MedPAC to Congress: Change MA Benchmarks, Slow Down on APMs

In its annual report to Congress this week, the Medicare Payment Advisory Commission (MedPAC) recommended several changes in how Medicare Advantage (MA) plan benchmark calculations are made due to growing concerns over a lack of yielded net savings for Medicare.

The report also made recommendations in 9 other areas, including streamlining alternative payment models (APMs).

Enrollment in MA plans has been growing, due to their enhanced benefits and low premiums. However, the report states, “over the 35-year history of private plan contracting in Medicare, although risk adjustment has improved payment accuracy, benchmark policy has not attained an appropriate balance of benefits for enrollees, payment adequacy for plans, or responsible use of taxpayer dollars that fund the program.”

For this year, the MA program’s bids for providing Medicare benefits have fallen to 87% of fee-for-service (FFS) spending. No version of private plan contracting has brought in net aggregate savings for Medicare, and Medicare pays 4% more for beneficiaries enrolled in MA plans compared with enrollees in FFS Medicare.

The issue lies with how the benchmarks are calculated, the report said; currently, benchmarks support payments that are 9% higher than FFS spending in the areas with the lowest FFS spending, which encourages a disproportionate share of MA enrollees.

To benefit more from the efficiency generated by MA efficiency and generate savings for the overall program, MedPAC recommends that Congress establish an improved MA benchmark policy that:

• Uses a generally equal mix of per capita local area FFS spending and standardized national FFS spending
• Uses a rebate of 75% or more
• Integrates a discount rate of 2% or more
• Applies the Commission’s prior MA benchmark recommendations

In addition, the report recommends that the HHS secretary streamline APMs to achieve reduced health care spending while improving quality. Integrating a small and what MedPAC called a “harmonized” portfolio with more consistent parameters and direct incentives should encourage providers to administer efficient care, lead to a potential decrease in Medicare spending, and reduce overlap, as well as possibly conflicting incentives.

Most APMs are temporary demonstrations operated by the Center for Medicare and Medicaid Innovation (CMMI) at CMS; CMMI was created as part of the Affordable Care Act (ACA). The largest APM, the Medicare Shared Savings Program, is a permanent part of the ACA. Within APMs, there are different financial participation tracks for providers to follow, each with their own mix of risk. While the report noted that MedPAC is supportive of APMs, the time has come to scale back so many demonstrations, as “continuing to test a large number of independent APMs is likely to inhibit the ability of APMs to reach their full potential.”

Late last year, in an interview with The American Journal of Managed Care®, Michael E. Chernew, PhD, chair of MedPAC, said having so many models with so many choices has the potential to be “distracting” and that his view would be to urge CMMI “to just slow down in terms of the number of models instead of finding new and interesting ones.”