At its November meeting, the Medicare Payment Advisory Commission (MedPAC) presented a policy option to update the Physician Fee Schedule (PFS), raised concerns about the accuracy of PFS payment rates, analyzed the effect of Medicare’s coverage limits on stays in freestanding inpatient psychiatric facilities (IPFs), and reviewed a workplan on Medicare Advantage (MA) provider networks.
The Medicare Access and CHIP Reauthorization Act of 2015 set PFS payment rate updates at 0.5% per year for calendar years (CYs) 2016-2018, 0.25% for CY 2019, 0% for CYs 2020-2025, and 0.25% for CY 2026 and subsequent years, with providers participating in advanced alternative payment model (A-APMs) receiving an increased 0.75% update. MedPAC has raised concerns with the current PFS updates and recommended alternative payment updates of half the growth in the Medicare Economic Index (MEI) in its 2023 and 2024 reports to Congress. During its most recent session, MedPAC raised two main concerns: 1) MEI is projected to exceed PFS updates by at least 1.5%, and 2) the current law’s differential updates for clinicians in A-APMs (starting in CY 2025) will compound over time and result in significantly higher payment rates for clinicians participating in A-APMs.
MedPAC staff presented a policy option to update PFS rates annually by a portion of MEI growth, such as MEI minus one percentage point, subject to a floor. Concerns about payment rate accuracy and potential remedies including using more recent data to update payments, improving the accuracy of global surgical bundles, and addressing the accuracy of indirect practice expense costs was also discussed. Most commissioners expressed support for including a portion of the MEI in PFS payment updates and using a balanced, directional approach to improving payment rate accuracy. These topics will inform draft recommendations that will be presented to the commissioners in the spring.
Under current law enacted in 1965, Medicare limits access to freestanding, non-government-owned IPFs to 190 days over the course of a patient’s life while on Medicare. It was noted that from 1970 to 2000, the share of state- and locally owned psychiatric hospitals, which are not subject to the limit, declined from 80% to 30%. A MedPAC analysis also demonstrated that Medicare beneficiaries at or near their lifetime limit of IPF days were more likely to be low income and disabled. MedPAC expressed concern that Medicare’s 190-day limit may exacerbate challenges in accessing IPF care for the most vulnerable populations. MedPAC staff presented draft recommendation to eliminate the 190-day lifetime limit on covered days in freestanding IPFs and reject the limit on the number of covered days available during the initial benefit period for those who received care from freestanding IPFs in the last 150 days. Commissioners supported the draft recommendation and will vote on this proposal in January 2025. MedPAC will also continue its work to ensure beneficiaries with severe mental illness receive high-quality care given recent investigations by the Department of Justice into large IPF chains.
The Commission also outlined the workplan for its analysis of MA provider networks. In its June 2024 report to Congress, MedPAC found the current system for generating MA provider directories costly and inefficient. A 2018 Centers for Medicare & Medicaid Services (CMS) evaluation found that half of provider directories had inaccuracies, leading to beneficiaries’ inability to access services. MedPAC also highlighted MA plans’ and providers’ ability to terminate contracts at any time. Although CMS has the discretion to declare a special enrollment period for beneficiaries affected by contract changes, the special enrollment period is not guaranteed, and the risk burden largely lies with beneficiaries. MedPAC seeks to understand the characteristics of MA plans and providers that choose whether to participate with MA plans, as well as the impact of network adequacy standards on access to care. The Commission suggested prioritizing activities that would ensure the accuracy of provider directories, evaluation of the adequacy of post-acute care and specialty access, and qualitative work to better understand how mid-year contract changes impact beneficiaries. This topic will not be a part of a report to Congress but will inform the direction of MedPAC’s future work.