Medicare Advisory Commission Puts Pressure on Providers
to Constrain Costs, Improve Quality
Report to Congress again emphasizes Medicare’s
payment system for private fee-for-service plans is seriously flawed;
wants significant cuts to home healthcare providers (payments cuts of
5.5% next year), hospice end-of-life care, medical imaging services and
Medicare Advantage insurance plans; does suggest a 1.1 percent hike for
doctors but more transparency.
March 2, 2009 – The annual Medicare Payment
Advisory Commission’s report to congress makes a serious stab at
recommendations to slow the spiraling costs that threaten the Medicare
programs viability, but the industries being pricked are fighting back.
In a press release released with the report on Friday, MedPAC’s chairman
says the government must not look at the costs of providers as
unchangeable but should realize the pricing is influenced by how
providers are paid.
MedPAC says the March 2009 Report to the
Congress: Medicare Payment Policy report offers a set of
recommendations for Medicare payments designed to assure beneficiaries’
access to care and preserve Medicare’s long-term sustainability.
Over the past several years the Commission has made
recommendations on directions the program might take to encourage
delivery system reform. This report focuses on furthering sustainability
by modifying the current payment systems and controlling their updates
for 2010, the news release says.
Limiting Medicare updates is an important means
to sustainability.
“We need to stop thinking about providers’ costs
as immutable (unchangeable) and instead recognize that they are
influenced by how providers are paid,” according to Commission Chair
Glenn Hackbarth.
In the report, MedPAC shows that hospitals under
greater fiscal pressure can constrain their costs. However, other
hospitals that are not under fiscal pressure - those with high private
payments that exceed their costs - allow their costs to increase.
This results in lower Medicare margins - not
because of low Medicare payments, but instead because of unconstrained
costs.
The report recommends updates for Medicare’s
fee-for-service (FFS) payment systems that take into account
beneficiaries’ access to care, the quality of care, the relation of
payments to costs, and other factors, while maintaining fiscal pressure
to increase Medicare’s sustainability.
For example, in the home health sector Medicare
margins have been over 16 percent since 2002, during which time use of
home health care, total payments, and payments per episode have
continued to rise but visits per episode have fallen.
The Commission recommends that payments be reduced
for this sector in 2010 and that the Secretary rebase rates in 2011 to
recognize that the content of a “home health episode” has changed.
Updates for other Medicare providers are specified in the accompanying
fact sheet, as are related recommendations for nine FFS payment systems.
The Commission also made recommendations in some
FFS sectors to redistribute payments.
For example, in addition to recommending an update
of 1.1 percent for physician services, MedPAC also reiterated its
recommendation to increase payments for primary care services delivered
by practitioners who focus on primary care. This recommendation
recognizes that a well functioning primary care network is essential to
help improve quality and control Medicare spending.
The report also reviews recent findings and
reiterates recommendations on Medicare Advantage (MA) plans.
MedPAC again documents that Medicare’s payment
system for private plans is seriously flawed.
In the most extreme case, Medicare pays private FFS
plans (which mirror Medicare’s FFS benefit) 18 percent more than it
would pay for the same beneficiaries under the traditional program, and
pays more than three dollars for each dollar of enhanced benefits these
plans provide. This is inequitable to the beneficiaries not enrolled in
these plans who pay higher Part B premiums without getting any
additional benefits. It is also a burden to taxpayers and weakens
Medicare’ fiscal sustainability.
The report also reviews enrollment and plan
characteristics of the more than 1,700 Part D drug plans.
Most beneficiaries continue to participate in Part
D. However, MedPAC found that premiums increased by about $6 per month
(24%), and about 1.6 million beneficiaries in the low income subsidy
program had to switch to a different plan to avoid paying a premium.
The report makes a series of recommendations to
increase transparency of physician financial relationships.
For example, manufacturers of drugs and medical
devices have extensive financial associations with physicians that may
create conflicts with the physicians’ obligation to do what is best for
their patients. Increasing transparency would discourage physicians from
accepting gifts or payments that violate professional guidelines and
help Medicare and others determine whether physician practice patterns
are influenced by those relationships.
The Commission recommends that manufacturers of
drugs and medical devices be required to publicly report their financial
relationships with physicians to the Secretary of Health and Human
Services.
Finally, the report recommends reforming Medicare’s
payment system for hospice care. MedPAC’s recommendations will
strengthen the hospice payment system while recognizing the importance
of the hospice benefit and its substantial contribution to end-of-life
care for beneficiaries.
