Medicare

Medicare

A major goal of the ACA has been to decrease health care spending through reform of Medicare delivery system and payment models.  The historic fee-for-service payment model links reimbursement to the quantity of services provided, which encourages increased use without tying to quality of care.  The ACA authorizes and appropriates funds for a number of demonstration programs that are intended to reduce expenditures while improving quality of delivery.  Below is a summary of some of the measures underway with CMS:

  • Value Based Purchasing (VBP) Program for hospitals and skilled nursing facilities (SNFs).  2013 is the first year in which value-based incentives are available to hospitals under the program.  CMS finalized the methodology for calculating the value-based incentive payment adjustment factor for hospitals in the Fiscal Year 2013 Inpatient Prospective Payment Program (IPPS) final rule.  The ACA also requires the implementation of a VBP Program for SNFs; the Secretary of Health and Human Services submitted a report to Congress describing the design and implementation of such a program in June 2012. 
  • Hospital Readmission Reduction Program.  As of October 2012, CMS is required to reduce payments to IPPS hospitals with excess readmissions for certain conditions.  The FY 2013 IPPS Rule established which hospitals are subject to the Program and methodologies for calculating relevant adjustment factors, and also developed a process for hospitals to review and correct their readmission information before readmission rates are made public.
  • Medicare Advantage Plan Payment Reductions.  Medicare Advantage plans have consistently been more costly than traditional Medicare.  Under the ACA, excess payments to private plans offering Medicare Advantage will be largely eliminated.  CMS began implementing these reductions in 2011.  The ACA calls for setting benchmark rates compared to traditional Medicare rates for Medicare Advantage plans by county and rebates have been offered to cover the difference between a plan’s benchmark rate and its initial bid will be reduced.  Meanwhile, high-performing Medicare Advantage plans will be rewarded with higher payments as incentive to increase quality.  2014 is expected to bring an overall 8% cut in costs, while at the same time beneficiary premiums have been lowered and enrollment is up.
  • Value-Based Physician Payment Modifier Program.  This program is an attempt to provide meaningful information to physicians to help them improve the quality and efficiency of the services they deliver and is meant to support the transformation of Medicare from a fee-for-service to a quality-based model.  The ACA requires CMS to provide to Medicare fee-for-service patients comparative information on cost among physicians and practice groups.  In 2013, large physician groups will receive Quality and Resource Use Reports.  The ultimate goal of the program is to develop and implement, by 2015, revisions to the Medicare Physician Fee Schedule so that both cost and quality data will be included in calculating physician payments for large physician groups.  The program will be fully implemented by 2017.blu
Independent Payment Advisory Board (“IPAB”).  The IPAB is a 15-member board authorized to recommend spending reductions to Medicare if spending in the program outpaces specified indices, to be evaluated by April 30 of each year.  These recommendations would take place automatically unless Congress substituted comparable reduction plans or the Senate overruled the IPAB plan.  As of April 30, 2013, CMS has concluded that Medicare spending has not exceeded the targets set forth under the ACA, so until at least next year, the IPAB will be making no recommendations on Medicare cost reductions.