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Are further cuts ahead? How is MedPAC influencing future decisions? What does all this mean for providers?

One of the key questions in 2018 is whether Congress will take a serious look at requiring that the Department of Health and Human Services (HHS) initiate a prospective payment system for Medicare post-acute care (PAC) beginning in 2021 with a three-year transition, as recommended by the Medicare Payment Advisory Commission (MedPAC), the independent agency Congress established in 1997 to advise on Medicare issues.

A unified PAC prospective payment system (PPS) that spans the four settings: skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals would redistribute payments more equitably across patient conditions; payments would decrease for rehabilitation care unrelated to patient characteristics and increase for medically complex care, MedPAC argues. “The Commission finds that Medicare payments exceed providers’ costs by 14 percent across the PAC settings and recommends that the aggregate level of payments be lowered by 5 percent to more closely align with the cost of care,” MedPAC said in releasing its June 2017 Report to the Congress: Medicare and the Health Care Delivery System. Also, HHS “should align regulatory requirements across the PAC settings when the PPS is implemented.”

“Greater equity in payments means providers would have less incentive to select certain patients over others,” adds MedPAC, which has been designing a model PAC PPS for Congress to consider, as mandated by the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014.”

“Greater equity in payments means providers would have less incentive to select certain patients over others,” adds MedPAC, which has been designing a model PAC PPS for Congress to consider, as mandated by the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014. “In 2015, Medicare fee-for-service (FFS) spending on these services totaled $60 billion,” MedPAC notes.

Even without any PAC PPS, if CMS had adopted in 2017 MedPAC’s Medicare payment recommendations across the four PAC settings, FFS program spending would be reduced by over $30 billion over the next 10 years, according to the Commission’s Fact Sheet accompanying its March report to Congress. “Moreover, if the Congress had implemented the Commission’s 2008 recommendations for skilled nursing facilities and home health agencies, spending would have been reduced by about $11 billion over the period 2009 to 2016, all else being equal.”

This begs the question: Does MedPAC’s advice carry much weight when Congress considers new law or regulatory agencies like the Centers for Medicare & Medicaid Services (CMS) draft proposed and final regulations?

Broad Mandate, But No Teeth

MedPAC’s creation through the Balanced Budget Act of 1997 followed other government-wide investigative/evaluation agencies, like the Government Accountability Office, originating as the General Accounting Office in 1921. Such nonpartisan agencies serve lawmakers and their various congressional committees, along with the Congressional Research Service and the Congressional Budget Office.

MedPAC's statutory mandate is quite broad: In addition to advising Congress on payments to private health plans participating in Medicare and providers in Medicare's

traditional fee-for-service program, it also is tasked with analyzing access to care, quality of care, and other issues affecting Medicare. The Commission's 17 members rely on a staff of two dozen policy analysts to research specific issues that can be presented at any one of the panel’s public meetings in Washington, where Commissioners may or may not draft recommendations to Congress.

Two reports issued in March and June each year are the primary outlet for Commission recommendations. In addition to these reports and others on subjects requested by Congress, MedPAC advises through other avenues, including comments on reports and proposed regulations issued by HHS/CMS, congressional testimony, and briefings for congressional staff.

Payment Updates Set by Regulation

Regarding its responsibility to comment on proposed regulations, MedPAC’s influence may be hard to discern. For example, its March 2017 Report to the Congress: Medicare Payment Policy, recommended:

“The Congress should eliminate the update to the hospice payment rates for fiscal year 2018.” MedPAC’s rationale: “Our payment indicators for hospice are generally positive. The number of hospices increased about 2.6 percent in 2015 because of the entry of for-profit providers. The number of beneficiaries enrolled in hospice increased by more than 4 percent. Average length of stay declined slightly because of a decrease among patients with the longest stays. Access to capital appears adequate. Limited quality data are now available. The projected 2017 aggregate Medicare margin is 7.7 percent. Based on our assessment of the payment adequacy indicators, hospices should be able to accommodate cost changes in 2018 without an update to the 2017 base payment rate.”

So, no update, according to MedPAC. But since Congress had not addressed this issue, CMS noted in legalism how instead it must follow the law, as its Fact Sheet on the August final rule explains: “Section 411(d) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) (MACRA) amends section 1814(i) of the Social Security Act to set the market basket percentage increase at 1 percent for hospices in FY 2018. As such, hospices will generally see a 1.0 percent ($180 million aggregate) increase in their payments for FY 2018.”