The hospice program has grown rapidly in ways not
contemplated at its inception, with a rapid increase from 2000 to 2007
in the number of providers, almost all for profit, and the average
length of stay. Medicare’s current hospice payment system contains
incentives that make very long stays profitable for the provider, which
may have led to inappropriate utilization of the benefit among some
hospices.
The recommendations are intended to encourage
hospices to admit patients at a point in their terminal disease that
provides the most benefit to the patient. The Commission also recommends
closely monitoring hospices with exceptionally long lengths of stay.
The Medicare Payment Advisory Commission is an
independent Congressional advisory body charged with providing policy
analysis and advice concerning the Medicare program and other aspects of
the health care system. Its 17 commissioners represent diverse points of
view and include health care providers; payers; beneficiary
representatives; employers; and individuals with expertise in
biomedical, health services, and health economics research.
Below is Fact Sheet Outlining
Specifics of the MedPAC Recommendations
Report to the Congress • March 2009
As required by the
Congress, the Medicare Payment Advisory Commission reviews Medicare
payment policies and makes recommendations each March. The March 2009
report includes payment policy recommendations for nine payment systems:
hospital inpatient, hospital outpatient, physicians, ambulatory surgical
center, outpatient dialysis, skilled nursing, home health, inpatient
rehabilitation facilities, and long-term care hospitals. It also reviews
the status of the Medicare Advantage (MA) plans beneficiaries can join
in lieu of traditional FFS Medicare and the plans that provide
prescription drug coverage.
In addition, the report includes MedPAC
recommendations on public reporting of physicians’ financial
relationships with pharmaceutical and device manufacturers and health
care providers, and on reforming Medicare’s hospice payment system.
Fee-For-Service Payment Update Recommendations
Hospitals
• The Congress should increase payment rates for
the acute inpatient and outpatient prospective payment systems in 2010
by the projected rate of increase in the hospital market basket index,
concurrent with implementation of a quality incentive payment program.
• The Congress should reduce the indirect medical
education adjustment (IME) in 2010 by 1 percentage point to 4.5 percent
per 10 percent increment in the resident-to-bed ratio. The funds
obtained by reducing the IME adjustment should be used to fund a quality
incentive payment program.
Physicians and Ambulatory Surgical Centers
• The Congress should update payments for
physician services in 2010 by 1.1 percent.
• The Congress should establish a budget-neutral
payment adjustment for primary care services billed under the physician
fee schedule and furnished by primary-care-focused practitioners.
Primary-care-focused practitioners are those whose specialty designation
is defined as primary care and/or those whose pattern of claims meets a
minimum threshold of furnishing primary care services. The Secretary
would use rulemaking to establish criteria for determining a
primary-care-focused practitioner.
• The Congress should direct the Secretary to
increase the equipment use standard for expensive imaging machines from
25 to 45 hours per week. This change should redistribute RVUs from
expensive imaging to other physician services.
• The Congress should increase payments for
ambulatory surgical centers (ASC) services in calendar year 2010 by 0.6
percent. In addition, the Congress should require ASCs to submit to the
Secretary cost data and quality data that will allow for an effective
evaluation of the adequacy of ASC payment rates.
Dialysis Services
• The Congress should maintain current law and
update the composite rate in calendar year 2010 by 1 percent.
Skilled Nursing Facility Services
• The Congress should eliminate the update to
payment rates for skilled nursing facility services for fiscal year
2010.
• The Congress should require the Secretary to
revise the skilled nursing facility (SNF) prospective paymentsystem by: adding a separate nontherapy ancillary (NTA)
component, replacing the therapy component with one that establishes
payments based on predicted patient care needs, and adopting an outlier
policy. (June 2008)
• The Secretary should direct SNFs to report more
accurate diagnostic and service-use information by requiring that:
claims include detailed diagnosis information and dates of service,
services furnished since admission to the SNF be recorded separately in
the patient assessment, and SNFs report their nursing costs in the
Medicare cost report. (June 2008)
• The Congress should establish a quality
incentive payment policy for SNFs in Medicare and to improve quality
measurement for SNFs, the Secretary should: add the risk-adjusted rates
of potentially avoidable rehospitalizations and community discharge to
its publicly reported post-acute care quality measures; revise the pain,
pressure ulcer, and delirium measures currently reported on CMS’s
Nursing Home Compare website; and require SNFs to conduct patient
assessments at admission and discharge. (March 2008)
Home Health Services
• The Congress should eliminate the market basket
increase for 2010 and advance the planned reductions for coding
adjustments in 2011 to 2010, so that payments in 2010 are reduced by 5.5
percent from 2009 levels.
