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Medicare Payment Advisory Commission report to Congress Brief

Summary:
Executive Summary portion of the Medicare Payment Policy Report to Congress I have only had time to wade through the Executive Summary portion of the MedPac Report to Congress on FFS and MA Medicare plans. If the Executive Summary has any meaning, we will see some changes in how MA plans administer pricing of services to Medicare patients. The difference between MA and FFS Medicare is extraordinary which you will see in my commentary. This is nothing new. I am hoping Congress will allow MedPac to force the issue. Key take-aways from this report: Medicare spends approximately 22 percent more for MA enrollees than it would spend if the beneficiaries were enrolled in FFS Medicare. Medpac projects the 22 percent will result in difference

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Executive Summary portion of the Medicare Payment Policy Report to Congress

I have only had time to wade through the Executive Summary portion of the MedPac Report to Congress on FFS and MA Medicare plans. If the Executive Summary has any meaning, we will see some changes in how MA plans administer pricing of services to Medicare patients. The difference between MA and FFS Medicare is extraordinary which you will see in my commentary. This is nothing new. I am hoping Congress will allow MedPac to force the issue.

Key take-aways from this report:

  • Medicare spends approximately 22 percent more for MA enrollees than it would spend if the beneficiaries were enrolled in FFS Medicare.
  • Medpac projects the 22 percent will result in difference translating into a projected $83 billion more to MA Plans in 2024
  • Estimates are MA premiums will be about $13 billion higher in 2024 because of higher MA spending.

This will be the result of a selective process of the healthiest patients into MA healthcare over time. More below.

Favorable selection of enrollees and higher MA coding intensity increases payments to MA Plans

When risk-based payment for private plans was first added to Medicare in 1985, payments to private plans were set at 95 percent of FFS payments because it was expected that plans would share savings from their efficiencies relative to FFS with taxpayers. But private plans in the aggregate have never been paid less than FFS Medicare because of policies increasing payments to MA above FFS.

MA benchmarks are set above FFS spending in many markets in part to encourage more uniform plan participation across the country, and payments under the quality bonus program further increase MA payments above FFS (without, the Commission has found, producing meaningful information on plan
quality for Medicare beneficiaries or the Medicare program).

Favorable selection of enrollees into MA leads to plan enrollees having actual spending that is lower than predicted (independent of the effects of any plan utilization management). MA plans’ diagnostic coding practices also increase payments. Currently, the Commission does not quantify the extent to which favorable selection stems from plan behavior, beneficiary preferences, or other reasons, nor the extent to which higher MA coding intensity reflects documenting diagnoses more comprehensively than providers in FFS Medicare do, the fraudulent submission of diagnostic data, or other reasons. Regardless of the causes, favorable selection of enrollees in MA and higher MA coding intensity increases payments to plans.

A major overhaul of MA policies is needed for several reasons.

When accounting for favorable selection of enrollees in MA and higher MA coding intensity, we estimate Medicare spends approximately 22 percent more for MA enrollees than it would spend if the beneficiaries were enrolled in FFS Medicare. A difference translating into a projected $83 billion in 2024. The Commission is concerned the higher payments to MA plans are subsidized by the taxpayers and beneficiaries who fund the program. Higher MA spending increases Part B premiums for all beneficiaries (including those in FFS who do not have access to the supplemental benefits offered by MA plans). The Commission estimates premiums will be about $13 billion higher in 2024 because of higher MA spending. Furthermore, the Commission is concerned that policies leading to higher MA payments also distort the nature of plan competition on the basis of improving quality and reducing health care costs. (page xxv)

