MedPAC recommendations on 2024 payment rates get mixed reaction

The Medicare Advisory Payment Commission recommends a higher-than-current-law fee-for-service payment update in 2024 for acute care hospitals and positive payment updates for clinicians paid under the physician fee schedule. It recommends reductions in base payment rates for skilled nursing facilities, home health agencies and inpatient rehabilitation facilities. 

MedPAC gave Congress recommendations on payment rates in both traditional fee-for-service and Medicare Advantage for 2024, satisfying a legislative mandate comparing per enrollee spending in both programs.

MedPAC estimates that Medicare spends 6% more for MA enrollees than it would spend if those enrollees remained in fee-for-service Medicare.

In their March 2023 Report to the Congress: Medicare Payment Policy, commissioners said they were acutely aware of how providers’ financial status and patterns of Medicare spending varied in 2020 and 2021 due to COVID-19 and were also aware of higher and more volatile cost increases.

However, they’re statutorily charged to evaluate available data to assess whether Medicare payments are sufficient to support the efficient delivery of care and ensure access to care for Medicare’s beneficiaries, commissioners said. 


MedPAC’s payment update recommendations are based on an assessment of payment adequacy, beneficiaries’ access to and use of care, the quality of the care, the supply of providers, and their access to capital, the report said. As well as higher payments for acute care hospitals and clinicians, MedPAC recommends positive rates for outpatient dialysis facilities.

It recommends providing additional resources to acute care hospitals and clinicians who furnish care to Medicare beneficiaries with low incomes. It also recommends a positive payment update in 2024 for hospice providers concurrent with wage adjusting and reducing the hospice aggregate Medicare payment cap by 20%.

It recommends negative updates, which are reductions in base payment rates, for skilled nursing facilities, home health agencies and inpatient rehabilitation facilities. 

Acute care

For acute care hospitals paid under the inpatient prospective payment system, commissioners recommend adding $2 billion to current disproportionate share and uncompensated care payments and distributing the entire amount using a commission-developed “Medicare SafetyNet Index” to direct funding to those hospitals that provide care to large shares of low-income Medicare beneficiaries.

This recommendation got pushback from America’s Essential Hospitals.

“We appreciate the Medicare Payment Advisory Commission’s desire to define safety net hospitals for targeted support, but the commission’s Medicare safety net index (MSNI) could have the perverse effect of shifting resources away from hospitals that need support the most,” said SVP of Policy and Advocacy Beth Feldpush. “The MSNI methodology fails to account for all the nation’s safety net hospitals by overlooking uncompensated care and care provided to non-Medicare, low-income patients – especially Medicaid beneficiaries. Any practical definition of a safety net provider must consider the care of Medicaid and uninsured patients, yet the MSNI misses on both counts.”

Feldpush urged policymakers to develop a federal designation of safety net hospitals and to reject the MSNI.

“Further, policymaking for these hospitals should supplement, rather than redistribute, existing Medicare DSH funding, which reflects a congressionally sanctioned, well-established methodology,” she said.

Physicians and clinicians

For clinicians, the commission recommends that Medicare make targeted add-on payments of 15% to primary care clinicians and 5% to all other clinicians for physician fee schedule services provided to low-income Medicare beneficiaries. 

The American Medical Association commended MedPAC, but also said that an update tied to just 50% of the Medicare Economic Index would cause physician payment to chronically fall even further behind increases in the cost of providing care. AMA president Dr. Jack Resneck Jr. urged Congress to pass legislation providing for an annual inflation-based payment update.

MedPAC has long championed a physician payment update tied to the Medicare Economic Index, Resneck said. Physicians have faced the cost of inflation, the COVID-19 pandemic and growing expenses to run medical practices, jeopardizing access to care, particularly in rural and underserved areas.