• The Congress should direct the Secretary to
re-base rates for home health care services in 2011 to reflect the
average cost of providing care.
• The Congress should direct the Secretary to
assess payment measures that protect the quality of care and ensure
incentives for the efficient delivery of home health care. The study
should include alternative payment strategies such as blended payments
and risk corridors and outcome-based quality incentives.
Inpatient Rehabilitation Facilities
• The update to the payment rates for inpatient
rehabilitation services should be eliminated for fiscal year 2010.
Long-Term Care Hospitals
• The Secretary should update payment rates for
long-term care hospitals for fiscal year 2010 by the projected rate of
increase in the rehabilitation, psychiatric and long-term care hospital
(RPL) market basket index less the Commission’s adjustment for
productivity growth.
Status Of Medicare Advantage Program
About 22 percent of Medicare beneficiaries were
enrolled in MA plans in 2008. All beneficiaries have access to an MA
plan in 2009, with an average of 34 plans available in each county.
In aggregate, the MA program continues to be more
costly than the traditional program.
Plan bids for the traditional Medicare benefit
package are 102 percent of FFS in 2009, compared with 101 percent of FFS
in 2008. As an exception, HMOs continue to bid below FFS, bidding 98
percent of FFS in 2009. In 2009, payments to MA plans continue to exceed
what Medicare would spend for similar beneficiaries in FFS. MA payments
per enrollee are projected to be 114 percent of comparable FFS spending
for 2009, compared with 113 percent in 2008.
MA plans provide enhanced benefits to enrollees,
but, except for HMOs, the enhanced benefits are financed entirely by the
Medicare program and by beneficiaries—and at a high cost. For example,
each dollar’s worth of enhanced benefits in PFFS plans costs the
Medicare program more than $3.00.
Quality is not uniform among MA plans or plan
types. High-quality plans tend to be established HMOs; in contrast,
plans that are new in the MA program have lower performance on many
measures.
The Commission has not changed its standing policy
regarding MA payments, and reiterated its 2005 recommendations in the
March 2009 report:
Recommendations on Medicare Advantage Payments
• The Congress should: Eliminate the stabilization
fund for regional PPOs. Remove the effect of payments for indirect
medical education from the MA plan benchmarks. Set the benchmarks that
CMS uses to evaluate MA plan bids at 100 percent of FFS costs.
Pay-for-performance should apply in MA to reward plans that provide
higher quality care. Clarify that regional plans should submit bids that
are standardized for the region’s MA-eligible population.
• The Secretary should calculate clinical measures
for the FFS program that would permit CMS to compare the FFS program
with MA plans.
Status Of Part D Program
As of January 2008, 90 percent of Medicare
beneficiaries received some form of drug coverage. Fifty-eight percent
of all Medicare beneficiaries enrolled in Part D plans; 32 percent had
drug coverage at least as generous as Part D through employer-sponsored
plans or other sources. Twenty-one percent of Medicare beneficiaries
received Part D’s extra help with premiums and cost sharing (called the
low-income subsidy or LIS). An estimated 2.6 million beneficiaries
eligible for the LIS were not enrolled to receive it.
In 2009, the number of stand-alone prescription
drug plan (PDP) options declined by 7 percent, but beneficiaries can
still choose among a median of 49 PDPs. For 2009, Part D premiums are
significantly higher than in 2008. If enrollees stayed in the same plan,
they saw premiums rise by an average of $6 to nearly $31 per month (24
percent).
For 2009, fewer premium-free PDPs will be available
to enrollees who receive the LIS: 308 plans qualified, compared with 495
in 2008. CMS estimated that it needed to reassign about 1.6 million LIS
enrollees to new plans for individuals to avoid paying some of the
premium: 1.2 million to a plan offered by a different sponsor and 0.5
million to a plan offered by the same sponsor.
Public Reporting of Physician Financial
Relationships
Requiring manufacturers to publicly report their
financial relationships with physicians and other health care
organizations should have several important benefits. It could
discourage physicians from accepting gifts or payments that violate
professional guidelines.
It would help reporters and researchers explore
whether manufacturers and physicians are complying with voluntary
industry and professional standards. In addition, payers could use this
information to examine whether physicians’ practice patterns are
influenced by their relationships with industry. In addition to
financial relationships with drug and device manufacturers, physicians
may also have financial ties to health care facilities.
