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MedPAC recognizes system is not working but wants to go further down same path

June 16, 2020

Topics: Quote of the Day

Medicare Payment Advisory Commission (MedPAC), June 2020

As part of its mandate from the Congress, each June the Commission reports on refinements to Medicare payment systems and issues affecting the Medicare program, including broader changes in health care delivery and the market for health care services.

Realizing the promise of value-based payment in Medicare: An agenda for change

The Commission outlines a multiyear effort to establish a strategic direction for Medicare payment policy and delivery system design that could be implemented by the Congress and CMS. This work will be aimed at identifying changes that broaden the use of value-based payment (which characterizes methods of paying for health care services that provide stronger incentives than fee-for-service to control overall costs while maintaining or improving quality) by encouraging more providers to organize into “accountable entities.” Medicare Advantage and accountable care organizations could serve as vehicles to broaden the use of value- based payment, but both programs need to be improved to realize that potential.

The Commission contends that policymakers will need new approaches to both how Medicare pays providers and how services are organized and delivered to address the currently unsustainable trends in Medicare spending.

Challenges in maintaining and increasing savings from accountable care organizations

CMS has made it a priority to move more Medicare beneficiaries into alternative payment models in which providers are responsible for the cost and quality of care. One such model is the accountable care organization (ACO). ACOs are now responsible for 23 percent of Medicare beneficiaries with both Part A and Part B coverage. Given the rapid growth in ACOs, it is important to evaluate whether they are generating savings for the Medicare program and thus helping make the program more sustainable.

To date, ACOs have generated modest savings, with most evaluations estimating 1 percent to 2 percent reductions in spending from existing ACO models. Some have expressed a concern that the ability of Medicare ACOs to achieve savings has been limited because key constituencies are not sufficiently engaged with ACOs and have incentives that run counter to those of ACOs.

Because Medicare savings from Medicare Shared Savings Program ACOs have been relatively small thus far (although still greater than most care coordination demonstrations), there is a risk that those savings could be eroded, or even completely offset, by unwarranted shared savings payments. Patient selection in ACOs could result in unwarranted shared savings payments, whether the selection is intentional or not. For example, if high-cost beneficiaries are disproportionately shifted out of an ACO in its performance year—while remaining in the baseline years—performance-year spending will decrease in relation to the ACO’s benchmark. This phenomenon could occur if clinicians with high-cost beneficiaries bill under a taxpayer identification number (TIN) that is not part of the ACO or if a clinician bills for patients with low spending under the ACO’s TINs and bills for patients with higher spending relative to their risk score under a non-ACO TIN.

The current system allows an ACO to strategically change the composition of its TINs to increase the likelihood of receiving unwarranted shared savings relative to benchmarks, creating a vulnerability for the Medicare program.

Properly matching the clinicians included in an ACO’s baseline and performance years will allow a more accurate assessment of an ACO’s performance and reduce opportunities for unwarranted shared savings.

Replacing the Medicare Advantage quality bonus program

The Commission maintains that Medicare program payments should take into account the quality of care delivered to beneficiaries, and the Commission has formalized a set of principles for designing Medicare quality incentive programs. Medicare’s quality bonus program (QBP) for assessing and rewarding quality performance in the Medicare Advantage (MA) program is not consistent with these principles, and in Chapter 3 we recommend replacing it with a new quality program: the MA value incentive program (MA–VIP).

In our June 2019 report to the Congress, we outlined multiple significant flaws in the QBP program. Those flaws must be addressed so Medicare can have confidence that the MA program encourages and appropriately rewards high quality in a manner that ensures that program dollars are wisely spent.

The Commission recommends that the Congress replace the QBP with an MA–VIP that includes the following five key design elements:

  • Scores a small set of population-based measures.
  • Evaluates quality at the local market level.
  • Uses a peer-grouping mechanism to account for differences in enrollees’ social risk factors.
  • Establishes a system for distributing rewards with no “cliff” effects.
  • Distributes plan-financed rewards and penalties at the local market level.

To drive quality improvement, policymakers would need to choose an appropriate amount of payment to fund the reward pool and an effective performance-to-points scale methodology.

In the future, we will attempt to take lessons learned from today’s experience into our assessments of Medicare’s payment systems as we help the Congress grapple with the difficult task of controlling the growth of Medicare spending while preserving beneficiaries’ access to high-quality care and providing sufficient payment for efficient providers.



By Don McCanne, M.D.

Medicare for All? Look at what they keep doing to Medicare!

First they decided that Medicare needed to be turned over to the private insurance industry, and so they established private Medicare + Choice to show that the private insurers could provide higher quality care at a lower cost. That didn’t work, so they replaced the program with private Medicare Advantage and provided the insurers with various incentives to establish plans which they claim lowered costs but actually increased costs when considering that the private plans were cream skimming the healthier patients. So then they introduced risk adjustment which provided the private plans with another opportunity – upcoding to make their patients appear sicker than they really were so the insurers could qualify for higher payments. And quality? They learned to game that as well.

The policy community recognized that there were problems so they decided we needed a new concept. Let’s put the providers in charge and make them accountable for the costs and quality of care. Well that hasn’t worked either. The cost savings were negligible, especially when considering the unaccounted for costs of the providers and the very modest bonuses that wiped out the savings for Medicare. Again there is evidence that they still do not have effective measurements of overall quality.

These two models – private Medicare Advantage and accountable care organizations have been a failure and should be abandoned and replaced with efforts to improve the traditional Medicare program – a program that has been neglected by Congress and the administrations of both parties. No, they won’t give up. Instead they want to replace the ineffective tools of these organizations with other tools that we can predict will be just as ineffective, but will prolong the life of these organizations that are designed under principles advocated by the medical-industrial complex while neglecting those who really count – the patients.

From MedPAC’s perspective, the problem is with Medicare Advantage and accountable care organizations, and that is what they want to fix. Well it’s the patient, doggone it, that needs relief. Medicare Advantage and accountable care organizations are incurable simply because they are artificial constructs that are designed to control costs while protecting the industry, but that doesn’t work because they are based on market incentives, and players in the market will always work the system to satisfy their own interests; patients are only their tools.

Medicare has some serious deficiencies, and they need to be fixed, but not by MedPAC since they fail to make recommendations on the deficiencies that negatively impact patients. There is a plethora of literature that demonstrates that the single payer model of Medicare for All corrects most of the deficiencies in the health care financing system such that patients would have free choice of health care that is accessible, effective, efficient, equitable and affordable for each of us. Tens of millions do not have that now but could without increasing our national health expenditures over the current level.

If you are not convinced, read the 244 page MedPAC report to Congress to see where we are headed. Then read PNHP’s Physicians’ Proposal. Then report back.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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