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MedPAC April 2017 Report – Executive Summary

MedPAC Votes Major Changes to Part B Rx and Post Acute Payment Policies

On April 6th, 2017 the Medicare Payment Advisory Commission (MedPAC) voted on draft recommendations for Medicare Part B drug payment policies and a unified post-acute care (PAC) prospective payment system (PPS). The recommendations and discussion highlights are noted below. Click here to review meeting presentations.

Medicare Part B Drug Payment Policy Issues

Part B drug spending was $26 billion in 2015 – up from $23 billion in 2014. The Commission voted unanimously to include the following package of recommendations in the June report to Congress: 1. Modify the average sales price (ASP) system in 2018 to:  Require all manufacturers of products paid under Part B to submit ASP data, and impose penalties for failure to report; Reduce wholesale acquisition coast (WAC) based payments to WAC +3%; Require manufactures to pay Medicare a rebate when the ASP for their product exceeds the inflation benchmark, and tie the beneficiary cost-sharing and the ASP add-on to the inflation adjusted ASP; and Require the Secretary to use a common billing code to pay for a reference biologic and its biosimilars. 2. No later than 2022, create and phase in a voluntary Drug Value Program (DVP) that would have the following elements: Medicare contracts with a small number of private venders to negotiate prices for Part B products;  Providers purchase all DVP products at the price negotiated by their selected DVP vendor; Medicare pays providers the DVP-negotiated price and pays vendors an administrative fee, with opportunities for shared-savings; Beneficiaries pay lower cost-sharing; Medicare payments under the DVP would not exceed 100 percent of ASP; and  Vendors use tools including a formulary and, for products meeting selected criteria, binding arbitration. 3. Upon implementation of the DVP or no later than 2022, reduce the ASP add-on under the ASP system. If the following recommendations are implemented, MedPAC projects that program spending would have an estimated decrease of $250 million over one year and $1 billion over five years relative to current law. Several Commissioners, while ultimately voting to approve the overall package of recommendations, voiced concern over the binding arbitration component of the recommendation. Additional information regarding ASP inflation rebate, timing of the ASP add-on reduction, design options for binding arbitration under the DVP, among other items, will be included in the Chapter.

April 2017
Implementing a Unified PAC Payment System

Under a unified PAC PPS, payments would be based on patient characteristics; MedPAC believes this design feature would decrease incentives to treat patients with certain conditions over others. Responding to Commissioner inquiries from the March 2017 meeting, MedPAC staff investigated lowering the aggregate payments reduction by 5%, versus the 3% proposed in March. The staff found that even with a 5% reduction, the average payments would be 9% higher than the average cost of stays. MedPAC staff noted that the Centers for Medicare and Medicaid Services (CMS) could implement a PAC PPS as soon as 2021, but it is unlikely that a PAC PPS would be proposed before 2024. Commissioner Warner Thomas stated that he supported a quick implementation, but also suggested including the ability to pilot these models between now and 2021. The Commission voted unanimously to include the following recommendations in the June report to Congress: 1. Implement a PAC PPS beginning in 2021 with a three year transition; 2. Lower aggregate payments by 5%, absent prior reductions to the level of payments; 3. Concurrently, begin to align setting-specific regulatory requirements; and 4. Periodically revise and rebase payments, as needed, to keep payments aligned with the cost of care.

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