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MedPAC Report, Part Deux

By May 1, 2014Commentary

The MedPAC annual report to Congress (link in yesterday’s post) covers not just fee-for-service providers but also the Medicare Advantage and Part D programs, which we discuss today.  Despite outright hostility from some in Congress and CMS, the Medicare Advantage program has done very well, with almost a third of seniors enrolled in the program.  Quality generally is better, while costs are lower than fee-for-service Medicare, although the plans are still reimbursed at a higher rate.  Notwithstanding payment reductions in the health reform law, Medicare Advantage plans continue to be available to almost every beneficiary.  The Commission found that for 2014, actual payments to MA plans will be about 106% of equivalent fee-for-service spending, but there have always been disputes about the methodology used for this calculation and it is important to realize that most MA plans use any excess to provide a higher level of benefits to members.  In any event, this ratio, or excess payment, has continued to drop.  Quality measure performance and stars ratings are generally improving.  MedPAC is very supportive of private plan options in Medicare, but noted two issues that need to be addressed.  One is that some employers have Medicare Advantage plans that cover their active employees and retirees who are Medicare-eligible, but those plans are not subject to the same bidding requirements as regular MA plans, thus they cost more.  MedPAC recommends that these employer plans be paid in the same manner.  The second is that the hospice benefit has traditionally be carved out of MA plans, which obviously fragments care at an important juncture.  The Commission wants it to be included as an MA benefit, which CMS is exploring.

Similar to Medicare Advantage, Part D or the prescription drug coverages of Medicare has been very successful and relies entirely on private plans to provide the benefit.  Almost all MA plans include Part D coverage and most of the remainder of Medicare beneficiaries have a separate Part D plan.  The majority of those who don’t enroll in Part D have low enough drug spending that it has no value for them.  The program has cost less than initial projections suggested and spending was about $62.5 billion in 2012.  Average premiums to beneficiaries are about $30 a month and about a third of enrollees are eligible for a low-income subsidy.    Enrollee satisfaction is high and most beneficiaries have access to a good selection of Part D plans.  The Commission expressed concern about whether the CMS reinsurance program dampened incentives for the Part D plans to control costs as aggressively as they could.  It also expressed concern about whether the lack of any cost-sharing among subsidy-receiving beneficiaries was causing higher utilization and more use of more expensive drugs.  These areas should be watched for future program changes.


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