From Health Law Daily, March 16, 2017

MedPAC makes 2018 payment recommendations

By Sheila Lynch-Afryl, J.D., M.A.

Recommendations for 2018 Medicare fee-for-service (FFS) rate adjustments were the focus of the Medicare Payment Advisory Commission’s (MedPAC) March 2017 report to Congress on Medicare payment policy. MedPAC recommended updates to fee-for-service (FFS) payments, reforms to payment for post-acute care, and an adjustment to the calculation of Part C benchmarks (MedPAC Report to the Congress, March 15, 2017).

Fee-for-service. MedPAC made the following payment recommendations:

• hospitals: update payments by the amount specified in current law;
• physicians and other professions: update payments by the amount specified in current law for 2018;
• ambulatory surgical centers: no payment increase for 2018;
• outpatient dialysis facilities: update payments by the amount specified in current law for 2018;
• skilled nursing facilities (SNFs): no payment increase for 2018 and 2019;
• home health agencies (HHAs): reduce payment rates by 5 percent in 2018 and implement a two-year rebasing of the payment system beginning in 2019;
• inpatient rehabilitation facilities (IRFs): reduce payment rates by 5 percent in 2018;
• long-term care hospitals (LTCHs): no payment increase for 2018; and
• hospice: no payment increase for 2018.

In 2015, FFS spending on current post-acute care (PAC) providers (SNFs, HHAs, IRFs, and LTCHs) totaled $60 million. The current PAC systems create incentives for providers to treat certain types of patients over others; contribute to wide variation in program spending across different geographic areas; and do not align payments with the costs of treating patients. MedPAC has made recommendations that would update payment rates and revise payment systems; for example, in June 2016 MedPAC recommended features of a unified system that would base payments on patient characteristics and distribute payments more equitably across stays.

MedPAC’s PAC recommendations have not been implemented, however. In fact, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) required value-based purchasing pilots in LTCHs and IRFs but CMS has taken no action. In addition, there have been few corrections to the known shortcomings of the SNF and HHA prospective payment systems (PPSs). MedPAC noted that Medicare is paying more than necessary for services and urged Congress and CMS to implement its recommendations this year.

Part C. While MA enrollees must be enrolled in both Part A and Part B, MA benchmarks are currently based on the Medicare spending of all FFS beneficiaries, including those in Part A or Part B. To ensure equity between Part C and FFS, MedPAC recommended calculating MA benchmarks using average FFS spending only for beneficiaries enrolled in both Part A and Part B.

MedPAC estimated that the recommended change would increase Medicare spending between $750 million and $2 billion over one year and $5-10 billion over five years. However, previous coding recommendations from MedPAC’s June 2016 report could offset the increased cost.

Part D. In 2016, about 41 million beneficiaries (72 percent of Medicare beneficiaries) were enrolled in Part D plans. Of those enrolled, 60 percent were in stand-alone prescription drug plans (PDPs) and 40 percent were in MA-PDPs. Part D has improved beneficiaries’ access to prescription drugs, with plans available to all beneficiaries. In 2017 beneficiaries have a choice among 18 to 24 PDPs depending on where they live, in addition to the MA-PDPs available in most areas. In June 2016 MedPAC made recommendations to address concerns about spending growth in Part D (see MedPAC’s annual exam gives Medicare Advantage and Part D a check-up, June 16, 2016).

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