Mar 8

March 7-8 Medicare Payment Advisory Commission (MedPAC) Public Meeting


Download the full report here


The Medicare Payment Advisory Commission (MedPAC) held public meetings on Thursday, March 7, and Friday, March 8, to discuss issues of interest to the Commisssion. There were no recommendations made or votes conducted at these meetings.

Commissioners in attendance included Glenn M. Hackbarth, J.D., Chairman; Michael Chernew, Ph.D., Vice Chairman;  Scott Armstrong, M.B.A., F.A.C.H.E.; Katherine Baicker, Ph.D.;  Peter Butler, M.H.S.A.; Alice Coombs, M.D.; Thomas M. Dean, M.D.; Willis D. Gradison, M.B.A.; William J. Hall, M.D., M.A.C.P.; Jack Hoadley, Ph.D.; Herb Kuhn; George N. Miller, Jr., M.H.S.A.; Mary Naylor, Ph.D., RN, FAAN; David Nerenz, Ph.D.; Rita Redberg, M.D., M.Sc., F.A.C.C.; Craig Samitt, M.D., M.B.A., and Cori Uccello, F.S.A., M.A.A.A., F.C.A.

 Meeting Highlights

Refining the Hospital Readmissions Reduction Program

In 2008, MedPAC recommended the federal government examine a readmissions reduction program. Through the Affordable Care Act (ACA), Congress acted upon this recommendation by creating a program which began in 2010, and penalties for readmissions went into effect in 2012. The payment penalties are capped at 1% of base operating payment in 2013, 2% for 2014, and 3% for 2015 and thereafter. Readmissions are measured among three conditions: acute myocardial infarction (AMI), heart failure, and pneumonia.

MedPAC staff conducted an analysis of the program to date, reporting that from 2009 to 2011, there was a 0.7% decline in the number of beneficiaries who returned to hospitals within 30 days of discharge and whose second visits might have been prevented. The analysis concluded that there are four issues with the implementation of this program:

  1. Random variation makes detection of differences in individual conditions difficult
  2. The penalty does not change as industry performance improves
  3. Socioeconomic status (SES) is related to readmission rates, but not captured adequately by the policy, and
  4. Some mortality rates are related to readmission rates.

Chairman Hackbarth said this effort to reduce readmissions was an opportunity to identify additional areas of improvement while larger changes in the Medicare fee-for-service (FFS) system are debated. Chairman Hackbarth and other Commissioners were supportive of the idea to use a comparison group based on SES for further refining the standards of the program. There was also concern that teaching hospitals are penalized more harshly relative to other hospitals with comparable readmission rates, since they see more complex cases and more low-SES patients.  Several commissioners were supportive of basing readmissions standards on measures which account for all medical conditions as opposed to the three medical conditions currently observed.

Effects of Adherence to Part D Covered Drugs on Parts A and B Spending

MedPAC staff presented an analysis of the relationship between medication adherence and health care spending on other services.  The staff tracked 5 million beneficiaries with congestive heart failure, chronic obstructive pulmonary disease (COPD), or depression for 6 months to determine their baseline for medication adherence (measured by prescription refills), and for an additional year to measure their levels of spending for Medicare Part A and Medicare Part B.

The analysis concluded that the effects of medication adherence had varied effects on spending, relative to condition, medication regimen, and low-income status (LIS). Reductions in spending for those beneficiaries with higher adherence rates were typically largest for inpatient hospitals. Additionally, a greater improvement in adherence did not always result in a greater reduction in spending. The staff suggested collecting this data over a larger period of time to see if the results were sustaining.

The Commissioners questioned if MedPAC should focus on medication adherence, noting it may be an area in which their influence is limited. The Commissioners also acknowledged that patients with satisfactory medication adherence are usually healthier than other beneficiaries for additional reasons such as maintaining healthy lifestyles.

Competitively- determined plan contributions

The MedPAC staff presented an analysis of how moving Medicare to a competitively-determined plan contribution (CPC) model, similar to competitive bidding, could affect spending and cost sharing. This design has been considered by lawmakers along with other models such as the voucher system. MedPAC staff concluded that the CPC model could result in some savings, with the federal government paying approximately 93%, if beneficiaries opted for the lower of either the average bid of local health plans or traditional fee-for-service. However, such a model would require beneficiaries to pay a higher premium.

Addressing Medicare Payment Differences Across Settings: Ambulatory Care Services

MedPAC continued the discussion from previous meetings regarding aligning payment rates across care settings, noting the number of physicians employed by hospitals increased by 55% from 2003 to 2011. This transition has had and will continue to have a pronounced effect on Medicare spending, as more services are provided in the outpatient department (HOPD) as opposed to a physician office setting. MedPAC staff reported that, if migration to HOPDs continues at the current rate, Medicare spending on evaluation and management (E&M) visits would be $1.2 billion higher per year by 2021, and beneficiary cost sharing would be $310 million higher by 2021.

MedPAC has deliberated on recommending equalized payment rates among some ambulatory payment classifications (APCs), but concerns have arisen regarding a disparate adverse effect for rural, government, and teaching hospitals. This policy would reduce Medicare spending by $900 million, but would also reduce hospitals’ Medicare revenue by 0.6% and OPD revenue by 2.7%. The Commission did not make a formal recommendation on equalizing payment rates.

The Commission also discussed Medicare’s health professional shortage areas (HPSA) payment adjustment and the use of shared decision-making to increase patient-centered care and reduce health care disparities.

Next Friday, Chairman Glenn Hackbarth will testify at a House Ways and Means Health Subcommittee hearing regarding the Commission’s March Report to Congress. The next MedPAC public meeting will be held on April 4 -5, 2013.

Please contact Aubrey Beckham with questions or request more information on this meeting at: Meeting transcripts are usually posted 4-5 days after the meeting at