“Not only have Medicare payments failed to respond adequately, but physicians saw a 2% payment reduction for 2023, creating an additional challenge at a perilous moment,” Resneck said. “As one of the only Medicare providers without an inflationary payment update, physicians have waited a long time for this change. When adjusted for inflation, Medicare physician payment has effectively declined 26% from 2001 to 2023. These increasingly thin or negative operating margins disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or other historically minoritized or marginalized patient communities. Our workforce is at risk just when the health of the nation depends on preserving access to care.”

The AMA and 134 other health organizations wrote to congressional leaders urging for a full inflation-based update to the Medicare Physician Fee Schedule.

MGMA’s SVP of Government Affairs Anders Gilberg said, “Today’s MedPAC report recommends Congress provide an inflationary update to the Medicare base payment rate for physician and other health professional services of 50% of the Medicare Economic Index (MEI), an estimated annual increase of 1.45% for 2024. In the best of times such a nominal increase would not cover annual medical practice cost increases. In the current inflationary environment, it is grossly insufficient.”

MGMA urged Congress to pass legislation to provide an annual inflationary update based on the full MEI.

Ambulatory surgical centers and long-term care hospitals

Previously, the commission considered an annual update recommendation for ambulatory surgical centers (ASCs). However, because Medicare does not require ASCs to submit data on the cost of treating beneficiaries, the commissioners said they had no new significant data to inform an ASC update recommendation for 2024.

Commissioners also previously considered an annual update recommendation for long-term care hospitals (LTCHs). But as the number of cases that qualify for payment under Medicare’s prospective payment system for LTCHs has fallen, they said they have become increasingly concerned about small sample sizes in the analyses of this sector.

“As a result, we will no longer provide an annual payment adequacy analysis for LTCHs but will continue to monitor that sector and provide periodic status reports,” they said in the report. 


Commissioners said that overall, indicators point to an increasingly robust MA program. In 2022, the MA program included over 5,200 plan options, enrolled about 29 million Medicare beneficiaries (49% of eligible beneficiaries), and paid MA plans $403 billion (not including Part D drug plan payments). 

In 2023, the average Medicare beneficiary has a choice of 41 plans offered by an average of eight organizations. Further, the level of rebates that fund extra benefits reached a record high of about $2,350 per enrollee, on average.

Medicare payments for these extra benefits – which are not covered for beneficiaries in FFS – have more than doubled since 2018. For 2023, the average MA plan bid to provide Medicare Part A and Part B benefits was 17% less than FFS Medicare would be projected to spend for those enrollees. 

However, the benefits from MA’s lower cost relative to FFS spending are shared exclusively by the companies sponsoring MA plans and MA enrollees (in the form of extra benefits). The taxpayers and FFS Medicare beneficiaries (who help fund the MA program through Part B premiums) do not realize any savings from MA plan efficiencies. 

Medicare should not continue to overpay MA plans, MedPAC said. Over the past few years, the commission has made recommendations to address coding intensity, replace the quality bonus program and establish more equitable benchmarks, which are used to set plan payments, the report said. All of these would stem Medicare’s excess payments to MA plans, helping to preserve Medicare’s solvency and sustainability while maintaining beneficiary access to MA plans and the extra benefits they can provide. 


Medicare’s cost-based reinsurance continues to be the largest and fastest growing component of Part D spending, totaling $52.4 billion, or about 55% of the total, according to the report

As a result, the financial risk that plans bear, as well as their incentives to control costs, has declined markedly. The value of the average basic benefit that is paid to plans through the capitated direct subsidy has plummeted in recent years. 

In 2023, direct subsidy payments averaged less than $2 per member per month, compared with payments of nearly $94 per member, per month, for reinsurance. To help address these issues, in 2020 the commission recommended substantial changes to Part D’s benefit design to limit enrollee out-of-pocket spending; realign plan and manufacturer incentives to help restore the role of risk-based, capitated payments; and eliminate features of the current program that distort market incentives.

In 2022, Congress passed the Inflation Reduction Act, which included numerous policies related to prescription drugs. One such provision is a redesign of the Part D benefit with many similarities to the commission’s recommended changes. 

