Insights^

The 2024 Reports from the Medicare Trustees and the Social Security Trustees are here.  Let’s dig in to learn where things stand on the perennial question of insolvency and their recommendations. 

The 2024 Medicare Trustees Report showed a positive trend for the Hospital trust fund (Part A), with 5 more years of solvency added.  This moves out the point at which all benefits could be paid at current levels from 2031 to 2036. 

The improvement was due to lower than expected Medicare trust fund expenditures for 2023 (especially for inpatient hospital and home health services), higher payroll tax income, and “a policy change correcting for the way medical education expenses are accounted for in Medicare Advantage rates starting in 2024.”  

In other words, they changed the way the assumptions were calculated.   

The trustees noted 3 factors related to the pandemic: 

1. Beneficiaries who died from COVID-19 were the sickest with more comorbidities.  Now, the remaining Medicare population is “healthier” as a percentage which leads to lower overall projected spending.  

1. The expiration of the waiver requiring a 3-day inpatient stay to receive SNF services. Trustees assume that the 3-day inpatient stay requirement will now remain in place, which will increase inpatient spending by 1.9 percentage points and decrease SNF spending growth by 7.5 percentage points in 2024.      

1. Lower than normal home health spending.  Due to staffing shortages in 2023, home health expenditures were still lower than expected.  But Trustees believe that demand will increase in 2024, and are projecting an increase in the home health spending growth factor by 2.9 percentage points for the next 3 years (2024-2026).   

By contrast, the Social Security Trustees noted a neutral trend from last year.  For Social Security, insolvency is coming in 9 years (CY 2033), which is the same projection as last year.  Funding was projected to decrease due to declining fertility rates but was projected to increase due to increased labor productivity.  So, the two factors equalized the other out.   

Medicare and Social Security Trustees said that Congress and the White House need to act now to be able to create solutions that can be more flexible and gradual.    If the can continues to be kicked down the road, cuts will have to be harsher and more immediate.  Trustees also recommended that Congress and the White House work together to come up with solutions.   

So, is this the year that Congress and the administration address Medicare and Social Security insolvency?  It looks unlikely.  When Speaker Johnson (R-LA) took leadership in January, he announced he would create a bipartisan fiscal commission to address the national debt and necessity of spending cuts.  But news agencies have already reported the Commission is DOA.  Sponsors of a bill to create such a commission in both the House and Senate have said that they have no support to move the bills forward.  A commission faces bipartisan disapproval, with Democrats concerned a commission would cut benefits like Social Security and Medicare and Republicans concerned a commission would be a vehicle for tax increases.    

So, the deadline towards insolvency once again looms, without a path to address it…. 
 

Medicare beneficiaries are often uninformed on prices, supplemental benefits, and the use of prior authorization in their Medicare Advantage (MA) plans.  In a landscape where healthcare decisions can feel opaque, transparency could empower patients in navigating the Medicare Advantage program. New initiatives and regulations by HHS and CMS are working to enhance transparency within Medicare Advantage, creating more informed decision-making and ensuring equitable access.

The Administration’s goal is to provide tools so beneficiaries can make informed choices about their healthcare coverage. By bolstering transparency within the Medicare Advantage program, the Administration aims to address longstanding challenges and equip beneficiaries with the information needed to select plans that align with their healthcare needs and preferences.

At the core of this initiative lies a multifaceted approach designed to enhance transparency across various dimensions of the Medicare Advantage program. Key components of the Administration’s efforts include:

Enhanced Access to Plan Information

The initiative seeks to enable beneficiaries to compare coverage options with greater ease and clarity. By centralizing plan data and making it readily accessible to beneficiaries, the Administration aims to facilitate informed decision-making and empower individuals to select plans that best meet their healthcare needs.

Improved Cost Transparency

By providing beneficiaries with clear and comprehensive information regarding plan costs, including premiums, deductibles, and copayments, the initiative aims to empower individuals to assess the financial implications of their healthcare choices and make informed decisions aligned with their budgetary constraints.

