The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 6-7, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

1. While Accountable Care Organizations received high marks for quality they failed to produce Medicare savings in 2015.

MedPAC staff provided a status report on Medicare Accountable Care Organizations (“ACOs”). The report found that while ACOs received high marks for quality they failed to produce significant Medicare savings in 2015. Pioneer model ACOs produced net savings of only $5 million while Medicare Shared Savings ACOs cost the Medicare program $216 million. The MedPAC staff conducted a review of the ACO data and found that ACOs in the south, those that are physician led, and are smaller in size were more likely to produce savings. However, the most important variable was the historic level of service use in the area where the ACO was located. Regions with a high historic use of services had more success producing savings.

2. MedPAC finds the rate of potentially avoidable hospital admissions varied significantly among long-stay nursing facilities.

As part of an ongoing project to develop measures to properly evaluate initiatives aimed at reducing the number of hospital admissions and use of skilled nursing facilities among long-stay nursing facility residents, MedPAC staff found a wide discrepancy among nursing facility providers. Overall the staff found that in 2014 long-stay nursing residents accounted for 200,000 “potentially avoidable” hospital admissions and 20 million days of skilled nursing facility care. They found that nursing facilities with fewer than 100 beds and rural nursing facilities made up a disproportionate share of facilities with high potentially avoidable hospital admission rates. The data showed that some facility-level characteristics affected the rate of potentially avoidable hospital admissions; facilities with higher portions of hospice days and access to x-ray services on site had lower potential avoidable admissions, and facilities with a higher use of licensed practical nurses and lower frequency of physician visits had higher rates of hospital use.

3. MedPAC considering suggesting changes to Part B drug payment policies.

MedPAC discussed a number of policy options with respect to the Part B drug payments. The options the Commission discussed sought to either increase price competition and address the growth in Part B prices or improve the current payment formula and available data. The polices designed to increase price completion and address price growth included: consolidating billing codes for drugs and biologics with similar health effects, limit the growth in drug prices based on inflation, and introduced a restructured competitive acquisition program. The policies designed to improve the payment formula and improve available data included: modifying the average sale price add-on formula, modifying the wholesale accusation cost formula, and strengthen the manufacture reporting requirements. MedPAC is expected to continue to actively work towards developing policy recommendations regarding Part B drug payment reforms.

4. MedPAC continues to develop a premium support model to reward high quality plans and ACOs and incentivize beneficiaries to seek out high quality care.

As part of its efforts to develop a payment model that rewards high quality care and incentivizes beneficiaries to seek high quality care MedPAC continued its discussion of alternative quality measures that could be used across the Medicare delivery system. Under this alternative model Medicare would use a smaller number of population based health outcomes and patient experience to measures to measure quality across the delivery spectrum (including fee-for service). The Commission suggests that these quality measures be collected at a local market level; each market will then be given a quality benchmark based on the measures. Medicare Advantage (“MA”) plans and ACOs which have quality scores that are higher than the benchmark would see an increased federal contribution to lower beneficiary premiums, with the hope of pushing more beneficiaries into higher quality delivery systems based on the lower beneficiary premiums.

5. MedPAC is considering how to improve Medicare’s behavioral health benefits.

MedPAC staff gave an overview of behavioral health issues among Medicare beneficiaries and of highlighted potential areas for programmatic improvement. The staff suggested Medicare improve payment of inpatient psychiatric care and work towards integrating primary care delivery and behavioral health services. MedPAC appears to be committed to dedicating more resources towards developing policy options for achieving these suggestions in the future.