Capitol Insights Newsletter

Authors: Luke Schwartz, Caroline Oliver, and Matt Reiter

What happened in Congress this week?

Congress is expected to vote on a $1.2 trillion deal to keep the remainder of the government open through September 30. As part of the spending bill, HHS will receive $117.4 billion, a $955 million boost from last fiscal year. The CDC will receive $9.2 billion, a $4.5 million increase, while NIH will get a $48.6 billion budget, a $300 million expansion in funding. The appropriations bill funds discretionary programs. Medicare’s spending on payments to providers is mandatory spending tied to the Medicare entitlement and is therefore not included in the appropriations process.  

The House passed H.R. 766, the “Dr. Michael C. Burgess Preventive Health Savings Act”, which will allow Congress to request that the Congressional Budget Office (CBO), the federal agency that provides budget and economic information to Congress, create budgetary savings estimates of prospective preventative healthcare legislation over a 30-year time span. Currently, CBO only projects out as far as ten years. Lawmakers argue that this step will give Congress a better insight into spending/savings associated with preventative healthcare policy proposals before passing legislation.

Additionally, on Wednesday, HHS Secretary Xavier Becerra appeared before the House Appropriations Labor-HHS Subcommittee and the House Ways and Means Committee to discuss Biden’s 2025 HHS Budget Request. These hearings were an opportunity for Committee members to question the secretary about topics unrelated to the budget. Secretary Becerra emphasized HHS’s stance on prioritizing access to preventative care, enforcing Medicare Advantage regulations while increasing transparency for enrollees, and funding data collection to combat disparities in health research. He also discussed the importance of addressing the nursing home staffing shortage; however, many representatives raised concerns about the potential implications a minimum staffing rule may pose to rural providers. Secretary Becerra also discussed the Change Healthcare cyberattack and assured Congress that HHS is dedicated to researching and implementing new ways to better protect healthcare data.

MedPAC March 2024 Report Released

Last Friday, March 15th, the Medicare Payment Advisory Commission (MedPAC) released the first of its two annual reports to Congress on Medicare payment policy. MedPAC is a nonpartisan Congressional agency that advises Congress on Medicare payment policy. The Commission’s recommendations to Congress are non-binding; however, they are highly influential.

MedPAC’s annual March report asses the adequacy of Medicare payments and provides policy recommendations for how to improve Medicare payment systems. MedPAC defines the “adequacy” of Medicare payments by evaluating beneficiaries’ access to care, the quality of care received, and clinicians’ revenues and costs. Based upon the Commission’s annual access to care survey and assessment of data from 2022, the MedPAC determines by their own definition that current Medicare payments are “adequate.” Their findings include that the number of clinicians per Medicare beneficiary is steady, and that patient experience scores remained stable between 2021 and 2022.

However, at the same time, MedPAC acknowledges that updates to the physician fee schedule have not kept up with the growth of input costs to provide services. In its considerations, the Report acknowledges the end of pandemic-related policy changes for Medicare with the expiration of the public health emergency (PHE) in May of 2023. Additionally, the Report mentions high inflation.

MedPAC makes two recommendations for physician and other health professional services based on their seemingly contradictory findings.

MedPAC recommends that Congress update the Medicare base payment rate by the amount specified in current law plus 50% of the projected increase in the Medicare Economic Index (MEI). At the time of the report, the MEI is projected to grow by 2.6% in 2025, translating to a 1.3% increase in the physician fee schedule under this recommendation. MedPAC estimates that implementing this increase would increase program spending between $2 billion and $5 billion in 2025 and between $10 billion and $25 billion over the next five years. MedPAC issued a similar recommendation last year. 

Additionally, MedPAC reiterated last year’s recommendation to implement a safety-net add-on payment for the physician fee schedule for services provided to dual-enrolled Medicare beneficiaries. This add-on payment would be a 15% increase for primary care clinicians and a 5% increase for all other clinicians. This additional payment intends to increase revenue for treating patients who are dually enrolled in Medicare/Medicaid and therefore, close the gap for patients who are underserved. This recommendation is estimated to increase the fee schedule for primary care clinicians by 4.4% and for non-primary care clinicians by 1.2%.

Turning to the future of Medicare Advantage (MA), MedPAC proposed four suggestions to improve the MA program. These recommendations include building more equitable coding between fee-for-service (FFS) Medicare beneficiaries and MA plan enrollees, enacting more transparency in MA data and spending, restructuring the MA Quality Bonus Program (QBP) with a budget neutral or budget savings program as an alternative, and implementing better benchmarks for MA plans. The MedPAC report also suggests decreasing the concentration of MA plans to provide better market competition and earn enrollees more generous rates when weighing their plan options.

MedPAC also discusses how favorable selection results in MA plans generating higher Medicare spending compared to the actual cost of enrollees. Risk scores are calculated based on the average cost of an individual in FFS Medicare, but the skewed pool of low beneficiaries and high-risk patients is increasing costs as MA plan enrollment grows. In addition, MedPAC data and analysis show that enrollees who are higher-spending ultimately leave MA plans, while lower-spending enrollees are more likely to remain, again resulting in higher estimated MA costs than actual spending.

Finally, MedPAC analyzes how dual-eligible beneficiaries may struggle to receive adequate care from both Medicare and Medicaid programs separately. They propose that Dual Eligible Special Needs Plans (D-SNPs) may be viable alternatives, but data and analysis results are mostly unclear about the success of these programs. MedPAC uses this to comment on its larger issue with the lack of performance results for MA plans, and the struggle of understanding the degree of their quality of care.

Top Stories in Healthcare Policy

CMS published the updated 2024 Medicare Physician Fee Schedule (PFS) Conversion Factor (CF) of $32.29 that will apply for all services furnished on or after March 9th. The new CF is the result of legislation passed by Congress earlier this month that partially mitigates the 3.37% reduction to the 2024 CF that was finalized in the 2024 PFS final rule.

AstraZeneca announced on Monday, March 18th, that it will cap out-of-pocket costs for inhalers at $35 beginning on June 1, 2024. GSK followed suit on Wednesday. The announcements follow a similar one by Boehringer Ingelheim and continued scrutiny of inhaler prices by the Senate HELP Committee.

President Biden signed an executive order to expand women’s health research, requesting action from federal agencies. One initiative includes investing $200 million in research at the National Institutes of Health (NIH).

Elevance Health is looking to acquire Kroger’s specialty pharmacy business through a deal that was announced on Monday, March 18th. If the sale is finalized, Kroger’s specialty pharmacy will merge with CarelonRx, continuing Elevance’s acquisitions of specialty pharmacy businesses.

The Centers for Disease Control and Prevention issued an advisory this week urging vaccination against measles. Through mid-March of 2024, the CDC had recorded 58 measles cases, which is equal to the total number of measles cases recorded in the U.S. in 2023.

CMS announced a new primary care model for accountable care organizations (ACOs), called ACO Primary Care Flex, under the Medicare Shared Savings Program (MSSP). This value-based model will provide monthly prospective payments to primary care providers in low-revenue ACOs.