On January 11 and 12, 2024, the Medicare Payment Advisory Commission (MedPAC) held a virtual public meeting, which included the following sessions:

• Assessing payment adequacy and updating payments: Physician and other health professional services;
• Assessing payment adequacy and updating payments: Hospital inpatient and outpatient services;
• Assessing payment adequacy and updating payments: Outpatient dialysis services; hospice services; skilled nursing facility services; and home health agency services;
• Assessing payment adequacy and updating payments: Inpatient rehabilitation facility services; and improving the accuracy of payments in the IRF prospective payment system;
• Medicare Part D: Status report;
• Ambulatory surgical centers: Status report;
• The Medicare Advantage program: Status report; and
• Standardized benefits in Medicare Advantage plans: Policy options.

The full agenda for the meeting and the presentations for the sessions are available here.

MEDPAC COMMISSIONERS UNANIMOUSLY APPROVE PHYSICIAN PAYMENT DRAFT RECOMMENDATION

MedPAC staffers briefly reviewed the payment adequacy findings discussed at the December meeting and presented on the history of recent budget neutrality cuts to the conversion factor. They found that Medicare beneficiaries maintained strong access to care. An equivalent share of physicians accepted patients with Medicare and commercial insurance, and survey measures of beneficiary access indicated equal or better satisfaction with access to care for Medicare beneficiaries than the privately insured. Quality of care was much more difficult to measure. Staffers found stable patient experience scores but high variance in rates of ambulatory care sensitive hospitalizations and emergency department visits. Regarding clinician compensation, spending per fee-for-service (FFS) beneficiary increased 2.8 percent from 2022, and median compensation for physicians and advanced practice providers grew by 9 percent and 5 percent respectively. Inflation measured via the Medicare Economic Index (MEI), however, peaked in 2022.

The commissioners then voted on the following draft recommendation:

• Increase base payment rates under the Physician Fee Schedule (PFS) in 2025 by 50 percent of the projected increase to the MEI. The MEI is currently projected to increase by 2.6 percent in 2025, so this increase to base payment rates would be 1.3 percent.
• Enact the clinician safety net recommendation included in MedPAC’s March 2023 report, which called for add-on payment of “15 percent to primary care clinicians and 5 percent to all other clinicians for physician fee schedule services provided to Medicare beneficiaries enrolled in the Part D low-income subsidy program.”

The commissioners voted unanimously to approve the draft recommendations, though Commissioner Dr. Larry Casalino noted that he would have voted no without the inclusion of the safety net payments, as he does not believe 50 percent of MEI is enough and would be perceived by physicians as unfair.

Many commissioners took issue with the language used by MedPAC staffers when analyzing access to care, as Medicare access being comparable to commercial insurance does not mean that access is acceptable. While Chair Commissioner Dr. Michael Chernew agreed that Medicare access being equivalent to commercial does not mean that there are no access issues, he pointed out that the comparison was not meant to show that access to care for Medicare members was perfect, but rather that access issues were not the result of insufficient payment, as commercial rates are significantly higher than Medicare. During discussion, multiple commissioners reiterated that access issues cannot be solved by a simple payment update.

Other topics that came up during the discussion included the trend of more physicians being employed by health plans, whether the lack of site neutral payments drove consolidation, and how the employment of physicians by hospitals, who often require that these physicians serve Medicare patients, could make it difficult to accurately use Medicare participation as an access indicator within the context of payment adequacy.

Dr. Chernew closed the meeting by stating that this recommendation is not the be-all-end-all, and that there is plenty of other work on payment reform to be done this spring, including addressing structural issues with current policy and site neutral payments.

MEDPAC COMMISSIONERS APPROVE HOSPITAL PAYMENT DRAFT RECOMMENDATION

MedPAC staffers briefly reviewed measures of access to care, quality of care, hospitals access to capital, and hospital margins, which were presented at the December meeting. The staff found that access to care remained generally positive. Quality of care indicators were mixed. In comparison to pre-pandemic data (2019) 2022 mortality and readmission rates improved but patient experience scores fell. Regarding access to capital, while hospital’s all payer operating margins fell from 8.8 percent in 2021 to 2.7 percent in 2022, the lowest level since 2008, the demand for hospital bonds remained high.  Hospitals’ Medicare FFS margins declined to record lows in 2022, at negative 11.6 percent (negative 12.7 percent when including federal coronavirus relief funds) and are expected to remain low in 2024, with projections of negative 13 percent.

