MedPAC Releases June Report to Congress

June 17, 2024

In its June 2024 report to Congress, the Medicare Payment Advisory Commission (MedPAC) detailed its work over the past year, including approaches to updating physician payments, the Acute Hospital Care at Home (AHCaH) program, targeting reductions to inpatient rehabilitation facility (IRF) payments, paying for software technologies, and Medicare Advantage (MA) encounter data.

MedPAC considered two approaches for updating the fee-for-service (FFS) Medicare physician payment rates to ensure adequate access to care and accountability for cost growth: 1) updating the practice expense portion of fee schedule payment rates by the market basket adjusted for productivity, and 2) updating the rate by the Medicare Economic Index (MEI) minus 1 percentage point. MedPAC believes that the second approach would be simpler to implement and lead to more equitable rate increases among various specialties. It also emphasized the need for implementing site-neutral payments to stagnate vertical consolidation. Additionally, MedPAC considered temporarily extending the bonus for participation in Advanced Alternative Payment Models (A-APMs) to incentivize participation in them instead of the Merit-Based Incentive Payment System (MIPS) program. MedPAC has recommended repealing MIPS because it doesn’t differentiate clinicians’ overall quality of care, has complex reporting requirements, and leads to arbitrary payment adjustments that could create financial uncertainty for clinicians.

The AHCaH program was established to address inpatient capacity during the COVID-19 public health emergency. Congress has since extended it through 2024 and is currently considering an additional extension. MedPAC reported limited uptake of the AHCaH and cited challenges in starting programs, including the 2024 expiration of the program’s statutory authority, start-up costs, gaining institutional support, hiring staff, and patients declining AHCaH care. MedPAC was unable to determine if AHCaH is less costly or provides better patient outcomes than traditional hospital care. If the program continues, MedPAC stated that policymakers will need to consider how to measure outcomes to safeguard quality of care, ensure that an AHCaH level of care is appropriate for participating beneficiaries, and set payments appropriately.

MedPAC also addressed its longstanding concerns that IRF payments exceed costs and considered ways to lower payment rates for select conditions. According to MedPAC, IRF Medicare margins have exceeded 10% for the past 20 years, and the Office of the Inspector General has concluded that high profitability may have created incentives to admit patients inappropriately. CMS requires that 60% of an IRF’s admissions be for patients with one of 13 conditions. MedPAC considered lowering payments to IRFs for patients that do not count toward the 60% compliance threshold as a proxy for cases that may not require IRF-level care. However, MedPAC found that these cases are not more profitable than those that count toward the 60% threshold and expressed concern that reducing payments for targeted conditions could disrupt patient care. For these reasons, MedPAC believes that its standing recommendation to lower overall IRF payments is preferrable to lowering payments for certain conditions. MedPAC also recommended that CMS regularly monitor and update the list of conditions that count toward the compliance threshold to ensure the eligible conditions require intensive therapy.

MedPAC reviewed Medicare coverage of medical software approved by the Food and Drug Administration (FDA) that is currently classified as software as a medical device (SaMD). MedPAC believes that appropriate payments for medical software will ensure a balance between access and affordability. The Commission supports larger payment bundles and believes that paying separately for SaMDs can deter competition and promote overuse.

Finally, MedPAC reported on data sources for measuring health care utilization by MA enrollees and found continued issues with incomplete data. MedPAC urged policymakers to consider the impact of missing data when examining MA utilization, particularly when comparing it to FFS utilization. MedPAC reiterated its June 2019 recommendation to encourage plans to submit complete data and recommended adding an independent data source (e.g., plan quality and bid data) to partially reduce the impact of missing data.