Center Testimony on “The Current Status of the Medicare Program”

UNITED STATES HOUSE OF REPRESENTATIVES
COMMITTEE ON WAYS & MEANS, SUBCOMMITTEE ON HEALTH
HEARING ON "THE CURRENT STATUS OF THE MEDICARE PROGRAM, PAYMENT SYSTEMS, AND EXTENDERS”

WRITTEN TESTIMONY SUBMITTED BY
CENTER FOR MEDICARE ADVOCACY

May 18, 2017

Introduction

The Center for Medicare Advocacy, founded in 1986, is a national, non-partisan education and advocacy organization that works to ensure fair access to Medicare and to quality health care.  At the Center, we educate older people and people with disabilities to help secure fair access to necessary health care services.  We draw upon our direct experience with thousands of individuals to educate policy-makers about how their decisions affect the lives of real people. Additionally, we provide legal representation to ensure that people receive the health care benefits to which they are legally entitled and the quality health care they need.

We appreciate the opportunity to provide these comments, which are organized according to the title of the Committee hearing: the current status of the Medicare program; payment systems; and extenders.

Current Status of the Medicare Program

Any discussion about the current status of the Medicare program should start with those it was created to serve – over 56 million people who now rely on the Medicare program for basic health and economic security.  While per beneficiary spending growth has slowed significantly in recent years, out-of-pocket costs for beneficiaries continue to rise, making it difficult for many individuals to maintain access to affordable care.

Unfortunately, when looking at the Medicare program’s finances, many policymakers push for changes in Medicare’s structure, design, or other changes that would pass additional costs on to beneficiaries, rather than finding savings elsewhere in the program, or seeking additional revenues to further solidify program solvency.  Beneficiaries cannot afford to pay more; before passing additional costs on to them, Congress must look at achieving programmatic savings in areas ripe for redress, including Medicare Advantage payment and prescription drug costs.  In addition, Congress must not pursue health reform policies that would negatively impact beneficiaries, such as the recently House-passed American Health Care Act (AHCA), or wholesale changes to Medicare, such as converting the program into premium support/vouchers.

Current Expenses of Medicare Beneficiaries  

Before advancing proposals that would increase what Medicare beneficiaries pay for their health care, it is necessary to recognize the current fiscal challenges faced by this population. The vast majority of Medicare beneficiaries have low or moderate incomes. In 2016, half of all Medicare beneficiaries had incomes below $26,200; one quarter of beneficiaries had incomes below $15,250.  Similarly, in 2016, half of all beneficiaries had savings below $74,450, and 25 percent had savings below $14,550 (including those with no savings or who were in debt).[1]  Looking to the future, the prospective picture of Medicare beneficiaries’ financial outlook does not improve too much.  According to the Kaiser Family Foundation, per capita income among Medicare beneficiaries will be “moderately higher” in 2035 than it is now; however, “much of the growth is projected to be in the upper incomes.”[2]

Relatively lower income and resources among Medicare beneficiaries are exacerbated by relatively high spending on health care.  As noted recently by the Commonwealth Fund, more than one-fourth of all Medicare beneficiaries spend 20 percent or more of their incomes on premiums and medical care.  Overall, beneficiaries spent an average of $3,024 per year on out-of-pocket costs.  High-need beneficiaries – those with multiple chronic conditions or functional limitations – are at “significant financial risk” as their out-of-pocket spending increases steeply (for example, beneficiaries with serious cognitive and/or physical impairments spend, on average, more than three time as much out-of-pocket as those without chronic disease or disability).[3]

We agree with the Commonwealth Fund report’s conclusion that “any proposals to change Medicare must proceed with caution.  Already-high financial burdens mean any changes to the program must be assessed to safeguard beneficiaries’ access and affordability.”[4]

Medicare Advantage Payment

We concur with Chairman Tiberi’s statement in the announcement to this hearing that with respect to Medicare “[w]e need to ensure each dollar spent and each program are benefitting the people they are intended to serve.”  In this vein, we urge both Congress and the Administration to direct more attention to protecting public funds by ensuring that payment to Medicare Advantage (MA) plans is accurate and equitable.  MA “upcoding” – when an MA plan inappropriately reports an enrollee as being more sick than he or she actually is in order to obtain a higher risk-adjusted payment from the Medicare program – remains an ongoing problem that policymakers must address. 

Various studies have attempted to document the scale of inappropriate MA coding intensity, or upcoding, and the resultant overcharges by MA plans.  An investigation by the Center for Public Integrity, for example, found that Medicare paid MA plans nearly $70 billion in “improper” payments, mostly from upcoding, from 2008 through 2013 alone.[5]  More recently, a study published in Health Affairs found that coding intensity practices could result in overpayments to MA plans totaling $200 billion over the next decade.[6]

In April 2016, the General Accounting Office (GAO) issued a report entitled “Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments.”[7]  The report states that CMS estimates that about 9.5% of its annual payments to Medicare Advantage (MA) organizations were improper – totaling $14.1 billion in 2013 alone – “primarily stemming from unsupported diagnoses submitted by MA organizations.”  The report also highlights the significant flaws in CMS’ current efforts to address and recoup such payments, including execution of the Risk Adjustment Data Validation (RADV) audit process.