The changes adopted in the IRA will be implemented over the next several years, and are likely to alter the drug-pricing landscape, commissioners said.

Patient acuity is driving up hospital costs, AHA says

The AHA wants Congress to halt Medicare payment cuts and extend or make permanent certain waivers, among other requests.

The American Hospital Association has released a report on patient acuity that shows hospital patients are sicker and more medically complex than they were before the COVID-19 pandemic.

This is driving up hospital costs for labor, drugs and supplies, according to the AHA report. 

Hospital patient acuity, as measured by average length of stay, rose almost 10% between 2019 and 2021, including a 6% increase for non-COVID-19 Medicare patients as the pandemic contributed to delayed and avoided care, the report said. For example, the average length of stay rose 89% for patients with rheumatoid arthritis and 65% for patients with neuroblastoma and adrenal cancer. 

In 2022, patient acuity as reflected in the case mix index rose 11.1% for mastectomy patients, 15% for appendectomy patients and 7% for hysterectomy patients.


Mounting costs, combined with economy-wide inflation and reimbursement shortfalls, are threatening the financial stability of hospitals around the country, according to the AHA report.

The length of stay due to increasing acuity is occurring at a time of significant financial challenges for hospitals and health systems, which have still not received support to address the Delta and Omicron surges that have comprised the majority of all COVID-19 admissions, the AHA said. 

The AHA is asking Congress to halt its Medicare payment cuts to hospitals and other providers; extend or make permanent certain waivers that improve efficiency and access to care; extend expiring health insurance subsidies for millions of patients; and hold commercial insurers accountable for improper and burdensome business practices.


Hospitals, through the AHA, have long been asking the federal government for relief beyond what’s been allocated in provider relief funds.

In January, the American Hospital Association sought at least $25 billion for hospitals to help combat workforce shortages and labor costs exacerbated by what the AHA called “exorbitant” rates on the part of some staffing agencies. The Department of Health and Human Services released $2 billion in additional funding for hospitals.

In March, the AHA asked Congress to allocate additional provider relief funds beyond the original $175 billion in the Coronavirus Aid, Relief and Economic Security Act.

Earlier this month, the Centers for Medicare and Medicaid Services increased what it originally proposed for payment in the Inpatient Prospective Payment system rule. The AHA said the increase was not enough to offset expenses and inflation.

House hearing ups ante on Medicare Advantage reform

Political will seems to be growing to reshape the increasingly popular Medicare Advantage program.

At a House Energy and Commerce committee hearing on Tuesday, lawmakers on both sides of the aisle called for more oversight of MA following watchdog reports that found impediments to receiving covered care, including improper denials of prior authorization requests, and plans gaming the system in exchange for more funding from Medicare.

Medicare Advantage is an important tool for helping seniors and we want it to succeed. We’re going to continue to conduct the oversight necessary,” said Oversight and Investigations Subcommittee Chair Diana DeGette, D-Colo.

Witnesses at the hearing — officials from the Government Accountability Office, HHS Office of Inspector General and congressional advisory board MedPAC — also pointed to higher rates of beneficiary disenrollment in their last year of life and opaque plan data, which can complicate oversight efforts.

Surveys have shown MA remains extremely popular with beneficiaries, attracted by lower co-pays and supplemental benefits like vision coverage and telehealth. In the program, Medicare pays private plans a capitated monthly rate to provide care for their beneficiaries based on the severity of their beneficiaries’ needs.

The hearing comes amid inflamed industry debate over the future of MA.

For-profit hospital lobby Federation of American Hospitals submitted a letter for the record sharing concerns over some MA plans denying patient care and having inadequate care networks.

Meanwhile, MA trade group Better Medicare Alliance sent a letter to the CMS on Monday urging the agency to safeguard the program as Congress mulls changes to Medicare.

But as Medicare’s hospital benefit — part of which funds MA — limps towards insolvency, lawmakers appear poised to target the growing MA program in a bid to crack down on improper payments and care denials.

