MedPAC Offers Changes to Medicare Advantage Benefits, Payment Policies

The Medicare Payment Advisory Commission’s (MedPAC) June 2023 report to Congress offered recommendations for addressing disparate Medicare Advantage plan benefits and the future of Medicare Advantage payment policies.

MedPAC discussed the challenges of comparing Medicare Advantage plan benefits and shared how policymakers can standardize benefits.

In 2023, Medicare beneficiaries have an average of 41 Medicare Advantage plans available in their area. However, beneficiaries often struggle to compare the different plans and choose the one best suited to their health and social needs. Establishing standardized benefits in Medicare Advantage plans may help beneficiaries overcome this confusion.

Standardization refers to the set of services the plan covers and the cost-sharing beneficiaries would pay for the services. Policymakers would have to consider the number and design of standardized plan benefits and whether insurers could still offer non-standardized plans.

One approach consists of developing a limited number of plan benefits for Part A and Part B cost-sharing and requiring insurers to include them in their plans, specifying an annual limit on out-of-pocket costs and cost-sharing amounts for services.

When it comes to standardizing supplemental benefits, standardizing a limited number of common supplemental benefits like dental, hearing, and vision services would give plans flexibility while also simplifying plan comparisons for beneficiaries.

Although plan selection also revolves around premium amounts and provider networks, standardized benefits would make the process easier to navigate, according to MedPAC.

The report highlighted how favorable selection impacts the Medicare payment policy and how new approaches can lead to more accurate payment rates.

Medicare Advantage benchmarks are currently largely based on fee-for-service (FFS) spending. After risk adjustment, it is assumed that the average spending for Medicare Advantage beneficiaries will be equal to that for FFS beneficiaries.

However, risk scores frequently overpredict actual spending for Medicare Advantage beneficiaries because a larger share of Medicare beneficiaries are enrolling in Medicare Advantage instead of FFS plans. MedPAC estimated that spending for Medicare Advantage beneficiaries in 2019 was 11 percent lower than spending on FFS beneficiaries with the same risk scores.

As a result, Medicare Advantage benchmarks are higher than actual spending, leading to overpayments to Medicare Advantage plans.

MedPAC suggested that policymakers set Medicare Advantage benchmarks in a way that is not based on FFS spending, such as a competitive bidding system that relies on Medicare Advantage bids to determine benchmarks. Additionally, policymakers could base benchmarks on both FFS and Medicare Advantage spending or update benchmarks using administratively set rates.

The report also addressed high drug prices under Medicare Part B.

The Food and Drug Administration’s (FDA) accelerated approval pathway helps drugs enter the market faster. However, this path also means some drugs are approved before clinical evidence exists, and drug manufacturers often set high prices relative to the drug’s expected clinical benefit.

MedPAC shared how Congress can ensure Medicare is not overpaying for accelerated approval drugs with unconfirmed clinical benefits.

Congress should require the HHS Secretary to cap the Medicare payment rate of accelerated approval Part B drugs and biologics that do not have completed post-marketing confirmatory trials, do not have confirmed clinical benefits, or have an excessive price relative to the high-end of its value estimates.

Congress can also promote price competition by allowing the HHS Secretary to establish a single average sales price (ASP) payment system for groups of drugs and biologics that work similarly or have similar clinical guidelines.

Add-on payments for Part B drugs may influence providers to prescribe higher-priced drugs as the two metrics are positively correlated. MedPAC recommended an approach that would minimize the relationship between the two by reducing add-on payments for expensive drugs.

The MedPAC report also touched on rising Part D prescription drug rebates, outcome disparities among beneficiaries with different social risks, Medicare coverage of telehealth, and Medicare’s wage index system.