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MedPAC Recommendations on GME, APMs

In its June report to Congress, the Medicare Payment Advisory Commission (MedPAC) issues recommendations on several issues of importance to essential hospitals, including payment for Part B drugs, alternative payment models (APMs), indirect medical education (IME) payments, and Medicare coverage of vaccines.

The report also touches on Medicare Advantage benchmark policy, access to care in rural areas, clinical laboratory fee schedule payment rates, private equity and Medicare, and the relationship between clinical services and other Medicare services.

Alternative Payment Models

MedPAC reviewed the current state of APMs operated by the Centers for Medicare & Medicaid Services (CMS), noting the agency currently oversees 12 APMs with 25 tracks that have distinct payment options and risk arrangements. In the report, MedPAC recognizes that while APMs have the potential to reduce Medicare spending and improve quality of care, some characteristics of certain APMs increase spending and the number of APMs can be overly complex for providers to navigate.

To improve coordination, MedPAC recommends the health and human services (HHS) secretary implement a more harmonized portfolio of fewer APMs that work together to promote the objectives of reduced spending and improved quality. MedPAC provides three possible options for HHS to implement this recommendation:

  • a single population-based model with different tracks by provider type or beneficiary population;
  • a geographic approach, which could test different models in different parts of the country; and
  • a state-based approach that would incentivize states to operate state-specific models, similar to models adopted by Virginia and Maryland.

Revising IME Payments

Medicare pays for graduate medical education (GME) through two payment streams: direct GME and indirect medical education (IME), with IME payments intended to cover the higher costs teaching hospitals incur while providing inpatient care. MedPAC reviewed Medicare’s payment methodology for IME payments and determined it precludes reimbursement for residents trained in the outpatient setting and is not sufficiently tied to the actual costs of training residents (not “empirically justified”).

To address these perceived issues, MedPAC recommends Congress require CMS to transition to empirically justified IME adjustments to both inpatient and outpatient payments. Under such a policy, IME payments would be:

  • made for both inpatient and outpatient services;
  • based on a hospital’s ratio of residents to patients (instead of residents to beds); and
  • maintained at current levels.

Separately Payable Drugs

MedPAC also recommends changes to Medicare’s payment for Part B drugs under the Outpatient Prospective Payment System (OPPS). Currently, Medicare either packages payment for drugs when they are ancillary to a primary service (that is, they are not the primary reason for the visit) or pays separately for the drugs in certain cases. Separately payable drugs are split into two categories: pass–through drugs, which are new to the market and lack an established payment rate, and separately payable non-pass through drugs, which are separately payable because they are the primary reason for an outpatient visit.

MedPAC recommends Congress direct CMS to modify the pass-through policy so it only applies to drugs that are ancillary to a service and clinically superior to other comparable packaged drugs. This would transition pass-through drugs that are the primary reason for a visit to the separately payable non–pass through category.

Second, MedPAC recommends CMS clarify that separate payment for non-pass through drugs be made only for drugs that are the reason for a visit and meet a defined cost threshold. MedPAC cites the payment rate difference for 340B Drug Pricing Program hospitals under the OPPS for pass-through drugs and separately payable non–pass through drugs as a reason to transition many pass-through drugs to the non-pass through category. 340B hospitals receive a lower reimbursement rate for the latter category of drugs, while pass-through drugs are not subject to the lower payment rate.

Vaccine Coverage and Payment

MedPAC also recommends that Medicare pay for all preventive vaccines under Part B instead of Part D, and that the payment rate for these preventive vaccines is set at 103 percent of wholesale acquisition cost (WAC), instead of the current Part B vaccine payment rate of 95 percent of average wholesale price.

Currently, Medicare pays for some preventive vaccines, including COVID-19 vaccines, under Part B and pays for the rest under Part D. MedPAC cites the lack of beneficiary cost-sharing for Part B preventive vaccines, as well as the ability to administer Part B drugs in a wider variety of settings (as opposed to Part D drugs, which are primarily administered in pharmacies), as reasons for shifting drug coverage to Part B. Doing so could encourage vaccine uptake among Medicare beneficiaries.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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