According to MedPAC, in its March 2017 report to Congress, “after accounting for all coding adjustments, payments to MA plans were about 4 percent higher than Medicare payments would have been if MA enrollees had been treated in [traditional] Medicare.”[8] 

We agree with the Acting U.S. Attorney for the Central District of California, who, in a press release announcing that the department is intervening in another False Claims Act lawsuit relating to inappropriate MA billing, stated that “[t]he primary goal of publicly funded healthcare programs like Medicare is to provide high-quality medical services to those in need – not to line the pockets of participants willing to abuse the system.”[9]

The Center is deeply concerned by these ongoing improper payments to MA plans and the lack of progress in recouping previous payments and deterring future misconduct.  In order to ensure that the traditional Medicare program is not further disadvantaged by inappropriate overpayments to MA plans, Congress and CMS must employ more rigorous oversight of MA payment.

Prescription Drug Costs

Another area where significant programmatic savings can be achieved is addressing the cost of prescription drugs.  In short, drugs cost too much, and the federal government – including Medicare – can do a better job of keeping costs down. 

Drug costs paid both by the Medicare program and out-of-pocket by beneficiaries has grown significantly in recent years.  According to the Kaiser Family Foundation, average per capita costs in Medicare Part D are projected to increase annually by 5.8 percent between 2015 and 2025 – more rapidly in the next decade than they did in the first decade of Part D.[10]  Moreover, Medicare per beneficiary spending is projected to grow more rapidly for the Part D drug benefit than for other Medicare-covered services over the next decade.[11]  The expected increase in Part D spending will significantly increase beneficiary out-of-pocket spending in premiums and deductibles over the coming decade (the annual Part D premium of $487 in 2017 is projected to increase to $846 in 2015; similarly, the annual deductible will correspondingly rise from $400 to $645).[12]

If it chose to act, Congress would have multiple options for addressing the high-cost of prescription drugs in the Medicare program and beyond, including reinstating Medicaid-level rebates for low-income Medicare beneficiaries,[13] removing the prohibition on the Secretary of Health & Human Services from negotiating drug prices, and other policies as articulated in a number of bills introduced in the 114^th or 115^th Congress, such as the FAIR Drug Pricing Act, PRICED Act, CREATES Act, Prescription Drug and Health Improvement Act, the Prescription Drug Affordability Act and the Preserve Access to Affordable Generics Act, and the Improving Access to Affordable Prescription Drugs Act.  Lowering the cost of prescription drugs through government action would not only save the Medicare program money, the prospect of doing so enjoys broad bipartisan support.^[14]

Health Care Reform

As noted above, when looking at the Medicare program’s finances, many policymakers push for changes in Medicare’s structure, design or other changes that would pass additional costs on to beneficiaries rather than finding savings elsewhere in the program or seeking additional revenues to further solidify program solvency.  Primary among such proposals are efforts to partially or wholly convert the Medicare program into a premium support, or voucher, model. 

While there is currently no detailed premium support plan under debate, and many questions remain unanswered about such a proposal, we are concerned that, given that one of the primary goals of premium support would be to reduce federal spending, beneficiaries would feel the brunt of any reductions in coverage and increases in out-of-pocket costs. Even grandfathering in current Medicare beneficiaries from a new voucher system could result in harm to them.  As noted in a recent Health Affairs blog,  “if a new premium support system for Medicare separates younger from older seniors, it runs the risk of rapidly rising premiums and health care costs for today’s seniors, possibly culminating in a ‘death spiral’ for the current Medicare program.”[15]

Efforts at health care reform, even when Medicare is not the stated primary subject, can nonetheless have negative impacts on the Medicare program.  The American Health Care Act (AHCA), recently passed by the House, is no exception.  Despite the oft-noted concern among some policymakers about Medicare’s financial footing, one of the effects of AHCA’s proposed tax cuts for higher income earners would be to accelerate the projected insolvency date of the Medicare Part A Trust Fund by at least two years,[16] from 2028 to 2026. Further, the repeal of a tax on pharmaceutical manufacturers would increase Part B premium costs for Medicare beneficiaries.[17]

Far more devastating, however, would be AHCA’s projected $839 billion in cuts to Medicaid and the proposed caps in funding.  The one in five people with Medicare who rely on Medicaid (dual eligibles) to cover Medicare costs and services that are not covered by Medicare, such as long-term home care and nursing home services,[18] would be harmed.  These drastic cuts to Medicaid would likely force states to make difficult choices about eligibility and coverage, putting older adults on Medicaid at tremendous risk of reduced access to both coverage and care.

In sum, we urge the Committee and Congress to proceed with caution when weighing health care reform proposals that will make things more difficult for beneficiaries.  Both premium support, and enactment of AHCA, would be steps in the wrong direction.

