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  • Washington Highlights

    MedPAC Discusses Medicare Payment Recommendations for its 2016 June Report to Congress

    Len Marquez, Senior Director, Government Relations

    The Medicare Payment Advisory Commission (MedPAC) April 7-8 met to discuss policy options and draft recommendations for its 2016 June Report to Congress on various payment systems, including Medicare Part D payments, payments for post-acute care, and low-value care.

    Commissioners discussed recommendations to reduce the Medicare Part D payment structure and unanimously voted in support of three draft recommendations to reduce Medicare Part D payments.  The three draft recommendations include changing Part D to transition Medicare’s reinsurance from 80 percent to 20 percent of catastrophic spending and keep Medicare’s overall subsidy at 74.5 percent, exclude manufacturers’ discounts in the coverage gap from enrollees’ “true out-of-pocket” spending, and eliminate cost sharing above the out-of-pocket threshold; make moderate changes to low income subsidy (LIS) cost sharing to encourage use of generics and biosimilars; and encourage greater flexibility to use formulary tools.

    The combination of all draft recommendations are estimated to lead to one-year program savings of $2 billion relative to baseline spending, and more than $10 billion in savings over five years. Some commissioners expressed concern that excluding manufacturers’ discounts in the coverage gap would expose beneficiaries in the “donut hole” to higher premiums. However, commissioners agreed that all three draft recommendations would reduce program spending.

    Commissioners continued their discussion of Part B drug payments and potential policy options and unanimously voted on a draft recommendation that the Secretary of Health and Human Services reduce Medicare Part B dispensing and supplying fees to rates similar to other payers. MedPAC staff also presented four policy options to restructure Medicare Part B drug payment:

    • 103.5 percent of average sales price (ASP) plus $5 per drug per day;

    • Placing a limit on how much Medicare’s ASP plus six percent payment for a drug can increase over time;

    • Putting products with similar health effects in the same billing code to promote strong price competition; and

    • Restructuring the Competitive Acquisition Program that uses vendors to purchase Part B drugs and provide for physicians.

    Finally, MedPAC staff continue to develop potential policy options for measuring low-value care and continue to evaluate the impact of various demonstration projects for dual-eligible beneficiaries.