Safety Net Payments, Telehealth Expansion Discussed at MedPAC Public Meeting

October 3, 2022

The Medicare Payment Advisory Commission (MedPAC) discussed Medicare payments for safety net clinicians, expansion of telehealth services, evaluations of a post-acute care (PAC) prospective payment system (PPS) and inpatient psychiatric facility (IPF) payments, nursing facility staffing data, and Part D rebates and discounts at its public meeting held last week.

The Commission discussed options for additional targeted funding for safety net clinicians. MedPAC defines safety net providers as those who treat a disproportionate share of Medicare beneficiaries who have low incomes and result in lower payments to providers than the average beneficiary, or the uninsured or those with public insurance that is “not materially profitable.” MedPAC further defines low-income Medicare beneficiaries as those who receive full Medicaid benefits, partial Medicaid benefits, or the Part D low-income subsidy (LIS), and refers to this population as “LIS beneficiaries.” The Commission expressed concern that clinicians who treat LIS beneficiaries tend to receive less revenue and that targeted financial support for these providers does not exist under the physician fee schedule (PFS). MedPAC staff presented four potential options to apply an add-on payment to the PFS rate for these clinicians, ranging from 5-20%, with some options providing a higher add-on for primary care clinicians. The Commission will continue to discuss this issue in upcoming sessions.

The Commission also began work updating its Congressionally mandated analysis of IPF payments. MedPAC’s analysis found that there has been an overall decline in the number of IPFs, particularly among non-profit hospital-based IPFs, and that IPF use by fee-for-service (FFS) Medicare beneficiaries has also declined in recent years. Additionally, while the aggregate Medicare margin for IPF PPS services was -2.1% in 2019, this reflects wide variation between IPF types: freestanding for-profit IPFs had a 25.2% Medicare margin and hospital-based non-profit IPFs had a Medicare margin of less than -20%.  Some commissioners expressed concern over payment adequacy for hospital-based non-profit IPFs. The analysis also found that unmeasured patient severity and poor reporting of ancillary costs may affect payment accuracy. MedPAC will continue to update its analysis with more recent data in upcoming sessions and will release an informational chapter as part of the June 2023 report to Congress.

The Centers for Medicare & Medicaid Services (CMS) is evaluating payroll-based journal (PBJ) data to establish mandatory minimum staffing standards to address concerns with the quality of care in skilled nursing facilities (SNFs). CMS recommends adding the total nursing hours per resident staffing measure to the SNF value-based purchasing program in fiscal year 2026 and includes the measure in its five-star quality rating system. MedPAC’s analysis of the PBJ data found that aggregate nurse hours per resident day have generally remained consistent from 2019 through 2021 but declined to 3.64 hours by the end of 2021. Despite the decline in the total hours per resident day, the nursing facilities’ use of contract labor increased from 3% in the first quarter of 2019 to 8.4% in the last quarter of 2021. MedPAC will continue to evaluate the data for use in future nursing facility payment adequacy analysis and other nursing facility research but will not provide a chapter on this topic in the June report.

The Commission also discussed its plan to analyze the utilization of telehealth services during the COVID-19 pandemic and the impact of expanded telehealth coverage on access to care and quality, which was mandated by the Consolidated Appropriations Act of 2022. Staff presented an analysis plan focused on changes in telehealth volume and spending due to the pandemic and presented a potential alternative approach to FFS reimbursement for telehealth services that would bundle telehealth services into a larger unit of payment, such as evaluation and management services. Staff also presented an alternative reimbursement methodology that would reimburse federally qualified health centers and rural health centers for telehealth services at the PFS rate rather than their standard payment rates to reflect the lower facility costs of providing telehealth. The mandated report will be included in the Commission’s June report.

MedPAC presented the results of its analysis of Part D drug rebates and discounts. Staff noted that price concessions, including manufacturer rebates, totaled roughly 33% of gross Part D spending in 2020 and that plans had wide variation in rebates, even among those using the same formulary. The analysis also showed for some highly rebated drugs, beneficiary cost sharing exceeded the plan’s net costs, indicating that beneficiaries were paying more for the drug than the plan. The staff and commissioners noted that provisions included in the Inflation Reduction Act may substantially impact rebates going forward and that their analysis will serve as a baseline for evaluating this impact. The Commission plans to continue this work in future sessions.

MedPAC staff discussed its plans to evaluate the Secretary of the Department of Health and Human Services’ prototype design for a unified PAC PPS. In response to a Congressional mandate, the Commission recommended its own design for a PAC PPS in June 2016 that bases payments on patient characteristics rather than PAC setting. The Secretary released a prototype earlier this year that adjusts payments by case-mix, PAC setting, comorbidities, and an adjustment for rural facilities. MedPAC will evaluate the design features, payment accuracy and adequacy, and impacts of this prototype, and will present its findings at future sessions.