For home health, MedPAC has long maintained that HHS/CMS have been too generous. “In 2015, Medicare margins for freestanding agencies averaged 15.6 percent and averaged 16.5 percent between 2001 and 2014,” said the March Report. “The marginal profit for HHAs in 2015 was 18.1 percent. The Commission projects that Medicare margins for 2017 will equal 13.7 percent. Two factors have contributed to payments exceeding costs: Agencies have reduced episode costs by lowering the number of visits provided, and cost growth has been lower than the annual payment updates for home health care. The high Medicare margins of home health agencies have led the Commission to recommend a 5 percent reduction in the base rate for 2018 and a two-year rebasing beginning in 2019. The chronic overpayments Medicare has made need to be addressed.”

However, in the final home health rule in the November 7 Federal Register CMS projected that Medicare payments to HHAs in CY 2018 would be reduced by 0.4 percent, or $80 million. This decrease reflects the effects of a 1 percent home health payment update percentage ($190 million increase); a -0.97 percent adjustment to the national, standardized 60-day episode payment rate to account for nominal case-mix growth for an impact of -0.9 percent ($170 million decrease); and the sunset of the rural add-on provision for an impact of -0.5 percent ($100 million decrease).

The decrease could have been a lot worse, especially if CMS had followed through and finalized its highly controversial proposed Home Health Groupings Model (HHGM) beginning in 2019 which MedPAC had endorsed in comments filed with CMS. In the end, CMS buckled to an “all-hands-on-deck” lobbying drive orchestrated by home care providers and other stakeholders, which most importantly produced a “sign-on” letter from 174 bipartisan House members and another from 49 Senators to HHS/CMS leadership warning that providers and beneficiaries could not sustain the $950 million Medicare cut CMS projected. The HHGM idea was shelved for now.

(The National Association for Home Care & Hospice for years has engaged in a running battle with MedPAC over its analysis of industry margins, as in NAHC’s 2017 Regulatory Blueprint for Action: “Recent data indicates that Medicare margins for home health agencies are quickly declining as the numerous years of rate cuts take their toll. In addition, new regulatory-driven costs are being incurred by home health agencies with more expected in future years.” Earlier, the association stated on its website: “NAHC has and will continue to oppose MedPAC recommendations on rate reductions as the MedPAC Medicare margin analysis continues to fail the test of reliability. For example, MedPAC does not consider all costs when calculating margins.”)

Future of MedPAC

Congress likes its Medicare advisory agencies toothless, but authoritative and respected nonetheless, like MedPAC. Conversely, a Medicare agency with a potential bite that Congress mandated as part of the Affordable Care Act (ACA) - the Independent Payment Advisory Board - is targeted for a congressional repeal (HR849).

Beginning in 2014, the IPAB is tasked with making recommendations to cut per capita Medicare spending if such spending exceeds certain economic growth targets. The Secretary of HHS is directed to implement the Board’s proposals automatically unless Congress affirmatively acts to alter the Board’s proposals or to discontinue the automatic implementation of such proposals.

Rep. Erik Paulsen (R-MN), a member of the House Ways & Means Health Subcommittee, mentioned in House debate before the bill passed there, having received letters from over 700 bipartisan groups representing patients, employers, hospitals, doctors, nurses, and other healthcare professionals all voicing strong support for IPAB repeal. “They believe that the threat of this Board is enough to warrant repeal and to place the decision-making back in the hands of elected Members of Congress, and I agree.” The “threat”: a reference to the IPAB’s current inactive status, with members having not been appointed, and no Medicare spending circumstances—to date--mandating it to act.

Though members of Congress were evidently motivated by self-interest to protect their prerogative over Medicare payment policy, HR849 in a bit of congressional puffery is named: “The Protecting Seniors Access to Medicare Act.” Republican lawmakers had long targeted the IPAB, but saw a new opportunity with the Republican-controlled Congress and a new President who would readily sign a bill repealing any measure undoing part or all of the ACA. Because of the IPAB’s lack of support even among some Democrats, repeal should garner sufficient votes to pass and become law, even if the ACA is left standing.

Impact of Spending Cuts

If the Republican-controlled Congress enacts sweeping tax reform legislation, having massive repercussions on the spending side of government, entitlement programs like Medicare and Medicaid could be in the cross hairs of lawmakers seeking spending cuts. And, MedPAC could experience a greater success record when it comes to advice that translates into policy.


By: Ronald M. Schwartz, Writer, The Remington Report

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