“This is something that I think is very much bipartisan,” said Rep. Gary Palmer, R-Ala.

Coverage delays and denials

It’s not the first time lawmakers have zeroed in on MA oversight as a strategy to save Medicare money: In a Senate hearing on Medicare insolvency in February, Sen. Elizabeth Warren, D-Mass., said “the Medicare system is hemorrhaging money on scams and frauds” due to insurers taking advantage of the program’s rules to increase profits.

Even amid rising congressional criticism of MA, lawmakers on Tuesday reiterated their support for the program overall, which covered roughly 27 million Americans in 2021.

That’s more than a third of all Medicare beneficiaries, though MA is expected to swell to cover half of all Medicare members by 2030.

But lawmakers said they are increasingly concerned about disparities in the quality of coverage offered by Medicare Advantage plans compared to traditional Medicare plans, along with unscrupulous practices in the program resulting in higher reimbursement for MA organizations.

GAO report found MA beneficiaries in their last year of life disenroll from MA in favor of traditional Medicare at a rate two times higher than other MA members, suggesting the plans may not support high-cost and specialized care, testified Leslie Gordon, GAO’s acting director for healthcare.

Gordon called it a “red flag” for the program that requires more scrutiny from CMS.

In addition, an HHS OIG report published April found MA organizations wrongly denied members care, with plans turning down 18% of payment requests that should have been approved.

Erin Bliss, OIG assistant inspector general in the Office of Evaluation and Inspection, testified plans sometimes use internal critical criteria that are not required by Medicare. In one example, an MA plan denied a medically necessary CT scan to diagnose a serious disease, citing that the patient hadn’t yet received an x-ray, Bliss said.

When appealed, plan denials were reversed 75% of time, a rate DeGette called “alarmingly high.”

“We are concerned that patients are receiving the timely care they need in those situations,” Bliss said.

OIG also found plans denied 13% of prior authorization requests that would have been approved under traditional Medicare.

Rep. Michael Burgess, R-Texas, suggested policymakers consider requiring insurers to forego prior authorization for doctors with a consistent track record of submitting accurate data. That strategy, called “gold carding,” is already used in some states, including Texas and West Virginia, to pare back on prior authorization delays.

MA payment reform

Along with coverage restrictions, lawmakers at Tuesday’s hearing asked witnesses about the scope and severity of improper MA payments in a bid to zero in on specific solutions Congress and the CMS can enact.

Though MA has potential to save the Medicare program money, “the current incentives for MA plans are not adequately aligned with the Medicare program,” said James Mathews, MedPAC executive director.

“Substantial reforms are urgently needed,” especially in light of Medicare’s “profound” financial problems, Mathews said.

In 2022, the average MA plan bid was 85% of fee-for-service spending, Mathews said. However, Medicare pays plans 104% of fee-for-service costs.

That imbalance is partially due to plans making patients appear sicker than they are to get extra payments from the government, witnesses said. The practice, called “coding intensity,” resulted in an estimated $12 billion in excess Medicare spending in 2020, according to MedPAC data.

Methods include chart reviews, where plans identify and add patient diagnoses that aren’t included in the service record, and health risk assessments, where plans contract with vendors to visit beneficiaries homes and conduct assessments, finding new diagnoses that often aren’t backed up by other records, according to Bliss.

GAO estimates that roughly a tenth of Medicare payments to MA plans in 2021 were improper, Gordon said.

To try to tamp down on coding intensity, the CMS should conduct targeted oversight of MA plans that routinely use these tools, and reassess whether chart reviews and in-home assessments are allowed to be sole sources of diagnoses for payment purposes, witnesses said. In addition, MA should improve care coordination for enrollees who receive health risk assessments. 

The CMS should also consider replacing the quality bonus program and change its approach to calculating MA benchmarks, Mathews said.

In addition, the agency should require and validate data for completeness and accuracy before risk-adjusting payments through methods like medical record reviews, Gordon said.

