MedPAC Recommends Significant Change in Medicare Benefits Package

The Medicare Payment Advisory Commission (MedPAC) in its June 2012 report to Congress recommended the most sweeping changes in the basic Medicare benefits package since the Medicare program started in 1965. The changes are designed to give CMS more flexibility in changing cost sharing requirements of beneficiaries while at the same time providing beneficiaries with more clarity about their out-of-pocket liabilities for Medicare coverage.

MedPAC recommended the following –

* an out-of-pocket maximum for beneficiaries (under the existing program, there is no upper limit on Medicare cost-sharing);

* deductible(s) for Part A and Part B services, that may be combined or separate;

* replacing coinsurance with copayments that may vary by type of service and provider;

* authority for HHS to alter or eliminate cost sharing based on the evidence of the value of services, including cost sharing after the beneficiary has reached the out-of-pocket maximum;

* no change in beneficiaries’ aggregate cost-sharing liability; and

* an additional charge on supplemental insurance.

MedPAC also made several recommendations to improve the coordination of health care received by beneficiaries, including creating a per beneficiary payment for care coordination; adding codes or modifying existing codes in the physician fee schedule that would allow practitioners to bill for care coordination activities; and using payment policy to reward or penalize outcomes resulting from coordinated or fragmented care.

MedPAC put a particular emphasis on coordinating care for “dual eligible” beneficiaries — people eligible for both Medicare and Medicaid. MedPAC describes this population as “generally a high-cost population for both Medicare and Medicaid [who] often require a mix of medical, long-term care, behavioral health, and social services. They also have fewer financial resources than the general Medicare population.”

MedPAC’s suggestions for improvements in coverage for dual-eligibles focuses on expanding payments to and coverage of the Program for All-Inclusive Care for the Elderly (PACE). This program integrates Medicare and Medicaid benefits for the dual-eligible population who are 55 or older and nursing home certifiable.

MedPAC recommended changing the PACE reimbursement system to match the system used for Medicare Advantage plans; allow individuals under age 55 to join PACE; allowing prorated Medicare capitation payments to PACE providers for partial-month enrollees; and directing the Secretary to publish select quality measures on PACE providers and develop appropriate quality measures to enable PACE providers to participate in the MA quality bonus program by 2015.

Rural Health Care

MedPAC also released the results of two studies that were mandated by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148)  In one study, MedPAC concluded that rural Medicare beneficiaries have similar access to, and quality of, medical care as beneficiaries in urban areas.

MedPAC noted that while health care usage may vary widely between regions of the country, usage doesn’t vary much between rural and urban areas in the same region. The report noted that “rural hospitals tend to have below average outcomes on mortality and some [hospital] process measures.”

The report also concluded that Medicare payments to rural hospitals, skilled nursing facilities, home health agencies, and other providers are adequate. “The number of rural hospital closures has declined dramatically in recent years because of higher prospective payment rates and enactment of the critical access hospital program.,” MedPAC reported.

MedPAC also suggested that in order to maintain rural access to health care, “Medicare may need to make higher payments to low-volume providers that cannot achieve the economies of scale available to larger providers.” These higher payments, however, should be focused on low-volume isolated providers; providers that have low patient volume and are at a distance from other providers.

Home Infusion Therapy

The second study focused on the costs and benefits of providing Medicare coverage for home infusion therapy services. The costs or savings of providing such therapy services are dependent on many factors, according to MedPAC.

For example, for a hospitalized patient who needs intravenous antibiotics, coverage of home infusion therapy might lead to shorter lengths of stay. According to MedPAC, however, “because Medicare pays a flat DRG rate for most Medicare patients in the hospital, shorter length of stay would not generally reduce Medicare program spending.”

In contrast, if a patient is in a skilled nursing facility or receiving Medicare home health coverage solely for infusion therapy services, then the possibility for overall Medicare savings is greater, since infusions at home are likely to be less expensive than care in a nursing facility or home health nursing services.

MedPAC recommended that, instead of just adding a new payment system for home infusion services, that it first set up a demonstration program with strong management controls to prevent fraud or abuse of the benefit. According to MedPAC, “This project could test CMS’s ability to administer a targeted prior authorization policy designed to improve quality of care and reduce costs.”