Although physician ownership of facilities may
improve access and convenience for patients, evidence suggests that
physician-owned hospitals are associated with a higher volume of
services within a market. Nevertheless, it is difficult for payers and
researchers to obtain ownership information. The report recommends
hospitals and other health care entities that bill Medicare be required
to disclose the amount and degree of physician ownership of the
facility.
Recommendations on Public Reporting of
Physician Financial Relationships
• The Congress should require all manufacturers
and distributors of drugs, biologicals, medical devices, and medical
supplies (and their subsidiaries) to report to the Secretary their
financial relationships with: physicians, physician groups, and other
prescribers; pharmacies and pharmacists; health plans, pharmacy benefit
managers, and their employees; hospitals and medical schools;
organizations that sponsor continuing medical education; patient
organizations; and professional organizations.
• The Congress should direct the Secretary to post
the information submitted by manufacturers on a public website in a
format that is searchable by: manufacturer; recipient’s name, location,
and specialty (if applicable); type of payment; name of the related drug
or device (if applicable); and year.
• The Congress should require manufacturers and
distributors of drugs to report to the Secretary the following
information about drug samples: each recipient’s name and business
address; the name, dosage, and number of units of each sample; and the
date of distribution. The Secretary should make this information
available through data use agreements.
• The Congress should require all hospitals and
other entities that bill Medicare for services to annually report the
ownership share of each physician who directly or indirectly owns an
interest in the entity (excluding publicly traded corporations). The
Secretary should post this information on a searchable public website.
• The Congress should require the Secretary to
submit a report, based on the Disclosure of Financial Relationships
Report, of the types and prevalence of financial arrangements between
hospitals and physicians.
Reforming the Hospice Benefit
The hospice benefit provides a substantial
contribution to end-of-life care for Medicare beneficiaries. However,
MedPAC research finds that Medicare’s hospice payment system contains
incentives that make very long stays in hospice profitable for the
provider, which may have led to inappropriate utilization of the benefit
among some hospices.
We also find that certain hospices have
questionable practice patterns (e.g., very long stays, financial
relationships with nursing homes) that justify additional oversight.
Finally, we find that the Medicare program lacks data vital to the
effective management of the benefit.
Recommendations on Reforming the Hospice
Benefit
• The Congress should direct the Secretary to
change the Medicare payment system for hospice to: have relatively
higher payments per day at the beginning of the episode and relatively
lower payments per day as the length of the episode increases; include a
relatively higher payment for the costs associated with patient death at
the end of the episode; and implement the payment system changes in
2013, with a brief transitional period. These payment system changes
should be implemented in a budget neutral manner in the first year.
• The Congress should direct the Secretary to:
require that a hospice physician or advanced practice nurse visit the
patient to determine continued eligibility prior to the 180th-day
recertification and each subsequent recertification and attest that such
visits took place, require that certifications and recertifications
include a brief narrative describing the clinical basis for the
patient’s prognosis, and require that all stays in excess of 180 days be
medically reviewed for hospices for which stays exceeding 180 days make
up 40 percent or more of their total cases.
• The Secretary should direct the Office of
Inspector General to investigate: the prevalence of financial
relationships between hospices and long-term care facilities such as
nursing facilities and assisted living facilities that may represent a
conflict of interest and influence admissions to hospice, differences in
patterns of nursing home referrals to hospice, the appropriateness of
enrollment practices for hospices with unusual utilization patterns
(e.g., high frequency of very long stays, very short stays, or
enrollment of patients discharged from other hospices), and the
appropriateness of hospice marketing materials and other admissions
practices and potential correlations between length of stay and
deficiencies in marketing or admissions practices.
• The Secretary should collect additional data on
hospice care and improve the quality of all data collected to facilitate
the management of the hospice benefit. Additional data could be
collected from claims as a condition of payment and from hospice cost
reports.
March 2, 2009 – The annual Medicare Payment
Advisory Commission’s report to congress makes a serious stab at
recommendations to slow the spiraling costs that threaten the Medicare
programs viability, but the industries being pricked are fighting back.
In a press release released with the report on Friday, MedPAC’s chairman
says the government must not look at the costs of providers as
unchangeable but should realize the pricing is influenced by how
providers are paid. 
Medicare Payment Advisory Commission (MedPAC)
objects to how hospice payments determined
