The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. On April 4-5, 2013, the commission met to discuss select policy initiatives. The meeting was divided into seven sessions, summarized below.


Session I: Medicare Accountable Care Organization (ACO) Update

Background: Accountable care organizations (ACOs), which are entities comprised of various health providers that hope to achieve savings through care coordination created by the Affordable Care Act (ACA), have been expanding rapidly in the Medicare program. Commissioners have been informed of the number and location of the new ACOs, of which there are now about 250 operating under Medicare serving four million beneficiaries, and some observations on the strategies they are expected to use to achieve cost savings and quality performance.

Key Points: The pattern of where they are locating is linked to markets served by Medicare Advantage plans, but with some noteworthy differences. Specifically, MedPAC is interested in understanding what circumstances could create an atmosphere in which ACOs may have a comparative advantage relative to Medicare Advantage plans, taking into consideration the position of ACOs as being somewhere between traditional fee-for-service Medicare and Medicare Advantage on the payment spectrum.

Session II: Low-income Beneficiaries in a System of Competitively Determined Plan Contributions

Background: The Commission has been examining design concepts for a system of competitively-determined plan contributions (CPC) for low-income beneficiaries in connection with possible benefit redesigns in Medicare including archetypes similar to Part D subsidies and any differences in a CPC model consisting of Medicare Parts A and B structures. Other topics discussed in the meeting include how dually-eligible beneficiaries would be accommodated in such a CPC system by examining existing issues in treatment in Medicare Advantage and traditional fee-for-service.

Key Points: While weighing the benefits of existing models will be crucial to crafting a an efficient CPC model, it is possible that the least costly option could include a piecemeal CPC bidding system or require plans to bid on an entire package. A lack of uniformity in Medicaid benefits and cost sharing elements in Medicare among states has made it difficult to design a CPC system model that incorporates dual eligible beneficiaries; questions exist about whether the population should be segmented to better accommodate the competitive bidding process.

Session III: Preparing Private Plans to Better Serve Dual-Eligible Beneficiaries

Background: Dual-eligible beneficiaries are enrolled in both Medicare and Medicaid benefits, and operationally receive medical services through two separate systems. The Commission has been looking into measures to better synchronize care for these beneficiaries through programs (typically operated by private health plans at a high risk.) There are only a small number of these Medicare-Medicaid (MMCP) programs, and most Medicare Advantage plans do not have familiarity with managing the full range of services for dual eligibles in a capitated environment.

Key Points: While literature suggests that MMCP can reduce utilization of certain high-cost services, such as hospital and nursing home utilization, Medicare and Medicaid programs may not realize savings due to reduced utilization. This session provided an overview of dual-eligible beneficiaries, reviewing spending patterns on these beneficiaries, in particular, long-term care services users and beneficiaries with chronic mental illness; the panel further discussed findings on care coordination activities in MMCP, including the complexity of physical health needs among beneficiaries, the coordination of electronic medical record sharing, and the lack of knowledge of MMCP care managers in social services and other resources in beneficiaries' communities. Suggestions for better coordination included financially aligning Medicare and Medicaid benefits and financially aligning those benefits in the context of a CPC system.

Session IV: Medicare Hospice Policy Issues

Background: In MedPAC’s March 2009 Report to Congress, the Commission made recommendations to improve the hospice payment system, including measures to increase accountability in benefits and enhance data collection systems. In the years since, several steps have been taken to support methods for accountability and data collection through PPACA and CMS administrative actions, while additional channels remain pending. In addition, PPACA gave CMS the authority to revise the payment systems for hospice care no earlier than fiscal year 2014. As it stands, no regulatory action has been taken to date on payment reform.

Key Points: The Commission continued its data collection and analysis related to hospice policy improvements, consistent with the Commission’s recommendations of payment reform and greater accountability. MedPAC staff suggested that larger changes in payments might need to be instituted to eliminate the higher profitability of long stays, as data findings show that long stays in hospice are tied to long survival post-discharge. Payment reduction for hospice care in nursing facilities could be considered as hospices provide more aide visits in nursing facilities than the home. The staff advised that reducing costs could be done be reducing a portion of the hospice payment rate in nursing facilities based on estimates of the labor cost visits of hospice vs. in home treatments due to differences in staff visit frequency.

Session V: Bundling Post-Acute Care Services

Background: The administration of care for post-acute incidents can vary substantially due to the type and amount and unexpected nature of treatment service after an acute event. Fee-for-service payments foster overuse of service, as there exists little motivation for a provider to curb the total costs to treat a beneficiary following hospitalization. MedPAC staff suggested the creation of a system of well-constructed bundled payments as a way to create enticements for providers to decrease the costs of care across settings while improving the care quality of services beneficiaries receive. However, the bundles must be designed carefully to avoid increased volume, stinting, or patient selection.

Key Points: Staff presented information on the construction of an illustrative bundle proposal and possible ways to establish episode benchmarks. Such payment bundles would encourage care coordination between providers, bolster better resource use across an episode of care, and narrow the variation in spending. Bundling could entail an initial FFS-based approach (minus a small withheld) with a risk-adjusted benchmark and compare provider’s actual spending with an episode benchmark set forth by CMS. Such a model would provide a quality and outcome gauges to monitor provider performance and which could be used for later discussion. Staff also outlined the model’s effect on beneficiary care and gave suggestions for potential transition implementation of bundled payments.

Commissioners provided comments on the principles for establishing bundled payments, recommended quality and outcome measures, suggested best-practices approaches to setting the necessary post-acute care service benchmarks, provided insights as the implications for beneficiaries, and suggested ways to transition to a system of bundled payments. The Commission anticipates this information will be added as a chapter in the June 2013 report.

Session VI: Improving Medicare Payment for Chronically/Critically Ill Patients in Hospital Settings

Background: Chronically/critically ill (CCI) beneficiaries, those that have spent at least 8 days in the ICU/CUU, have significantly increased without payment adjustments, efficiencies or incentives for improvements. As it stands, Medicare pays for the cost of caring for Chronically Critically Ill (CCI) beneficiaries under different payment systems depending on whether care is delivered at Acute Care Hospitals (ACHs), based on the inpatient prospective payment system (IPPS) with a built in outlier, or Long-term Care Hospitals (LTCHs), based on inflationary costs. Such a payment model is inequitable and creates financial incentives to provide services in more expensive LTCH facilities, inflating expenses for the Medicare program and/or encouraging transitions between care facilities.

Key Points: At the April meeting, MedPAC staff advocated that design concepts for payment reform should make payments should be site-neutral and patient centered by either reforming the IPPS to better align with costs of CCI or by bundling price adjusted codes costs in a new CCI MS-DRGS.

Session VII: Medicare’s Coverage of Services Provided by Advanced-Practice Nurses and Physician Assistants

Background: Generally, Medicare covers provider payments for services rendered by advanced-practice nurses (APNs—nurse practitioners and clinical nurse specialists), and physician assistants (PAs), provided licensed APNS and PAS services are within APN and PA’s scope of practice emanating from each states’ laws.

Key Points: MedPAC staff issued a paper that discusses state licensure, state scope-of-practice laws, provider policies, and other payer policies that affect the services provided by APNs and PAs. It should be noted that the variation in scope of practice laws do not follow regional patterns as states tend to be quite individualized in setting these rules. The paper also delineated Medicare’s coverage and billing policies for APN and PA services and presented an examination and analysis of claims activity regarding the types of services and facilities that APNs and PAs bill under the Medicare program.