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Listening to MedPAC

By John Reichard, CQ HealthBeat Editor

February 29, 2008 -- Which among the many recommendations formally transmitted to Congress Friday by the Medicare Payment Advisory Commission in its 355-page "March report" will lawmakers most likely heed this year? Advice by the commission to freeze Medicare payment rates in fiscal 2009 for home health agencies and skilled nursing and inpatient rehabilitation facilities could prove the most handy for lawmakers looking to justify politically unpopular cuts to pay for legislation blocking a scheduled 10.6 percent payment cut to doctors in July 2008 and a 15.4 percent cut in 2009.

The panel's arguments for trimming payments to private health plans are likely to be well-thumbed parts of the Democrats' playbook this year and next as they try to slow the rapid movement of the program away from traditional Medicare. And the commission's recommendations for tying hospital payment to quality performance will likely be part of the ongoing struggle in Congress to fulfill the vision of many policy analysts of bringing greater value to Medicare spending.

The March report, one of two key annual reports filed by MedPAC with Congress, tends to be viewed by at least some analysts as a sort of bible of good policy—but in the yearly clash between political reality in Medicare and aspirations to good policy, the March report only has so much influence and is prone to being read in a selective way to advance personal interests.

The principal feature of the report—recommendations for payment revisions for the upcoming fiscal year—is already well known to health industry insiders, having been resolved at the January meeting of the commission. But the March report also includes other types of recommendations relating to the quality and efficiency of the program. In that area, one of the key recommendations this year is a call for greater access to the millions of claims filed each year for prescriptions filled under the programs "Part D" prescription drug benefit.

At a press briefing on the report Friday morning, questions about its take on Medicare Advantage payments, the reimbursements made to private health plans in Medicare, dominated the session.

Executive Director Mark Miller emphasized that the commission has always supported choices for beneficiaries between traditional Medicare and private health plans in the program. Those plans create an opportunity for innovation in the program that improves the coordination and efficiency of care, he said. But that innovation will only occur if payment policy is structured the right way, he added. Originally, payments to the plans were set at levels below that in traditional Medicare, a decision meant to capitalize on the claims of the plans that they could deliver care more efficiently. Not only were plans paid less, but they were able to operate at costs enough below the payments they received to allow them to offer extra benefits to seniors beyond those in traditional Medicare.

MedPAC's policy, he said, is one of "financial neutrality" between traditional Medicare and Medicare Advantage—in other words, that plans should be paid at the same levels as providers in traditional fee-for-service Medicare. But MedPAC projects that in 2008 Medicare Advantage plans on average will be paid 13 percent more than rates in traditional Medicare. And one type of Medicare Advantage plan known as the private fee-for-service plan will be paid rates 17 percent higher, even though they are organized in a way that is less likely to produce efficient care than managed care plans in Medicare Advantage, he said.

Plans say that although they are paid more they offer lots of extras in the form of lower premiums and out of pocket charges and added benefits such as vision, dental and hearing benefits. Miller said that's true—"there's lots of extra benefits being offered out there"—but that the payments they receive are now at levels that no longer encourage plans to be as efficient as traditional fee-for-service care, which MedPAC views as a badly flawed standard in that their are many inefficiencies in traditional Medicare, he said. "The concern here is that we are encouraging inefficient plans to come into Medicare," he said. Setting bidding benchmarks above payment levels in traditional Medicare does not make for a sustainable Medicare program, Miller said.

With higher payment levels, enrollment in the Medicare Advantage program is growing fast. Miller noted that Medicare Advantage now accounts for 20 percent of all Medicare enrollment, or almost 9 million beneficiaries, and that for the most part growth in the program has occurred in private fee-for-service plans not set up for efficient care and in "special needs" plans that are subject to few standards to spur efficiency. Between November 2006 and November 2007, enrollment in private fee-for-service plans grew from 800,000 to 1.7 million, while that in standard types of managed care plans that are better organized to coordinate care grew much more modestly, from 6.7 million to 7.2 million. However, access to those more standard plans is growing, according to the report. In 2008, 85 percent of Medicare beneficiaries will have access to a local HMO or PPO in their county of residence, up from 82 percent in 2007 and 67 percent in 2005.

Meanwhile, growth in special needs plans climbed from 532,000 in July 2006 to 1,081,000 in November 2007. The plans in theory are meant to coordinate the care of sicker and more costly beneficiaries but the value they deliver is unclear, according to the report. It recommends various steps to assure efficiency, such as adoption of tailored performance measures and the coordination of Medicaid with Medicare benefits for those in both programs.

"Let's be honest," Miller said concerning MedPAC's view that there should be financial neutrality. "If you start to do this less plans will be offered"—as well as fewer extra benefits—"but my point is that we will be growing managed care plans that are more efficient."

With respect to prescription drug claims, Miller said that "there's a lot of use this data could be put to but there's no way to get it out." MedPAC regards opening up access to the data for research purposes as "incredibly important," he said. Congress will ask the commission how well the drug benefit is working, but it is hard put to answer without access to the data, Miller suggested.

MedPAC previously recommended that the HHS secretary should broaden access to the data but that hasn't happened. The March report goes farther, calling on Congress to direct HHS to widen access.

The report notes that in 2006, Medicare and Part D enrollees spent nearly $50 billion on benefits and premiums but "there are fundamental questions that the Commission and other organizations cannot answer about how Part D is operating. These include questions such as: which prescription drugs enrollees are using most widely; how much, on average, enrollees are paying out of pocket for their medicine; and how many beneficiaries are entering Part D's coverage gap.

"Other federal agencies need Part D data to carry out postmarketing surveillance of drug safety and efficacy, to help monitor the prevalence and treatment of specific conditions, and to support research on clinical outcomes and the effectiveness of covered drugs," the report said.

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