The Medicare Payment Advisory Commission (MedPAC) has recommended changes to Medicare Advantage benefits and payment policies in its June 2023 report. They propose standardizing benefits to help beneficiaries navigate the numerous plan options. MedPAC also suggests revising Medicare Advantage benchmarks to ensure accurate payment rates. Additionally, they address the issue of high drug prices in Medicare Part B, recommending measures to control costs and promote price competition. The report covers various other topics, including prescription drug rebates, outcome disparities, telehealth coverage, and the Medicare wage index system.
MedPAC, the Medicare Payment Advisory Commission, recently released its report to Congress in June 2023, offering recommendations to address the disparities in Medicare Advantage plan benefits and the future payment policies of Medicare Advantage. One significant area of focus was the issue of high drug prices in Medicare Part B.
One of the challenges highlighted by MedPAC is the difficulty faced by Medicare beneficiaries in comparing the various benefits offered by different Medicare Advantage plans. To alleviate this confusion, MedPAC suggested implementing standardized benefits across Medicare Advantage plans.
Standardization refers to a uniform set of services covered by the plans, as well as the cost-sharing arrangements for these services. Policymakers would need to determine the number and nature of standardized plan benefits while allowing insurers the option to offer non-standardized plans.
One proposed approach involves establishing a limited number of standardized plan benefits for Part A and Part B cost-sharing, along with an annual cap on out-of-pocket costs and cost-sharing amounts for services.
Regarding supplemental benefits, MedPAC recommended standardizing a few common options such as dental, hearing, and vision services. This would provide plans with some flexibility while simplifying the process of plan comparison for beneficiaries.
While factors like premium amounts and provider networks also influence plan selection, MedPAC emphasized that standardized benefits would enhance the navigability of the selection process.
The report also shed light on the impact of favorable selection on Medicare payment policy and proposed alternative approaches to achieve more accurate payment rates.
Currently, Medicare Advantage benchmarks heavily rely on fee-for-service (FFS) spending. After adjusting for risk, it is assumed that Medicare Advantage beneficiaries’ average spending would align with that of FFS beneficiaries.
However, due to the increasing enrollment of Medicare beneficiaries in Medicare Advantage plans over FFS plans, risk scores often overpredict actual spending for Medicare Advantage beneficiaries. MedPAC estimated that in 2019, spending on Medicare Advantage beneficiaries was 11 percent lower than that of FFS beneficiaries with the same risk scores.
Consequently, Medicare Advantage benchmarks exceed actual spending, leading to overpayments to Medicare Advantage plans.
To address this issue, MedPAC recommended setting Medicare Advantage benchmarks in a manner that is independent of FFS spending. This could involve adopting a competitive bidding system where Medicare Advantage bids determine the benchmarks. Alternatively, benchmarks could be based on both FFS and Medicare Advantage spending, or they could be updated using administratively set rates.
The report also tackled the issue of high drug prices in Medicare Part B.
While the FDA’s accelerated approval pathway expedites drug market entry, it also means that some drugs are approved before sufficient clinical evidence is available. Drug manufacturers often set high prices based on the anticipated clinical benefits of these drugs.
MedPAC outlined measures to ensure that Medicare does not overpay for drugs approved through accelerated approval pathways with unconfirmed clinical benefits.
Congress could mandate that the HHS Secretary caps the Medicare payment rate for accelerated approval Part B drugs and biologics that lack completed post-marketing confirmatory trials, have unconfirmed clinical benefits, or carry excessive prices relative to their estimated value.
Another approach to promoting price competition involves allowing the HHS Secretary to establish a single average sales price (ASP) payment system for groups of drugs and biologics that share similarities or adhere to similar clinical guidelines.
MedPAC also suggested reducing add-on payments for Part B drugs, as these payments may influence providers to prescribe more expensive drugs. By minimizing the relationship between add-on payments and drug prices, cost-effective prescribing practices can be encouraged.
The MedPAC report touched on additional topics such as increasing Part D prescription drug rebates, addressing outcome disparities among beneficiaries with varying social risks, expanding Medicare coverage for telehealth services, and evaluating Medicare’s wage index system.
