On December 9, 2014, the US House Energy and Commerce Committee’s Health Subcommittee held a hearing on options to curb Federal health care spending. The hearing was entitled “Setting Fiscal Priorities: Reforming Health Spending and Strengthening Our Future.”
The Subcommittee’s background memorandum noted that the level of Medicaid and Affordable Care Act (ACA) Exchange spending were largely unaffected by the Budget Control Act of 2011 that imposed sequestration.
The upcoming 114th Congress that commences in January 2015 will likely consider such topics as increasing Medicare payments for physician services through Sustainable Growth Rate (SGR) reform, extending Children’s Health Insurance Program’s funding, and prioritizing medical research and development.
Four witnesses testified before the Subcommittee:
- Mark Miller, Executive Director of the Medicare Payment Advisory Commission (MedPAC)
- Christopher Holt, Director of Health Care Policy for the American Action Forum
- Mark Goldwein, Senior Policy Director for the Committee for a Responsible Budget
- Judy Feder, Fellow at the Urban Institute and Professor and founding Dean, Georgetown University McCourt School of Public Policy
Highlights from their testimonies are provided below.
- Mark Miller recapped MedPAC’s most recent payment reform recommendations, including:
- modest payment updates – incentivize providers to control costs through modest and even negative updates to payment rates in the fee-for-services (FFS) payment systems: zero updates for ambulatory surgical centers, outpatient dialysis, inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), and hospices; and rebasing payment rates for home health and skilled nursing facility (SNF) services.
- site neutral payments – pay the same amount for a service regardless of the provider setting in which the service was furnished unless payment differentials are justified by differences in patient mix, provider mission (e.g. maintaining stand-by capacity for emergencies), or other factors. The Commission also recommended financially neutral payments between FFS and Medicare Advantage plans.
- rewards for primary care – identify overpriced services and price them appropriately, replace the SGR formula with payment updates that are higher for primary care compared to specialty care, and establish a primary care bonus funded from non-primary care services.
- penalties for high readmission rates – reduce payments to both SNFs and home health agencies (HHAs) that have relatively high risk-adjusted readmission rates.
- bundled payments – replace inefficient care with a more effective mix of services through bundled payments, either for the hospital stay or for the stay plus a period of post-acute care (PAC), coupled with quality outcome metrics.
- common spending benchmark – set a common spending benchmark, tied to local FFS spending, for MA plans and Accountable Care Organizations (ACOs) to encourage beneficiaries to choose the model that they perceive as having the highest value in terms of cost and quality that would be financially neutral to the Medicare program.
- Christopher Holt proposed cost saving reforms focused on the ACA, specifically the exchanges and Medicaid expansion, including:
- decrease premium subsidies eligibility – lower the income eligibility level to receive premium subsidies for insurance purchased through the exchanges.
- increase individual contribution to premiums – increase the applicable income percentage of an individual’s income to require some individuals to contribute more to their monthly insurance premiums.
- lower Federal Medical Assistance Percentage (FMAP) – lower the federal matching funds for those individuals newly eligible for Medicaid under the expansion.
- eliminate age limits for catastrophic coverage – eliminate age limits for individuals who can purchase catastrophic coverage.
- repeal the medical device tax and the Independent Payment Advisory Board.
- Mark Goldwein reiterated MedPAC’s recommendations to restructure provider incentives and echoed Christopher Holt’s cost savings reforms in addition to additional payment reductions, including:
- bundled payments – expand the use of bundled payments and imposition of penalties for preventable readmissions and complications.
- site neutral payments – equalize payments for similar services in different settings.
- medical malpractice reform – enact medical malpractice reform.
- reduce certain payment updates –reduce payment updates for PAC providers, payments for GME, and payments to rural hospitals.
- lower FMAP – reduce FMAP Medicaid payments to states (and set FMAP for administrative costs at 50%).
- eliminate bad debt payments – eliminate Medicare reimbursement for bad debts.
- decrease premium subsidies eligibility – repeal ACA exchange subsidies for incomes above 300% FPL.
- implement certain Medicare managed care reforms – increase Medicare Advantage coding intensity adjustment; extend and increase Medicare income-related premiums; increase drug rebates in Part D.
- Judy Feder testified that there is “little room for savings from efficiency [in Medicaid], given already constrained provider payment rates and existing opportunities for state flexibility.” For Medicare, in light of the current national deficit reduction, she conveyed that policymakers do not have to “drastically cut entitlements but can reduce spending by refining current payment methods without jeopardizing the quality of care or access to care,” including:
- restore the Medicaid rebate on prescription drugs for low income beneficiaries;
- eliminate overpayments to Medicare Advantage plans, and
- refine payment mechanisms for post-acute care.