmark might be set to 100 percent of FFS in the aggregate, rather than in each payment area.
MedPAC Examines Dialysis Services
According to MedPAC, the MMA improved payment methods for dialysis services in some respects.However, it criticizes Medicare for continuing to pay dialysis providers differently based on the site providing treatment and the type of drug utilized.
The report recommends that Medicare pay the same amount at hospital-based and freestanding dialysis facilities for dialysis services, a recommendation that will be strongly opposed by hospital interests. In addition, it argues that Medicare should use the same payment method—average sales price (ASP)—to pay for all dialysis drugs provided by both facility types. MedPAC also calls for the HHS OIG to collect acquisition cost data from dialysis facilities to compare with average sales price data, indicating that MedPAC may believe that CMS should review the cost control potential of average acquisition price (AAP) and ASP on an on-going basis.
Post-acute Services Critiqued
The MedPAC report points out that a different patient assessment tool is used in each post-acute care setting, making it difficult to compare patients and outcomes among facilities. "This raises concerns that payments may not be balanced across settings and that patients may not go to the best setting for their condition," says the Commission.
The report also finds that costs and outcomes differ by setting for hip and knee replacement patients, but that conclusion is difficult to evaluate without a common assessment tool.
Finally, the report reviews a series of issues related to reforming the skilled nursing and home health prospective payment systems.
MedPAC Proposes Changes
The MMA directed MedPAC to study three issues: (1) MA program payment areas and risk adjustment, (2) pharmacy and nuclear medicine handling costs, and (3) critical access hospitals (CAH).The report made these findings:
- Congress should establish larger payment areas for MA local plans to stabilize rates and approximate private sector market areas. The CMS-hierarchical condition category risk adjustment model performs better than the model used in the past.
- Pharmacy and nuclear medicine handling costs warrant a separate (budget-neutral) payment. In general, larger payment bundles would create stronger incentives for efficiency in the outpatient prospective payment system (PPS), MedPAC contends.
- According to MedPAC, the CAH program has succeeded in protecting the financial viability of many small rural hospitals; closures of CAHs have almost ceased. As a result of the CAH provisions in the MMA, MedPAC predicts a few more hospitals will convert this year, but conversions will effectively end after 2005 when about 1,300 hospitals will be in the program. Cost-based payments for CAHs will total about $5 billion in 2006—roughly $1.3 billion more than PPS payments would have been. Payment modifications and other adjustments may need to be made to ensure fair competition as some CAHs are located quite close to other providers that do not receive cost-based payment.
The report also maintains that cost-effectiveness analysis has the potential to promote care that is more cost-efficient and of higher quality, if the valid concerns about its methods are addressed. "Medicare could play an important role in standardizing the methods in these analyses," MedPAC concludes.
Finally, as mandated by Congress, the report discusses the HHS Secretary’s estimate of the payment update for physician services and notes that CMS’s preliminary estimate of growth in physician fee schedule expenditures in 2004 is 15.2 percent.This finding could increase the scrutiny of imaging and other physician-related services.
To view the entire MedPAC report, please visit:
http://www.medpac.gov/publications/congressional_reports/June05_Entire_report.pdf
This article has been prepared by Sidley Austin Brown & Wood LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.