MedPAC Recommends Giving CMS Greater Authority Over IME Payment Policy

April 5, 2021

At its April public meeting, the Medicare Payment Advisory Commission (MedPAC) voted on recommendations covering various Medicare payment issues. The recommendations will appear in the Commission’s June Report to Congress.

MedPAC completed its discussion of indirect medical education (IME) payments and continued to express concern about the current policy, noting it should be updated to include both inpatient and outpatient services to better reflect teaching hospitals’ additional costs. Despite concerns about the negative redistributive effect of this policy change on safety net hospitals and academic medical centers, the Commission voted to recommend that Congress require the Centers for Medicare & Medicaid Services (CMS) to transition to empirically justified IME adjustments to both inpatient and outpatient Medicare payments. MedPAC’s recommended policy would include services for Medicare Advantage (MA) beneficiaries, revise the teaching intensity measure to a resident-to-patient ratio (rather than the current resident-to-bed ratio), and base payments on estimates of teaching hospitals’ additional costs not otherwise accounted for in the prospective payment system. MedPAC also suggested that Congress grant CMS flexibility to implement its recommended changes through rulemaking to allow stakeholders to provide input such as whether to waive beneficiary cost sharing on outpatient IME payments. MedPAC stated that its recommendation is intended to be budget neutral by maintaining aggregate IME payments but redistributing payments toward outpatient care, although this was not part of the formal recommendation.

GNYHA sent a letter to the Commission to oppose this recommendation because MedPAC does not have outpatient claims data for MA patients and has not conducted a sufficient impact analysis, including fully understanding the effect on safety net teaching hospitals.

The Commission also voted to approve the following recommendations:

  • The Department of Health and Human Services (HSS) Secretary should implement a more harmonized portfolio of fewer Center for Medicare and Medicaid Innovation alternative payment models that are designed to work together to reduce spending and improve quality
  • Congress should cover all appropriate preventive vaccines and their administration under Part B instead of Part D without beneficiary cost sharing with a Medicare payment rate of 103% of wholesale acquisition cost and require vaccine manufacturers to report average sales price data to CMS for analysis
  • Congress should direct the HHS Secretary to modify the pass-through drug policy in the hospital outpatient prospective payment system (OPPS) to 1) include only drugs and biologics that function as supplies to a service, and 2) apply only to drugs and biologics that are clinically superior to their packaged analogs
  • The HHS Secretary should specify that the separately payable non-pass-through policy in the OPPS applies only to drugs and biologics that are the reason for a visit and that meet a defined cost threshold

MedPAC also presented findings from its Congressionally mandated review of the methodology CMS used to set Clinical Laboratory Fee Schedule (CLFS) private-based rates. Based on its findings, MedPAC suggested that the CLFS rates should not be based solely on private payer data, and Medicare should review different methods of setting rates that consider whether the test is routine, new, or a high cost. To lessen the burden on providers, MedPAC is examining survey methodologies to collect a sample of data that statistically represents private payers’ rates for all laboratories. According to MedPAC, these surveys could produce accurate payer rates while reducing by 70% the number of providers required to report data.