Payment Systems

While we recognize that payment systems within Medicare must evolve in order to incentivize appropriate care, we urge caution with respect to the potential impact of some new payment models on Medicare beneficiaries.  We recommend that new payment systems be tested in demonstration form before being adopted wholesale, and that any adoption be based on evidence that better care actually results from changes in payment models.  We note that there is some evidence that some of the most frequently discussed payment system reforms, such as value-based purchasing, bundled payments, and site-neutral payments between skilled nursing facilities and inpatient rehabilitation hospitals, have had unintended negative consequences for beneficiary care and access to services.[19]

In order to achieve the often-articulated policy goal of delivering high quality care, improving care transitions, and producing stronger patient outcomes, reforming Medicare coverage for all beneficiaries, and in particular those with chronic conditions, must place primary focus on the beneficiary perspective.  Shifting additional costs onto beneficiaries, as some Medicare reform proposals would do, would slow, rather than foster, these important goals.  Further, before private Medicare Advantage plans are looked to as a model of care coordination of those with chronic conditions, and such plans seek increased payment and altered quality measurement based upon enrollment of such individuals, greater scrutiny of MA plan performance is necessary.  In addition, quality of care across settings must not only be measured, but enforced.

Finally, we urge Congress – through its own actions and in its oversight of the Medicare program – to ensure that either payment models/demonstrations or long-standing benefit and coverage rules are not designed or implemented in a manner that incentivizes skimping on medically necessary care, particularly with respect to individuals with chronic conditions.  For example, the Center has increasingly heard from people unable to access Medicare-covered home health care, or the appropriate amount of care, despite meeting Medicare coverage criteria.[20]  We believe that this access issue is being fueled by reigning payment mechanisms, systemic pressures, and misinformation about Medicare home health coverage.  Further, we are concerned that payment changes will exacerbate these access to care issues, particularly for those with chronic conditions.[21]

Extenders

We limit our comments here to two Medicare-related extenders that, pursuant to the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), will have to be addressed by the end of this year: extension of the Medicare therapy cap exceptions process and funding for low-income outreach and assistance.   

Therapy Caps

Medicare coverage of outpatient therapy is currently capped on an annual basis at $1,980 for physical therapy (PT) and speech-language pathology (SLP) services combined, and $1,980 for occupational therapy (OT) services.  These arbitrary caps are aimed at federal cost-savings rather than providing clinically appropriate services, and disproportionately affect the most vulnerable Medicare beneficiaries who require ongoing therapy services.  As such, these caps should be repealed.  While we urge full repeal of these caps, we understand that, in the past, the Senate Finance Committee drafted “replace” language that would replace the therapy caps with a form of prior authorization (PA).  In general, we are concerned that PA often serves as a barrier to necessary care; more specifically, we are concerned that some of the language of the legislative replacement proposal would give the Secretary too much discretion to target certain medical conditions and inappropriately deny care.  Should Congress entertain therapy cap replacement language again, we ask that this language be revisited.

At a minimum, the therapy cap exceptions process should be permanently extended and revised.  As you are aware, Section 202 of MACRA extended the therapy caps exceptions process through December 31, 2017 and modified the requirement for manual medical review for services over the $3,700 therapy thresholds.  Because there is no longer a larger Sustainable Growth Rate (SGR) vehicle through which to regularly address this policy, absent repeal of the cap, the exceptions process should be permanently extended.  Further, the review process for services that exceed $3,700 should be revised. In our experience, the manual review process imposed at $3,700 is extremely burdensome for providers.  As a consequence, it creates a chilling effect on the willingness of many providers to use the exceptions process. This results in beneficiaries with chronic conditions who are most in need of ongoing therapy, foregoing therapy services until the beginning of the next calendar year.  The court approved settlement in Jimmo v. Sebelius[22] confirms the right of Medicare beneficiaries to therapy to maintain function, slow deterioration and prevent avoidable decline. Limiting Medicare reimbursement for therapy through arbitrary caps and a complicated exceptions process undermines beneficiaries’ Jimmo-guaranteed ability to receive medically necessary maintenance therapy services.

Assistance for Medicare Beneficiaries

Medicare is a complex program with many options, variables and choices that have to be made about how to access both coverage and care.  Many programs available for lower-income individuals remain underutilized.  Thus, we support permanently extending funding for critical community-based resources, including outreach and enrollment assistance to low-income Medicare beneficiaries and Aging and Disability Resource Centers (ADRCs), the “no-wrong door” network of long-term care services and supports information and referral services.

Although not typically part of the previous Medicare extenders packages, in same vein, we urge Congress to retain and expand funding for the State Health Insurance and Assistance Programs (SHIPs).  SHIPs are at the forefront of providing accurate, timely and unbiased information to people with Medicare.  The scope of SHIP counseling encompasses a broad range of areas, including coverage options, fraud and abuse issues, billing problems, appeal rights, and enrollment in low-income assistance programs. As such, SHIPs offer increasingly critical services that cannot be supplied by 1-800 MEDICARE or through web-based and written materials.  

Rather than cut funding for the SHIP network or eliminate funding altogether, as recent budget proposals would do, we urge greater investment in this vital, cost-effective program.

Conclusion

We appreciate the opportunity to submit this testimony to the Committee.

David A. Lipschutz
Senior Policy Attorney
Center for Medicare Advocacy
1025 Connecticut Ave NW, Suite 709
Washington, DC 20036
(202) 293-5760