Gordon also suggested the agency conduct more timely audits, as the CMS is currently missing out on recouping hundreds of millions of dollars in improper payments.

Policymakers appeared open witnesses’ suggestions to ensure MA is running as smoothly as possible, with Rep. Frank Pallone, D-N.J., calling for an additional hearing on the matter.

“This is bipartisan … You can be assured that we’re going to be following up,” DeGette said.

MedPAC: Overhaul MA payments and streamline CMMI models

Two influential advisory groups sent recommendations to Congress calling for a revamp of how health plans are paid in the lucrative Medicare Advantage program, culling how many models CMS tests and curbing high-cost drug approvals.

By many measures, the MA program has been thriving. Enrollment and participation has continued to grow, and in 2021, MA plans’ bids to provide the Medicare benefit declined to a record low: Just 87% of comparable fee-for-service spending in their markets.

But despite that relative efficiency, MA contracting isn’t saving Medicare moneyactually, in the 35 years Medicare managed care has been active, it’s never resulted in net savings for the cash-strapped program, James Mathews, executive director of the Medicare Payment Advisory Commission, told reporters in a Tuesday briefing.

MedPAC estimates Medicare actually spends 4% more per capita for beneficiaries in MA plans than those in FFS under the existing benchmark policy.

To save money, Medicare could change how the benchmark, the maximum payment amount for plans, is adjusted for geographic variation, MedPAC said.

Under current policy, Medicare pays MA plans more if they cover an area with lower FFS spending, despite most plans bidding below FFS in these areas. At the same time, plans in areas where FFS spending is higher bid at a lower level relative to their benchmark, and wind up getting higher rebates — the difference between the bid and the benchmark — as a result.

“Because the rebate dollars must be used to provide extra benefits, large rebates result in plans offering a disproportionate level of extra benefits,” MedPAC wrote in its annual report to Congress. “Moreover, as MA rebates increase, a smaller share of those rebates is used for cost-sharing and premium reductions — benefits that have more transparent value and provide an affordable alternative to Medigap coverage.”

The group recommended rebalancing the MA benchmark policy to use a relatively equal blend of per-capita FFS spending in a local area and standardized national FFS spending, which would reduce variation in local benchmarks, and use a rebate of at least 75%. Currently, a plan’s rebate depends on its star rating, and ranges from 65% to 70%.

MedPAC also suggested a discount rate of at least 2% to reduce local and national blended spending amounts.

The group’s simulations suggest the changes would have minimal impact on plan participation or MA enrollees, but could lead to savings in Medicare of about 2 percentage points, relative to current policy.

Finding savings in Medicare, even small ones, is integral for the program’s future, policy experts say. The Congressional Budget Office expects the trust fund that finances Medicare’s hospital benefit will become insolvent by 2024, as — despite perennial warnings from watchdogs and budget hawks — lawmakers have kicked the can on the insurance program’s snowballing deficit for years.

Fewer and more targeted alternative payment models

MedPAC also recommended CMS streamline its portfolio of alternative payment models, implementing a smaller and more targeted suite of the temporary demonstrations designed to work together.

CMS is already undergoing a review of the models, meant to inject more value into healthcare payments, following calls from legislators for more oversight in the program. The agency doesn’t have the most stellar track record: Of the 54 models its Center for Medicare and Medicaid Innovation has trialed since it was launched a decade ago, just four have been permanently encoded in Medicare.

New CMMI head Elizabeth Fowler said earlier this month the agency will likely enact more mandatory models to force the shift toward value, as the ongoing review has resulted in more conscious choices about where it should invest.

In its report, MedPAC pointed out many of CMMI’s models generated gross savings for Medicare, before performance bonuses to providers were shelled out. That suggests the models have the power to change provider practice patterns, but their effects are tricky to measure. Many providers are in multiple models at once, and the same beneficiaries can be shared across models, too.

Additionally, some models set up conflicting incentives. Mathews gave the example of accountable care organizations participating in one model to reduce spending on behalf of an assigned population relative to a benchmark, but its provider participants could also be in certain bundled models with incentives to keep the cost of care per episode low — but not reduce the overall number of episodes themselves.

