On Thursday, October 9, and Friday, October 10, the Medicare Payment Advisory Commission (MedPAC) held a public meeting during which members discussed findings and potential recommendations for issues related to Medicare. We monitored agenda items focusing on sharing risk in Medicare Part D, potentially inappropriate opioid use in Medicare Part D, private-sector initiatives to manage post-acute care, as well as validating relative value units in Medicare’s fee schedule for physicians and other health professionals. This memorandum summarizes relevant portions of discussions on these topics. The full presentations and a transcript from the meeting are available HERE.
I. Sharing Risk in Medicare Part D
MedPAC examined approaches for improving risk-sharing in Medicare Part D, including revisions to risk-sharing mechanisms and changes in low-income subsidy (LIS) policies. Four risk-sharing mechanisms currently are used, including capitated payments, risk adjustment, individual reinsurance, and risk corridors. Rachel Schmidt, a principal policy analyst for MedPAC, presented to the Commission on whether the original structure for sharing risk within Medicare Part D is still appropriate. According to Schmidt, these mechanisms were established to support the original market for stand-alone Part D plans, but the focus of risk-sharing has shifted more towards managing high-cost enrollees.
The presentation reviewed data suggesting that risk-sharing may merit revision, such as findings that reinsurance spending has grown 143% since 2007 and that sponsors have consistently bid too high based on concerns of attracting high-cost enrollees, which results in sponsors paying back Medicare each year. It also noted the lack of equal distribution of LIS enrollees among plans: 75% or more of LIS enrollees were concentrated in just 9 of the top 20 PDPs in 2012.
In terms of potential future policy changes, Commissioners discussed allowing the Secretary more flexibility in changing the width of the risk corridors. One suggestion that received a fair amount of discussion was to separate the types of risk and allow for different rates among those types. Proposed risk categories included, utilization risk, price mix risk, selection risk and regulatory risk. Commissioners indicated these designations could be beneficial where high-cost specialty drugs, like Sovaldi, are commercialized during the year and could not be projected in bids. In this case, some Commissioners suggested wider corridors so that the risk would fall on the federal government more than on the plan provider. Other Commissioners suggested lowering or eliminating reinsurance to allow the plan to bear the cost because these are insurable risks that risk adjusters should be able to account for in their bids. Some Commissioners also discussed the idea of using ACOs to manage risk by including Medicare Part D in the ACO framework. Despite entertaining several ideas, the Commissioners indicated that they need additional information before making any recommendations to Congress.
II. Potentially Inappropriate Opioid Use in Medicare Part D
MedPAC examined the use of opioids in Medicare Part D and considered policy options to manage their increase in use in recent years. MedPAC noted that more than one-third of Medicare beneficiaries use opioids in a given year, accounting for approximately 5% of total prescriptions and spending for Part D drugs. It also indicated that some use may not be clinically appropriate based on recent GAO and OIG findings. MedPAC acknowledged that opioid use of pain related to cancer and end-of-life care is well-supported in medical literature. It focused, instead, on use of opioids to manage other pain, such as use in patients without hospice stays or cancer diagnoses. While some of the Commissioners suggested data is insufficient to support use of opioids outside of cancer treatment and post-surgery, several of the physicians on the Commission noted that opioids may be used more frequently within the Medicare population due to reduced side effects, as compared to other pain management drugs.
The Commission discussed current opioid use monitoring tools in Part D, such as drug utilization review and the overutilization monitoring system, as well as changes taking effect next year as a result of recent regulatory revisions to better monitor opioid overuse and abuse. In terms of next steps, Commissioners requested more information about the most prevalent conditions within high-utilization beneficiaries. They plan to focus on prescribing of opioids in long-term care settings and the effectiveness of using mechanisms employed in managing opioid use in other medication areas. They also expressed their interest in examining other policy options, such as lock-ins for pharmacies.
III. Private-sector Initiatives to Manage Post-acute Care
Under fee-for-service Medicare, incentives do not exist for encouraging efficient post-acute care (PAC). MedPAC examined private sector incentives and tools to determine whether any lessons learned could be applied to the fee-for-service system. MedPAC researchers contacted and interviewed several private sector plans. The plans interviewed generally encourage the use of high-quality providers through education, preferred networks, and cost sharing. They often required prior authorization for the site of care and the amount of service and also utilized a PAC benefit manager to bear risk. Additionally, these plans utilized post-discharge monitoring with hospital/PAC provider collaboration to improve quality.
Commissioners discussed adding a third party vendor to act as the PAC benefit manager within Medicare. While Commissioners agreed that one entity needs to bear responsibility for PAC, several commissioners worried that adding an additional party would lead to further fragmentation and lower quality care. All Commissioners agreed that MedPAC should not recommend a new entity to manage PAC within Medicare. They acknowledged that integration of medical records would be helpful to allow for better integration of care. Additionally, the Commissioners discussed allowing hospitals to have more freedom to steer patients to PACs. The Commissioners acknowledged that the current system relies on soft-steering and considered the option of changing the law to allow for physicians to participate in more hard-steering. Commissioners noted the potential complications in allowing hard-steering if the physician is participating in bundled payments through ACOs.
IV. Validating Relative Value Units in Medicare’s Fee Schedule for Physicians and Other Health Professionals
Because of inaccuracies in relative value units (RVUs) in the current physician fee schedule and concerns over comparatively low compensation for primary care physicians, MedPAC is examining the best method to adjust these inaccuracies. CMS currently uses a “bottom-up” approach to re-evaluate RVUs, where time data is collected on a service-by-service basis. MedPAC asserts that it is costly to evaluate all 7,000 codes as not all RVUs need to be evaluated. Instead, MedPAC has conducted a study that uses a top-down approach to identifying overpriced services. The Commission’s method involved examining data from practices on mix of services, total time worked, and time assumed in the fee schedule. From this information, they are able to flag services that need a more detailed assessment.
While most of the Commissioners supported the idea of a top-down approach, a few were concerned that physician assistants and nurse practitioners may not be included in the total time worked. Others were concerned that there could be bias and difficulty ensuring quality hours worked. However, Kevin Hayes, principal policy analyst, noted that the use of practice managers is a good way to control for reporting bias. The Commission noted that while CMS’ contractors are near completion in their current evaluation of RVUs, they do not want CMS to lose sight of the top-down approach process. The Commission is not submitting a formal recommendation at this time.