Fee-for-service Medicare

Aligning with the Biden administration’s goal of improving health equity, the CMS Center for Medicare and Medicaid Innovation (CMMI) last year unveiled a “strategy refresh” that included health equity as a key objective in testing models of care for Medicare and Medicaid beneficiaries. Another strategic goal was to increase the number of beneficiaries in a care relationship where the provider is accountable for quality and total cost of care, with the objective of having all Medicare beneficiaries aligned with accountable entities by 2030.

Addressing a few recent changes to existing models, CMMI Director Elizabeth Fowler, Ph.D., said the agency’s goal in redesigning the Global and Professional Direct Contracting (GPDC) Model was to reorient it toward provider participants and respond to feedback from stakeholders. The model had been criticized for furthering the privatization of Medicare and allowing for-profit entities to manage fee-for-service (FFS) Medicare beneficiaries without their full knowledge and consent.

A small share of Medicare Part D beneficiaries without access to the low-income subsidy (LIS) program would benefit from the introduction of a $2,000 out-of-pocket (OOP) spending cap for prescription drugs, a provision that is included in the Build Back Better Act, according to a recent Urban Institute analysis. In 2019, a $2,000 cap could have saved approximately 866,000 non-LIS Part D enrollees about $900 each, on average. There are 32.8 million total non-LIS enrollees in the Part D program. The cap would carry a small price tag, increasing total Part D expenditures by $782 million in 2019 and the premium across all Medicare beneficiaries by $4.35 annually. The study concluded that capping out-of-pocket costs for certain Part D beneficiaries would enhance the program without significantly raising costs.

About half of non-maternity inpatient hospital admissions among large-group employer-sponsored plans were paid above 150% of Medicare rates, according to a recent analysis by Kaiser Family Foundation. To address high health care costs, some states have considered capping prices paid by private insurers at a multiple of Medicare rates. By analyzing in-network payment rates for inpatient hospital admissions, the study found that a cap set at 150% of Medicare rates could affect 36% of in-network spending in the large group market, while a cap at 300% could affect 13%. The study concluded that capping prices paid by employer-sponsored plans could be disruptive but could also make health care more affordable — “tradeoffs that warrant careful attention.”

From payment related to the growing number of Medicare Advantage enrollees with end-stage renal disease (ESRD) to the proposed exclusion of 2020 data from risk score assumptions, several commenters responding to the 2023 preliminary rate notice questioned various factors that will be used to determine MA plan reimbursement next year. And while AHIP and other MA stakeholders voiced strong support for CMS keeping the coding intensity adjustment at the statutory minimum for 2023, the Medicare Payment Advisory Commission (MedPAC) took the opportunity to reiterate its contention that MA organizations are overpaid and that the adjustment does not adequately account for the differences in coding between MAOs and fee-for-service (FFS) Medicare.

In the 2023 Advance Notice for MA and Part D plans, CMS said it intended to continue to apply an across-the-board adjustment of 5.9% — the statutory minimum — to offset the effects on MA risk scores of higher levels of coding intensity in MA relative to FFS. AHIP, in its March 4 letter to CMS, said it strongly supports retaining that overall risk score reduction but asked for more detail around CMS’s proposal to exclude 2020 data in its annual “FFS normalization” adjustment, its assumption that 2023 FFS risk scores would return to pre-pandemic trends, how it will incorporate 2021 utilization data into the normalization factor for 2024, and how CMS arrived at the MA risk score trend of 3.5% for 2023.

CMS’s coding intensity adjustment, which is used to account for the estimated difference between risk scores that hypothetical beneficiaries would receive if enrolled in Medicare Advantage vs. fee-for-service (FFS) Medicare, has led to more than $91 billion in payments to MA plans between 2007 and 2022, asserted a March 3 letter from the Medicare Payment Advisory Commission (MedPAC) to CMS Administrator Chiquita Brooks-LaSure. The agency in its 2023 Advance Notice proposed to use the statutory minimum adjustment of 5.9%, which MedPAC estimated will lead to an inflated $16.2 billion in payments — and that’s on the conservative end, the commission noted. MedPAC first raised this issue in 2016, when it urged CMS to consider a new model that would use two years of FFS and MA diagnostic data, exclude diagnoses documented only on health risk assessments from either MA or FFS, and then apply an adjustment that fully accounts for the remaining coding differences. The commission in its March letter reiterated its support for this approach.

After progressive Democratic lawmakers urged CMS to shut down a fee-for-service Medicare model aimed at fostering more value-based care arrangements, the agency’s Center for Medicare and Medicaid Innovation (CMMI) on Feb. 24 unveiled a revamped version that it said more closely aligns with its “vision of creating a health system that achieves equitable outcomes through high quality, affordable, person-centered care.” While the three types of Accountable Care Organizations (ACOs) that may participate starting next year appear to largely mirror the Direct Contracting Entities (DCEs) of the current Global and Professional Direct Contracting (GPDC) Model, CMS aims to ensure that participants in the new model operate as provider-led organizations, have a proven track record of providing care in underserved communities and will not be shifting any enrollees into Medicare Advantage — a key concern expressed by lawmakers and advocates.

America’s Physician Groups (APG) and other stakeholders at press time were urging the Biden administration not to cancel the Global and Professional Direct Contracting (GPDC) model. The model, in which provider groups and other entities share risk and receive capitated payments for serving fee-for-service (FFS) Medicare beneficiaries, formally launched in April 2021 and has drawn interest from Medicare Advantage organizations. Although CMS put a pause on new applicants for the 2022 performance year, progressive lawmakers have asked the administration to stop it out of concern that private entities are seeking to funnel FFS enrollees into managed care without their knowing. In a sign-on letter to HHS Secretary Xavier Becerra, APG and other groups suggested that instead of canceling the model, the administration should limit participation to provider-led entities and “place additional guardrails and add more beneficiary protections.”