MedPAC Releases Congressional Report

The Medicare Payment Advisory Committee (MedPAC) released their June report to Congress last week, identifying several changes that could be made to the Medicare program. The changes could potentially save over $1.5 billion per year. The report, the second that MedPAC has sent to Congress this year, is less substantive than their first in March, but CQ reports that it reflects an “effort in a variety of areas to identify and eliminate inefficient spending in [Medicare].”

Among the cost saving opportunity that MedPAC identified is a new version of “competitively determined plan contributions”, or what Mitt Romney called “premium support.” MedPAC specifies that the plan may or may not save money depending on how it’s implemented, but they go on to describe a federal contribution toward the coverage of a participant’s Medicare benefit. The contribution would vary based on the cost of competing options for the coverage, including both those offered by private plans and those offered by the traditional Medicare program.

The report also identified significant variations in charges for the same or similar services provided in different settings. Ambulatory services, for example, cost more when provided in hospital outpatient departments than they do when performed in a physician’s office. The report suggested a process where Medicare bases payment rates on the resources needed to treat patients in the most efficient settings, and then adjust for severity of the patient’s condition and locality. Looking at 66 groups of procedures, equalizing rates between the procedure performed in an outpatient department and the procedure performed in a physician’s office could save the program $900 million per year. Stabilizing rates in another 12 groups of procedures performed at ambulatory surgery centers could save an additional $600 million.

An additional way to save money is to equalize costs for post-acute care facilities. The report suggested bundling hospital and post-acute care payments, possibly leading to coordination between the facilities and the physicians. By doing that, MedPAC says, “providers would have an incentive to coordinate care and provide only clinically necessary services, rather than furnishing more services to generate revenue.”

Finally, the report discusses the new hospital readmission policy, part of the value based purchasing program, that curbs reimbursements based partially on readmission. MedPAC suggests re-evaluating the program and taking socioeconomic status into account when adjusting for readmissions, since poorer populations are more likely to use hospitals instead of primary care physicians.

You can view the full MedPAC report here, and the report fact sheet here.