Increased Quality Reporting

Quality of care is a fundamental consideration for Medicare Advantage beneficiaries seeking to maximize the value of their healthcare coverage. By changing the way plans are rated and creating more transparency around key quality metrics, such as clinical outcomes and patient satisfaction ratings, the initiative aims to empower beneficiaries to make informed assessments of plan performance and quality of care delivery.

Accessible Tools and Resources

The Administration’s initiative prioritizes the development of accessible online tools and resources designed to support informed decision-making. From online comparison tools to personalized assistance through the Medicare Plan Finder, these resources are intended to empower beneficiaries with the information and support necessary to navigate the complexities of the Medicare Advantage program effectively.

Conclusion

The Administration’s push for increased transparency within the Medicare Advantage should foster transparency across various dimensions of the program.  CMS is laying the groundwork for a more equitable, accessible, and patient-centered healthcare system that prioritizes the needs and preferences of Medicare Advantage beneficiaries. Major health plans and coalitions are objecting to many aspects of these proposals, so we will need to continue watching to see which of these proposals actually become finalized.

If you would like to connect with Chamber Hill Strategies, please do not hesitate to contact us.

A recent post came out saying, “How Out Of Touch is MedPAC? – They Are Recommending ONLY a 1.25% Payment Rate Increase for Physicians for 2024” – and it made us think, maybe some folks don’t know how MedPAC works?  We wanted to give a little inside baseball to explain the MedPAC Medicare payment update process.  

Congress created the Medicare Payment Advisory Commission (MedPAC) to recommend Medicare payment updates and strategies to improve the Medicare program. MedPAC is mandated in their charter to submit recommendations on annual payment updates for several fee-for-service payment sectors within Medicare. As MedPAC examines each sector, they must look at that sector only within the context of Medicare; that is to say, they cannot look at nursing home payments from other payers (i.e., private plans, Medicaid, etc.). While MedPAC commissioners examine the financial strength of the overall industry, payment recommendations must also fit within the confines of current law. The Commission is also required to look at the sustainability of the Medicare program – so any payment recommendations must reflect the goal of keeping the Medicare program solvent over time.  

As an example of how this works – let’s look at physician payments.  Reviewing MedPAC’s December 2023 draft physician payment recommendation, MedPAC recommended that physician payments be updated by 50% of the projected increase in the Medicare Economic Index (MEI) in 2025. The MEI is projected to be approximately 2.6% in 2025, so MedPAC’s recommendation is for an update of 1.3% in 2025. Commissioners also recommended a non-budget neutral add-on payment tied to the number of low-income beneficiaries that providers see, as the Commission previously recommended in March 2023. The add-on payment would amount to 15% for primary care physicians and 5% for others.  

Many have commented that the recommended update does not keep up with inflation and that physicians will leave the program based on the lack of updates. So, why didn’t MedPAC recommend a higher update? Because the Commission must work within the confines of data measurements they use as indicators as mandated by Congress – beneficiary access, quality of care, Medicare payment rates, and provider costs. When looking at those indicators for next year’s payment rates, beneficiary access remains at the same levels as past years, quality of care is remaining steady (as much as it could be measured), and private plan payment rates were 136% of fee-for-service rates (which is consistent over time – private plans have been paying more for years).  The only indicator that looked negative within this framework was the Medicare Economic Index (which is a measure of clinicians input costs) – the MEI was projected to be 2.6% in 2025, higher than the pre-COVID rates of 1-2%. So, given those sets of data, MedPAC set as high a rate as they could given those confines. 

It is important to note that the Commission stated its concerns multiple times about the accuracy of the physician fee schedule, the underpricing of primary care services relative to other services, and the impact of these problems on the pipeline of future primary care physicians.  Commissioners in the December 2023 meeting expressed great concern about the small physician payment update, specifically about the flat fee schedule update and lack of an inflation adjustor.  In addition, over the past 10 years, MedPAC voted on numerous recommendations to change the physician payment system.  

Punchline:  Until Congress fixes the physician payment system, the physician payment hole will continue to get deeper.  

So, is MedPAC out of touch? No, not given the constraints under which they work.