“The risk of these kinds of inconsistent incentives would be minimized again if the models were developed in a manner where they would work together at the outset,” Mathews said. MedPAC doesn’t have guidance on a specific target number of alternative models, but said it should be a smaller and more strategic number.

Curbing high-cost drugs in Medicaid

Another advisory board, on the Medicaid safety-net insurance program, also released its annual report on Tuesday, recommending Congress mitigate the effect of pricey specialty drugs on state Medicaid programs.

High-cost specialty drugs are increasingly driving Medicaid spending and creating financial pressure on states. The Medicaid and CHIP Payment and Access Commission (MACPAC) didn’t recommend Congress change the requirement that Medicaid cover the drugs, but recommended legislators look into increasing the minimum rebate percentage on drugs approved by the Food and Drug Administration through the accelerated approval pathway, until the clinical benefit of the drugs is verified.

The accelerated approval pathway, which can be used for a drug for a serious or life-threatening illness that provides a therapeutic advantage over existing treatments, allows drugs to come to market more quickly. States have aired concerns about paying high list prices for such drugs when they don’t have a verified clinical benefit.

That pathway has faced growing scrutiny in recent days in the wake of the FDA’s high-profile and controversial approval of Biogen’s aducanumab for Alzheimer’s disease.

Several advisors to the FDA have resigned over the decision, as it’s unclear if aducanumab actually has a clinical benefit. What aducanumab does have is an estimated price tag of $56,000 a year, which could place severe stress on taxpayer-funded insurance programs like Medicare and Medicaid if widely prescribed.

MEDPAC also recommended an increase in the additional inflationary rebate on drugs that receive approval from the FDA under the accelerated approval pathway if the manufacturer hasn’t completed the postmarketing confirmatory trial after a specified number of years. Once a drug receives traditional approval, the inflationary rebate would revert back to the standard amounts.

The recommendations would only apply to the price Medicaid pays for the drug and doesn’t change the program’s obligation to cover it.

What Does Medicare Actually Cover?

What Does Medicare Actually Cover?

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If it followed the path of traditional Medicare, it would end up paying for a lot of coverage that has little medical value.

In the first congressional hearing held on “Medicare for all” in April, Michael Burgess, a Republican congressman from Texas and a physician, called such a proposal “frightening” because it could limit the treatments available to patients.

The debate over Medicare for all has largely focused on access and taxpayer cost, but this raises a question that hasn’t gotten much attention: What treatments would it cover?

A good starting place for answers is to look at how traditional Medicare currently handles things. In one sense, there are some important elements that Medicare does not cover — and  arguably should. But a little digging into the rules governing treatments also reveals that Medicare allows a lot of low-value care — which it arguably should not.

Many countries don’t cover procedures or treatments that have little medical value or that are considered too expensive relative to the benefits. American Medicare has also wrestled with the challenge of how to keep out low-value care, but for political reasons has never squarely faced it.

You might remember the factually misguided “death panel” attack on the Affordable Care Act, which preyed on discomfort with a governmental role in deciding what health care would or would not be paid for. (This discomfort also extends to private plans, exemplified by the backlash against managed care in the 1990s.)

Perhaps as a result, Americans don’t often talk about what treatments and services provide enough value to warrant coverage.

You can divide current Medicare coverage into two layers.

The first is relatively transparent. Traditional Medicare does not cover certain classes of care, including eyeglasses, hearing aids, dental or long-term care. When the classes of things it covers changes, or is under debate, there’s a big, bruising fight with a lot of public comment. The most recent battle added prescription drug coverage through legislation that passed in 2003.

Over the years, there have also been legislative efforts to add coverage for eyeglasses, hearing aids, dental and long-term care — none of them successful. Some of these are available through private plans. So a Medicare for all program that excluded all private insurance coverage and that resembled today’s traditional Medicare would leave Americans with significant coverage gaps. Most likely, debate over what Medicare for all would cover would center on this issue.