  • First, beneficiaries lack meaningful quality information when choosing amongst MA plans.
  • Second, Medicare is paying more for MA than for comparable beneficiaries in FFS Medicare.
  • Third, the disparity between MA and FFS payment disadvantages beneficiaries who—for medical reasons or personal preferences—do not want to enroll in MA plans that use tools like provider networks or utilization management policies and instead want to remain in FFS (which includes care provided through alternative payment models).
  • Fourth, the lack of information about the use and value of many MA supplemental benefits prevents meaningful oversight of the program such that we cannot ensure that enrollees are getting value from those benefits.
  • Finally, the continued growth in MA will increasingly create challenges for benchmark setting because beneficiaries remaining in FFS may be higher risk (and thus have higher spending) in ways that risk adjustment cannot adequately capture. (page xxv)

As noted earlier, Medicare payments to plans total Medicare payments to MA plans in 2024 (including
rebates that finance extra benefits) are projected to be $83 billion higher than if MA enrollees were enrolled in FFS Medicare. Payments to MA plans average an estimated 122 percent of what Medicare would have expected to spend on MA enrollees if they were in FFS Medicare.

The Impact of MA Coding Differences

The estimate reflects the impact of higher MA coding intensity (even after the CMS coding adjustment); favorable selection of beneficiaries in MA; setting benchmarks above FFS spending in low spending FFS counties; and payments associated with benchmark increases under the quality bonus program (which the Commission contends does not effectively promote high-quality care). (page xxvi)

Most FFS Medicare claims are paid using only procedure codes. FFS offers little incentive for providers to record more diagnosis codes than necessary to justify providing a service. MA plans have a financial incentive to ensure their providers record all possible diagnoses. Adding new risk-adjustment eligible diagnoses raises an enrollee’s risk score and results in higher payments. MA plans have several mechanisms not existing in FFS Medicare to document diagnoses for their enrollees.

This includes chart reviews (which document diagnoses not captured through the usual means of reporting diagnoses) and health risk assessments (which sometimes rely on unverified enrollee-reported data). Coding differences may reflect MA plans documenting diagnoses more comprehensively than providers in FFS Medicare do, the fraudulent submission of diagnostic data, or other reasons. page xxvi

2024 Adjustments to MA Plans

In 2022 we estimate, MA risk scores were ~18 percent higher than scores for similar FFS beneficiaries due to higher coding intensity (the Commission has adopted a new method of estimating the effects of coding intensity, see Chapter 13). We project in 2024, MA risk scores will be about 20 percent higher than scores for similar FFS beneficiaries (accounting for the phase-in of the V28 risk-adjustment model). By law, CMS reduces all MA risk scores by the same amount to make them more consistent with FFS coding. CMS has the authority to impose a larger reduction than the minimum required by law but has never done so.

In 2024, the adjustment will reduce MA risk scores by the minimum amount, 5.9 percent, resulting in MA risk scores that will remain about 13 percent higher than they would have been if MA enrollees had been enrolled in FFS Medicare. In 2024, higher scores will result in a projected $50 billion in higher payments to MA plans. We continue to find coding intensity varies significantly across MA plans, with some plans having coding intensity falling below the 5.9 percent reduction (and even below FFS levels). Other plan coding are far above that amount, including 10 MA organizations having average coding intensity that is more than 20 percent higher than FFS levels. Among the eight largest MA organizations, we estimate a 15 point variation in average coding intensity. Higher coding intensity allows some plans to offer more extra benefits and attract more enrollees than other plans. That result distorts both the nature of competition in MA and plan incentives to improve quality and reduce costs. (page xxvi and xxvii)

One Cause of Increasing Costs

We find about half of higher MA coding intensity could result from use of diagnoses from chart reviews and health risk assessments and that these two mechanisms are primary factors driving coding differences among MA plans.

In 2024, nearly three-quarters of MA enrollees (23.3 million beneficiaries) were in a plan that received a
quality bonus increase to its benchmark, generating about $15 billion in additional program spending. In
its June 2020 report, the Commission recommended replacing the current quality bonus program. It is not achieving its intended purposes and is costly to Medicare. Replacement with a new value incentive program for MA.

In this report, we focus on the spending implications and other concerns regarding the current quality bonus program. page xxvii

March 2024 Report to the Congress: Medicare Payment Policy, MedPAC

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