The commissioners then voted on the following draft recommendation:

• For fiscal year 2025, update the 2024 base payment rates for general acute care hospitals by the amount specified in current law plus 1.5 percent.
• Redistribute disproportionate share hospital and uncompensated care payments through the Medicare Safety-Net Index (MSNI).
• Add $4 billion to the MSNI pool.
• Scale FFS MSNI payments in proportion to each hospital’s MSNI and distribute the funds through a percentage add-on to payments under the IPPS and OPPS
• Pay commensurate MSNI amounts for services furnished to Medicare Advantage (MA) enrollees directly to hospitals and exclude them from MA benchmarks.

The staffers estimated that the combined impact of the payment update recommendation and MSNI recommendation would be roughly 2.8 percent above current law updates and would cost between $5 and $10 billion per year.

The commissioners were overwhelmingly in favor of the recommendation, with no commissioners voting against and only two commissioners abstaining – Commissioner Dr. Brian Miller, who, while not averse to raising rates, would not vote for a recommendation that did not separate the OPPS and IPPS, and Commissioner Kenny Kan, who did not present a reason for his abstention. Dr. Miller also called for a specific payment update for rural hospitals, citing the unique challenges they face, and questioned whether the impact of general updates benefited hospital workers and helped solve burnout across the workforce. This last point was disputed by Commissioner Gregory Poulsen, who claimed that hospital staff payment increases over the last couple years have outpaced both CPI and the recommended update.

Multiple commissioners highlighted the importance of the safety net component of the recommendation, citing its impact on rural hospitals, and the fear that, without the safety net component, the recommendation would simply result in wealthy hospitals getting wealthier while poor hospitals continued to struggle.

COMMISSION VOTES ON PAYMENT RECOMMENDATIONS FOR OUTPATIENT DIALYSIS SERVICES, HOSPICE SERVICES, SKILLED NURSING FACILITY SERVICES, AND HOME HEALTH AGENCY SERVICES

Outpatient Dialysis Services

MedPAC briefly reviewed payment adequacy indicators for these services. Outpatient dialysis payment adequacy indicators show that there was a steady capacity in 2022. The FFS Medicare marginal profit was 18 percent. In 2022, there was a noticeable increase in use of home dialysis, but emergency visits, hospital admissions and readmissions remained steady for FFS beneficiaries. The all-payer margin for 2022 was 14 percent and the 2022 FFS Medicare margin was -1.1 percent; however, the predicted margin for 2024 is 0 percent.

Given this information, commissioners unanimously voted in favor of the following recommendation for dialysis facility services: for calendar year 2025, the Congress should update the 2024 Medicare end-stage renal disease prospective payment system base rate by the amount determined under current law.

MedPAC expects this recommendation to have no effect on spending relative to current law, and there are no expected adverse impacts on access to care as providers should continue to be willing and able to treat beneficiaries.

Commissioners noted differences between MA and FFS patients on dialysis and suggested merging some of the data together to gain deeper insight. Additionally, they highlighted beneficiary movement to MA and possible complications with guaranteed issue.

Hospice Services

MedPAC briefly reviewed payment adequacy indicators for these services. The overall hospice payment adequacy indicators show an increase in provider supply, length of stay, and people using hospice. In 2021 there was an FFS Medicare marginal profit of 17 percent. Regarding quality of care, the Consumer Assessment of Healthcare Providers and Systems (CAHPS) scores were stable, as were the visits at the end of life for 2022. The hospice sector continues to be viewed favorably by investors and there is a continued entry of for-profit providers. The 2021 FFs Medicare margin was 13.3 percent, and the predicted 2024 margin is 9 percent.

Given this information, commissioners unanimously voted in favor of the following recommendation for dialysis facility services: for fiscal year 2025, the Congress should eliminate the update to the 2024 Medicare hospice base payment rates.

MedPAC expects that relative to current law, spending would decrease by $250-$750 million over one year and between $1-5 billion over five years. For beneficiaries and providers there are not expected adverse impacts on access to care and providers should continue to be willing and able to treat beneficiaries.

Commissioners also discussed issues in the hospice sector such as the qualifications of non-hospice services and payments for them, as well as making sure to cater to the specific needs of the populations using hospice.