But there is a second layer of coverage that receives less attention. Which specific treatments does Medicare pay for within its classes of coverage? For instance, Medicare covers hospital and doctor visits associated with cancer care — but which specific cancer treatments?

This second layer is far more opaque than the first. By law, treatments must be reasonable and necessary” to be approved for Medicare coverage, but what that means is not very clear.

We think of Medicare as a uniform program, but some coverage decisions are local. What people are covered for in, say, Miami can be different from what people are covered for in Seattle.

Many treatments and services are covered automatically because they already have standard billing codes that Medicare recognizes and accepts. For treatments lacking such codes, Medicare makes coverage determinations in one of two ways: nationally or locally.

Although Medicare is a federal (national) program, most coverage determinations are local. Private contractors authorized to process Medicare claims decide what treatments to reimburse in each of 16 regions of the country.

In theory, this could allow for lots of variation across the country in what Medicare pays for. But most local coverage determinations are nearly identical. For example, four regional contractors have independently made local coverage determinations for allergen immunotherapy, but they all approve the same treatments for seasonal allergy sufferers.

There are more than 2,000 local coverage determinations like these. National coverage decisions, which apply to the entire country, are rarer, with only about 300 on the books.

When Medicare makes national coverage decisions, sometimes it does so while requiring people to enter clinical trials.

It has been doing this for over a decade. The program is called coverage with evidence development, and its use is rare. Fewer than two dozen therapies have entered the program since it was introduced in 2006. But it allows Medicare to gather additional clinical data before determining if the treatment should be covered outside of a trial. To be considered, the treatment must already be deemed safe, and it must already be effective in some population. The aim is to test if the treatment “meaningfully improves” the health of Medicare beneficiaries.

Only one therapy (CPAP, for sleep apnea) that entered this process has ever emerged to be covered as a routine part of Medicare. The others are in a perpetual state of limbo, neither fully covered nor definitively not covered. CAR-T cell therapy, a type of cancer immunotherapy, which appears to be very successful but is also very expensive, is one of the most recent to enter this process.

Despite the complexity of all these coverage determination methods — local, national, contingent on clinical trials — the bottom line is that very few treatments are fully excluded from Medicare, so long as they are of any clinical value. And this suggests that it’s not very likely that Medicare for all would deny coverage for needed care.

A 2018 study in Health Affairs found only 3 percent of Medicare claims were denied in 2015. And traditional Medicare doesn’t limit access to doctors or hospitals either, as it is accepted by nearly every one. (This is in contrast with Medicare Advantage.)

Medicare has a troubled history in considering cost-effectiveness in its coverage decisions. Past efforts to incorporate it have failed. For example, regulations proposed in 1989 were withdrawn after a decade of internal review.

As a result, Medicare covers some treatments that are extremely expensive for the program and that offer little benefit to patients. The Medicare Payment Advisory Commission recently studied this in detail. In a 2018 report to Congress, it noted that up to one-third of Medicare beneficiaries received some kind of low-value treatment in 2014, costing the program billions of dollars. If Medicare for all followed in traditional Medicare’s path, it could be wastefully expensive.

The United States has had a historical unwillingness to face cost-effectiveness questions in health care decisions, something many other countries tackle head-on. Some Americans favor Medicare for all because it would make the system more like some overseas. And yet, in choosing not to consider the value of the care it covers, Medicare remains uniquely American.



House committee to discuss DSH cut repeal next week

The House Energy and Commerce Committee next week will consider a full repeal of the Medicaid disproportionate share hospital cuts, a sign that hospitals are getting closer to securing the top lobbying priority for safety net providers and academic medical centers.

The committee will hold a hearing next Tuesday on proposed legislation from Rep. Eliot Engel (D-N.Y.), whose home state gets the single largest so-called Medicaid DSH allotment in the country. In fiscal 2018, New York received $1.8 billion of the roughly $12 billion in annual federal payments.

