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  • Washington Highlights

    MedPAC Votes on Payment Updates, Discusses Telehealth, Medicare Vaccine Coverage


    Andrew Amari, Hospital Policy and Regulatory Specialist
    Phoebe Ramsey, Director, Physician Payment & Quality
    Gayle Lee, Director, Physician Payment & Quality

    The Medicare Payment Advisory Commission (MedPAC) met on Jan. 14-15 to vote on the commission’s draft recommendations on payment updates for inpatient and outpatient hospital services, among other services. Additionally, MedPAC discussed alternative payment models (APMs), the future of telehealth in Medicare beyond the public health emergency, and Medicare vaccine coverage policies.

    Hospital Inpatient and Outpatient Payment Updates

    MedPAC staff reintroduced the findings from its December 2020 meeting [see Washington Highlights, Dec. 4, 2020] on their payment adequacy indicators for inpatient and outpatient hospital services, which generally remain positive across four key indicators, including beneficiary access to care, quality, hospital access to capital, and Medicare payments compared to hospital costs.

    Since the December meeting, the commission staff noted that the Centers for Medicare & Medicaid Services (CMS) has reduced its forecast of 2022 updates to hospital rates under current law, and that the suspension of sequestration was extended, both impacting MedPAC’s projections of Medicare margins, which remained negative in 2019 (-8.7%) but increased from -9.3% in 2018. The commission staff said that they do not anticipate any long-term changes that would affect payment adequacy beyond the COVID-19 public health emergency.

    MedPAC unanimously voted to approve a draft recommendation that Congress update the 2021 Medicare base payment rate for acute care hospitals by 2% for fiscal year 2022. For inpatient payments, the recommended 2% update is in addition to a 0.5% statutory increase, totaling a 2.5% annual update for 2022. Still, during the discussion, several commissioners expressed concern over the commission staff’s assessment that the public health emergency will not have long-term impact on hospital payment adequacy. The commissioners asked staff to continue to consider the impact of the public health emergency on payment adequacy, specifically citing concerns over the repayment of accelerated payments, return of sequestration in 2021, and hospitals’ continued need for personal protective equipment and persistent staffing issues, among other issues.

    Innovation Center’s Development of Alternative Payment Models

    MedPAC staff presented an update on the Center for Medicare and Medicaid Innovation’s (CMMI) portfolio of APMs since its inception 10 years ago. Overall, the evidence of gross savings generated by APMs suggests that provider behavior is changing in fee-for-service Medicare, but that CMMI’s diverse portfolio of APMs may frustrate broader goals of delivery system reform. Broadly, the commissioners showed support for a policy recommendation that CMMI implement a smaller suite of coordinated APMs designed to support a clear set of strategic goals. As part of that, CMMI should include a focus on equity and consistency of incentives and quality metrics for providers across payers. There was some support for a policy recommendation for greater transparency from CMMI to only develop second-generation APMs that show promise to meeting statutory criteria for expansion.

    The commissioners will review a draft recommendation at the March 2021 meeting and vote on a final recommendation at the April 2021 meeting for inclusion in MedPAC’s June Report.

    Telehealth Beyond the Public Health Emergency

    The commission staff also discussed policy options for the expansion of telehealth in Medicare following the public health emergency. While most MedPAC commissioners support the continuation of coverage for telehealth services, they believe a need exists to establish policies that achieve the benefits of telehealth and prevent overutilization. Some commissioners suggested pilot testing coverage of telehealth for a few years.

    The telehealth policy options post-public health emergency provided by MedPAC staff included expanding telehealth services covered by Medicare to include all geographic regions and to allow services in the patient’s home, allowing coverage for audio-only services after the public health emergency in certain circumstances, and reimbursing at lower rates for telehealth services than for in-person services. Additionally, the commission staff suggested Medicare could require patient cost-sharing for telehealth services, or not allow telehealth services to be billed for “incident to” services. MedPAC plans to publish a report that will include policy options on telehealth in March 2021. 

    Medicare Vaccine Coverage

    The MedPAC staff presented information on Medicare’s current vaccine coverage and payment policies across Medicare Parts B and D. Currently, Part B covers seasonal influenza, pneumococcal disease, Hepatitis B, COVID-19 vaccines, and Part D covers all commercially available vaccines not covered by Part B. Typically, Part B does not require beneficiary cost-sharing, and covers administration in a wider range of settings in comparison to Part D, which still requires some cost-sharing and are limited primarily to administration in pharmacies. The staff presented a policy option in which all preventative vaccines and their administration would be covered without cost-sharing under Part B instead of Part D, aiming to remove monetary barriers to vaccine access and provide a wider variety of settings to administer vaccines.

    The commission staff also presented details on payment for vaccines under Part B and D, noting that Part B generally pays 95% of average wholesale price (AWP), whereas Part D primarily pays for vaccines based on plan-negotiated rates with pharmacies. For COVID-19 vaccines, where the federal government directly purchases the vaccine, Medicare only pays for administration and not the vaccine itself. The staff presented a policy option for commissioners to consider that would pay for Part B vaccines based on 103% of wholesale acquisition cost, which would reduce payment for vaccines compared to the current payment rate of 95% of AWP. Additionally, the option suggests that Medicare concurrently collect average sales price data to aid in future development of a payment rate that best reflects market prices.

    During the discussion, the commissioners generally supported the two policy options, noting that Medicare should ensure cost-sharing does not act as a barrier to vaccine coverage, but requested staff continue to assess the implications that either of these options could have on the 340B Drug Pricing Program and on payments for vaccine administration. Additionally, the commissioners requested further consideration of what constitutes an appropriate preventative vaccine under the coverage option, and whether this concept should be limited as recommendations are developed. The commission staff will continue research on this topic and will present their findings in Spring 2021.

    MedPAC Approves 2022 Physician Payment Update Recommendations                                            

    MedPAC recommended that for 2022, Congress should update the 2021 Medicare payment rates for physicians and other health care professionals’ services by the amount determined under current law. This would mean that that there would be no update for physicians in 2022. However, physician payment could be adjusted upwards or downwards in 2022 based on performance under the Merit-Based Incentive Payment System or participation in Advanced Alternative Payment Models. 

    MedPAC based this decision on its analysis showing that Medicare beneficiaries have comparable access to care as the privately insured, there are no impacts of the pandemic on unwanted appointment delays, the number of clinicians is increasing faster than the number of beneficiaries, and the volume of clinician encounters per beneficiaries is increasing. The commission also noted that commercial payment rates are higher than Medicare’s rates and physician compensation is increasing. They examined the impact of the pandemic on clinician’s services and noted that although clinician’s revenue initially declined, revenues have rebounded. MedPAC will continue to monitor the environment.