Skilled Nursing Facility Services

MedPAC briefly reviewed payment adequacy indicators for these services. Payment adequacy metrics for skilled nursing facilities (SNFs) show that there was a slight decrease in supply but an increase in volume and occupancy, which highlights the limitations of not having enough staffing. The 2022 Medicare FFS marginal profit was 27 percent. There was also a small decline in the facility rate of discharge to the community as well as a decline in total nurse and RN staffing. Despite the declines, there is continued investor interest in the sector with a record high price per bed. In 2022 the all-payer margin was -1.4 percent, the FFS Medicare margin was 18.4 percent, and the 2024 predicted FFS Medicare margin is 16 percent.

Given this information, commissioners unanimously voted in favor of the following draft recommendation, except for one abstention: for fiscal year 2025, the Congress should reduce the 2024 Medicare base payment rates for skilled nursing facilities by 3 percent.

MedPAC expects that relative to current law, spending would decrease between $2-5 billion in one year and between $10-25 billion over five years. There are no expected adverse impacts on access to care, and providers should continue to be willing and able to treat beneficiaries.

Commissioners expressed concerns with low employment rates and how that could be a barrier to accessing care. Additionally, they discussed how length of stay has decreased as a result of having too many patients and not enough caregivers. A few commissioners noted that there may be a new law that would make their recommendation obsolete, but Chair Commissioner Dr. Michael Chernew reminded everyone that the recommendations were being made under current law and reflect the information had at the time.

Home Health Care Services

MedPAC briefly reviewed payment adequacy indicators for these services. Beneficiaries have adequate access to care as 98 percent of beneficiaries live in a zip code that has two or more home health agencies (HHAs), however, the total volume has decreased. The beneficiaries’ risk-adjusted discharge to community rate declined but still remained high, and patient experience measures remained high and stable. The 2022 all-payer margin was 7.9 percent and the FFS Medicare margin in 2022 was 22.2 percent, while the predicted FFS Medicare margin for 2024 is 18 percent.

Given this information, commissioners unanimously voted in favor of the following recommendation: for calendar year 2025, the Congress should reduce the 2024 Medicare base payment rate for home health agencies by 7 percent.

MedPAC expects that relative to current law, spending would decrease by between $750 million to $2 billion in one year, and between $5-10 billion over five years. There are no expected adverse impacts on access to care as providers should continue to be willing and able to treat beneficiaries.

The commissioners expressed concerns about the decline in the number of visits taking place, noting that efficient care is important but should not be at the cost of beneficiaries getting the care they need.

COMMISSION UNANIMOUSLY APPROVES PAYMENT RECOMMENDATION FOR INPATIENT REHABILITATION SERVICES

Currently, IRF use and spending and payment adequacy indicators show that access to care capacity is adequate with a stable occupancy rate of 68 percent. For quality of care the discharge to community rate improved to reach 67.3 percent and the rate of potentially preventable readmissions was 8.6 percent. The projected Medicare margin for 2024 is 14 percent which is higher than the 2022 margin. Given these factors, commissioners unanimously voted in favor of the following recommendation: for fiscal year 2025, the Congress should reduce the 2024 Medicare base payment rate for inpatient rehabilitation facilities by 5 percent.

MedPAC expects this recommendation will lead to a decrease in spending of $750 million to $2 billion in one year and between $5-$10 billion over a five-year period. No adverse effects on access to care are expected; however, some financial pressures on providers may increase.

In addition to the payment recommendation, commissioners also discussed improving the accuracy of payments in the IRF prospective payment system. One area to improve is differential profitability that may create incentives for admittance of certain patient case types over others. This selective admittance is seen as freestanding for-profit IRFs admitted a relatively high share of neurological patients compared to the other types of IRFs. There is a need to address the payment system because trends in profitability vary by IRF condition, with a direct relationship between the increase in severity of case-mix groups and profitability.

The proposed change to payment weighting would be to use the average-cost method over the hospital-specific relative value method (HSRV). The average-cost method uses case-mix group payment weights that are set to be proportional to costs per stay across IRFs which decreases the weight if a lower-cost IRF concentrates in a type of case. This method is currently used in the IPPS and SNF PPSs. The average-cost method is different from the HSRV method because the case-mix group weights are proportional within IRFs not across. Changing to the average-cost payment method would create a more uniform profitability by IRF condition and increase the amount of cases at smaller, hospital based IRFs.

