Finance
e-Newsletter
Intelligence Unit Special Reports Special Events Subscribe Sponsored Departments Follow Us

Twitter Facebook LinkedIn RSS

MedPAC Suggests Ending Medicare Advantage Overpayments

Janice Simmons, for HealthLeaders Media, June 16, 2009

At about the same time President Barack Obama was telling the American Medical Association in Chicago about making spending cuts through targeting inefficiencies in the Medicare program, the Medicare Payment Advisory Commission (MedPAC) officially was releasing its report to Congress on "Improving Incentives in the Medicare Program" that addresses similar spending issues.

MedPAC, with its 17-commissioner board, has provided advice to Congress since 1997. But this small organization has attracted more than its share of attention recently after the president suggested in early June that it should have new power as an executive-level agency to determine Medicare reimbursements.

On top of MedPAC's discussion list was overpayment to Medicare Advantage programs. According to MedPAC Executive Director Mark Miller, Medicare—under the current payment system—will pay as much as $12 billion more for beneficiaries enrolled in Medicare Advantage plans this year than it would spend if they were in traditional fee-for-service Medicare plans.

Those high payments have resulted in some plans offering no innovation to the Medicare program: instead plans were mimicking FFS programs—at a much higher cost to the program. MedPAC proposed four different solutions to turn this around, including setting benchmarks through competitive bidding.

MedPAC also examined the feasibility of accountable care organizations, which it defines as a set of providers held responsible for the quality and cost of healthcare. An ACO could consist of a group of primary care physicians, specialists, and at least one hospital.

The report describes two variations of the ACO model: mandatory or voluntary. With a mandatory ACO, participation by providers would be required. With a voluntary ACO, providers who reorganize care and change practice patterns could receive financial bonuses.

Providers in a successful ACO would need some type of mechanism to jointly decide on care protocols, according to MedPAC. However, this level of decision-making would be difficult in a mandatory model in which providers were placed together—without first agreeing on a system of common governance.

Other highlights of the report:

Biologics. Current Medicare spending on biologics was about $13 billion in 2007. While they account for a small part of the Medicare market now, their growth is expected to skyrocket soon. MedPAC is calling for establishment of a process to approve follow-on biologics.

Self-referral of imaging services. The use and spending of imaging has grown without a clear link to higher quality. MedPAC said it intends to explore policies "to encourage more prudent use of imaging services."


Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.

Comments are moderated. Please be patient.