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Monday, June 17, 2013

Proposed Medicare Payment Reductions Will Impact Workers' Compensation Costs

A government Medicare advisory panel reported on Friday that sweeping changes should be implemented to reduce increasing medical costs, including higher costs associated with hospital purchased physician practices. The impact of those proposed adjustments will significantly impact the national workers' compensation systems because of both direct and indirect links between the two programs, including medical fee schedules, and Medicare Secondary Payment reimbursements.

The Medicare Payment Advisory Commission (MedPAC)  releases its June 2013 Report to the Congress: 
Medicare and the Health Care Delivery System.

According to Commission Chair Glenn Hackbarth, “This report can inform a dialogue about future 
directions for the Medicare program, as well as about technical refinements to existing Medicare 
payment policy. Whether broad or narrow, the Commission’s work aims to balance the interests of 
Medicare beneficiaries, health care providers, and tax payers.”

Redesigning the Medicare benefit. In the report, the Commission continues its discussion of 
possible ways to redesign the Medicare benefit by focusing on the concept we refer to as competitively
determined plan contributions (CPC). Under CPC, Medicare beneficiaries could receive care through
either a private plan or traditional fee-for-service (FFS), but the premium paid by the beneficiary might
vary depending on the coverage option they choose. How much the federal government pays for a 
beneficiary’s care would be determined through a competitive process comparing the costs of available 
options for coverage. The report identifies key issues to be addressed if the Congress wishes to pursue a 
policy option like CPC. These include how benefits could be standardized for comparability, how to 
calculate the Medicare contribution, the role FFS, and the structure of subsidies for low-income 

Reducing Medicare payment differences across sites of care. Medicare’s payment rates often 
vary for similar services provided to similar patients, simply because they are provided in different sites of 
care. For example, Medicare pays 141 percent more for one type of echocardiogram when done in a
hospital outpatient department than when it is done in a freestanding physician’s office. If Medicare pays a 
higher rate for a service in one setting over another, program spending increases and beneficiaries pay 
more in cost sharing without a corresponding increase in quality of care. 

The Commission previously recommended reducing the rate Medicare pays for basic office visits from the 
payment rate in the outpatient setting to the physician office rate. Using similar criteria, this report identifies
additional services that may be eligible for equalizing or narrowing payment differences across settings. 
Bundling post-acute care services. Each year, about one-quarter of Medicare beneficiaries receive 
care following a hospitalization from a post-acute care provider, such as a skilled nursing facility, home 
health agency, or inpatient rehabilitation facility. However, nationwide the use of these services varies 
widely, for reasons not explained by differences in beneficiaries’ health status. Under traditional 
Medicare, the program pays widely varying rates for different settings and—characteristic of FFS—pays 
based on the volume of care provided, without regard to quality or resource use. 

Medicare has begun to explore the possibility of bundling services as a way to encourage providers to 
coordinate and furnish needed care more efficiently. In this report, the Commission explores the 
implications for quality and program spending for different design features of the bundles, such as the 
services included, the length of time covered by the bundle, and the method of payment.

Reducing hospital readmissions. In 2008, the Commission recommended a hospital readmissions 
reduction program to improve patient experience and reduce Medicare spending. In 2012, Medicare 
began such a program, penalizing hospitals that have high rates of Medicare beneficiaries being 
readmitted to the hospital within 30 days of discharge. The readmission penalty has given hospitals a 
strong incentive to improve care coordination across providers, and for that reason Medicare should 
continue to implement the policy. In this report, the Commission suggests further refinements to 
improve incentives for hospitals and generate program savings through reduced readmissions rather than 
higher penalties. 

Payments for hospice services. The Medicare hospice benefit provides beneficiaries an important 
option for end-of-life care. At the same time, the Commission has identified several problems in the way 
Medicare pays for hospices that may lead to inappropriate use of the benefit. The report presents 
information on the prevalence of long-stay patients and the use of hospice services among nursing home 
patients—both of which may inform policy development in the hospice payment system in the future. It 
also presents further evidence to support the Commission’s March 2009 recommendations to revise the 
hospice payment system.

Improving care for dual-eligible beneficiaries. Beneficiaries eligible for both Medicare and 
Medicaid—many of whom have complex medical and social needs—often have trouble accessing 
services and receive little care coordination, resulting in poorer health outcomes and higher spending 
relative to other beneficiaries. Programs that coordinate dual-eligible beneficiaries’ Medicare and 
Medicaid benefits have the potential to improve care for this population. In the report, the Commission 
notes that federally qualified health centers and community health centers may be uniquely positioned to 
coordinate care for dual-eligible beneficiaries because they provide primary care, behavioral health
services, and care management services, often at the same clinic site.

Mandated reports. The report includes three chapters that fulfill Congressional mandates: one on 
Medicare ambulance add-on payments, a second on geographic adjustment of fee schedule payments for 
the work effort of physicians and other health professionals, and a third on Medicare payment for 
outpatient therapy services. In each case, the Commission considers the existing policies—which are not 
permanent statutory provisions—and examines the effect of their continuation or termination on 
program spending, beneficiaries’ access to care, and the quality of care beneficiaries receive, as well as 
their potential to advance payment reform. 

The three congressionally mandated reports are described in further detail in separate fact sheets, posted 
on MedPAC’s website. The full report can be downloaded from MedPAC’s website:

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