At its January public meeting, the Medicare Payment Advisory Commission (MedPAC) voted on its draft recommendations for fiscal year (FY) 2020 Medicare payment updates.

Payment and Other Policy Recommendations

MedPAC approved the following recommendations to Congress on provider payment updates:

  • Hospital inpatient and outpatient services: Increase rates by 2% (projected current law update is 2.8%; see related hospital quality proposal, below)
  • Physician and other health professional services: No update (current law)
  • Ambulatory surgical centers (ASCs): No update
  • Hospice: Reduce rates by 2%
  • Skilled nursing facilities (SNFs): No update
  • Home health: Reduce rates by 5%
  • Inpatient rehabilitation facilities: Reduce rates by 5%
  • Long-term care hospitals: Increase rates by 2%
  • Outpatient dialysis: Increase rates by 1.9% (current law)

The Commission also recommended that Congress replace the current inpatient hospital quality penalty programs (i.e., readmissions, value-based purchasing, and hospital-acquired conditions) with the “Hospital Value Incentive Program” (HVIP). HVIP would include five measure domains, set prospective performance targets, provide a socioeconomic risk adjustment by placing hospitals into peer groups, and distribute a pool of funds to hospitals based on performance. The Commission discussed a payment withhold of 2% to 5% to fund the pool, but did not specify the withhold amount in its recommendation. Additionally, the 0.8 percentage point difference between the hospital update and the amount specified under current law would be added to the pool to increase payments under HVIP.

Other recommendations:

  • Congress should eliminate “incident to” billing and require advanced practice registered nurses and physician assistants to bill Medicare directly
  • Health and Human Services (HHS) Secretary should require ASCs to report cost data
  • HHS Secretary should annually recalibrate the relative weights of the case mix groups in the SNF prospective payment system to align payments and costs

Other Policy Discussions

MedPAC continued its discussion on opioids and their alternatives in the hospital setting, finding that both are available in overlapping price ranges, with no clear evidence that prices under the Medicare hospital payment systems incentivize use of opioids over non-opioids. MedPAC also discussed the lack of an opioid tracking system in Part A or Part B. Options to address this included requiring prescription drug event reporting by hospitals (either on claims or separately) and developing a measure for opioid use disorder to include in the Hospital-Acquired Condition Reduction Program or any replacement quality program. MedPAC will detail its work on this topic in its March 2019 report.

MedPAC staff also discussed an analysis of Medicare’s prescription drug program (Part D), finding that while overall Part D spending was relatively flat between 2016 and 2017, reinsurance payments to plans are growing as a share of spending. Under this policy, Medicare pays Part D plans 80% of spending over a beneficiary-specific catastrophic coverage threshold. MedPAC’s analysis found that more beneficiaries are triggering the catastrophic phase mainly due to the increase in the price of specialty drugs and biologics. The Commission expressed concern about beneficiaries facing high out-of-pocket expenses for drugs. MedPAC summarized its past work on lowering Part B and Part D drug costs and will continue to discuss this subject in the spring.

Finally, MedPAC staff presented its analysis of the Medicare Shared Savings Program’s performance, finding that the current retrospective assignment of beneficiaries encourages accountable care organizations (ACOs) to treat healthier beneficiaries over less healthy, costlier patients, and that ACOs incur higher financial risk if beneficiaries first see ACO clinicians when their health status declines. MedPAC has advocated for prospective assignment, which may mitigate this risk.