Engel has pitched a full repeal of the cuts mandated by the Affordable Care Act, which are set to take effect Oct. 1. Should those cuts move forward, they would reduce federal DSH payments to states by $4 billion in fiscal 2020 and $8 billion in fiscal 2021. An aide to Engel said that a full repeal “provides the long-term solution.”

Medicaid DSH is the second-largest federal program to boost hospital Medicaid funding, representing about $12 billion in federal spending annually. It has been the subject of a political fight over proposed reforms to the program.

Last week, 300 of the 435 U.S. House of Representatives lawmakers sent a letter to the chamber’s leadership urging a two-year delay to the DSH cuts, and hinted that some in Congress believe the Medicaid DSH formulas need to be reconfigured, calling for a “sustainable, permanent” solution.

“This delay will ensure that hospitals can continue to care for the most vulnerable in our communities,” the lawmakers wrote, led by Engel and Rep. Pete Olson (R-Texas).

The amount the federal government pays out for DSH varies enormously across states and is mostly arbitrary, reflecting the caps set by Congress in 1992 instead of a relevant benchmark.

Florida, where about 3.3 million people are uninsured, gets the exact same federal DSH allotment as Connecticut, where about 245,000 people are uninsured.

Finance Committee Chair Chuck Grassley (R-Iowa) has said he wants to see a reset. Sen. Marco Rubio (R-Fla.), whose state has a strong vested interest in a formula change, has used the Sept. 30 deadline to push a proposal that would base the federal dollar allotment on a particular state’s share of U.S. citizens living below the poverty level.

But the major trade groups representing DSH hospitals continue to push for a simple delay, since their constituents include hospitals in all the states. Dr. Bruce Siegel, CEO of America’s Essential Hospitals, said at a briefing to House staff earlier this month that he’d be open to a formula change as long as hospitals don’t see cuts to existing funding. That means Congress would have to allocate even more money to the program.

House Speaker Nancy Pelosi (D-Calif.) said she backed another delay when she addressed American Hospital Association’s annual meeting in April. She noted that she wouldn’t back a program overhaul.

“We cannot support efforts that will reward states for not expanding Medicaid or simply take DSH money from some other state and give it to others,” she said. “Who thought that was a good idea?”

The DSH debate doesn’t fall along the lines of which states expanded Medicaid or not. Alabama and Missouri haven’t expanded Medicaid but receive high federal DSH allotments, and would likely lose money if Congress decided to redistribute the existing payments.

Although the policy rationale behind the ACA-mandated cuts was that Medicaid expansion would shrink hospitals’ need for DSH money, high-DSH expansion states such as New York and New Jersey aren’t giving an inch.

Siegel framed the debate over expansion states’ need as being “a little more complicated now” than in the early years of the ACA.

“I think the market has changed in the last eight years or nine years when we started down the road of Medicaid expansion,” he said at the Capitol Hill staff briefing.

He pointed to the slight rise in the uninsured rate recently, as well as the increase of high-deductible plans that put more fiscal burden on enrollees.

“We are frankly concerned about any moves to move us toward skinny health plans,” he added.

Enrollment in more bare-bones commercial plans doesn’t really affect the Medicaid enrollment, but he argued that expansion still brings Medicaid shortfall — which is the difference between Medicaid and Medicare reimbursement.

“If you have 70% Medicaid patients which some of our hospitals do, you are in a terrible disadvantage in terms of payment streams, with the shortfall becoming enormous for you,” he said.

There is another Medicaid program that can help hospitals with shortfall: the “upper payment limit” supplement for Medicaid fee-for-service. States can deploy UPL payments to hospitals in order to increase their reimbursement based on rates Medicare would have paid for the same treatment.

UPL is the largest Medicaid supplemental funding program, with about $13 billion in annual spending according to the Medicaid and CHIP Payment and Access Commission data from fiscal 2017.

The UPL program is also under scrutiny by MACPAC, whose analysts found that 17 states have overspent billions of these payments.