The commissioners discussed the merits between using HSRV and average-cost payment methods, noting how HSRV made more sense when it was first implemented but average-cost method would be more appropriate now with the differences in profitability between IRFs. Multiple commissioners noted the need to ensure small rural facilities and low-cost facilities have adequate profit opportunities. Additionally, commissioners note that there are few downsides to changing to an average-cost based payment system because it will not disincentivize IRFs from taking patients while equalizing profitability across facilities.

Chair Commissioner Dr. Michael Chernew closed the session by urging commissioners to think of the bigger picture by looking at the entire process and how the scale of organizations are weighted in all payment systems, and to keep in mind weighting throughout the whole payment restructuring process.

MEDPAC REVIEWS TOPICS IMPACTING THE PART D PROGRAM, INCLUDING IMPACT OF INFLATION REDUCTION ACT CHANGES AND AVAILABILITY OF HUMIRA BIOSIMILARS

Each March, MedPAC includes a Part D status report chapter in its report to Congress. Staffers reviewed highlights from the draft chapter, including enrollment trends and plan offerings, Inflation Reduction Act (IRA) changes and other legislative and regulatory changes impacting plans, and availability of Humira biosimilars.

Part D Enrollment Trends and Plan Offerings

In 2024, there are 709 Prescription Drug Plans (PDPs), over 3,500 Medicare Advantage Part D (MA-PD) plans, and 1,300 Special Needs Plans. Enrollment continues to shift towards MA-PD plans. In 2023, 51.5 million beneficiaries were enrolled in Part D. Program spending in 2022 totaled $101.9 billion, and enrollee out-of-pocket (OOP) spending totaled $18.5 billion. Program costs increased by 7.5 percent from 2021 to 2022, and more beneficiaries reached the catastrophic phase than in 2021. Overall, beneficiaries have high program satisfaction. Access issues for beneficiaries taking high-cost drugs are likely to lessened upon the implementation of the OOP cap under IRA. In 2022, more than 482,000 enrollees filled a single prescription that was expensive enough to meet the OOP threshold, up from 33,000 enrollees in 2010.

Legislative and Regulatory Changes Impacting Plans’ Insurance Risk

A number of legislative and regulatory changes will increase plans’ insurance risk moving forward as beneficiaries experience reduced cost sharing and lower point of sale prices (POS), including the following:

• IRA provisions, including expanded coverage of insulins and vaccines (2023), a 6 percent cap on annual premium growth (2024), eliminated cost sharing in the catastrophic phase of the benefit (2024), and benefit redesign (2025).
• Regulatory changes that require all pharmacy price concessions to be applied at the POS, beginning this year.
• Postsale pharmacy price concessions have increased to over $17 billion in 2022, up from less than $500 million in 2014. A May 2022 final rule from CMS redefined “negotiated price” as the lowest possible reimbursement. In addition to reducing enrollee OOP costs and increasing plan liability, CMS expects that this change will increase Medicare spending and provide more predictable revenue for pharmacies.

Trends for Biologics and Biosimilars, Including Humira Availability

• Prices of biologics are expected to increasingly drive the growth in overall Part D prices, as they make a growing share of Part D spending. List prices of biologics grew by more than 300 percent from 2006 to 2022. MedPAC suggests that adoption of biosimilars is key to lowering biologics prices.
• In 2023, nine Humira biosimilars were launched. Products have varying list prices in comparison to Humira’s ranging from discounts of 5 percent to over 80 percent. For 2024 formulary coverage, having a lower list price did not appear to give a biosimilar product a formulary placement advantage compared to products with higher list prices.
• For 2024, most plans are continuing to cover most or all Humira products, and nearly 60 percent of all Part D enrollees are in plans with at least one Humira biosimilar product on the formulary, typically on the same cost-sharing tier as Humira.

Part D Enhance Medication Therapy Management (MTM) Model Appeared to Have No Significant Impacts on Health Outcomes and Medicare Spending

The Center for Medicare and Medicaid Innovation’s (CMMI) Part D Enhanced MTM Model, which was tested from January 1, 2017, through December 31, 2023, appeared to have no improvements in health outcomes based on medication adherence, use of potentially unsafe medication, and downstream medical expenditures. The model also did not have a statistically significant impact on Medicare Part A and Part B spending.

Commissioner Discussion

Much of the commissioner discussion centered on IRA. Commissioners recommended MedPAC examine the impacts of IRA on several areas, including on innovation; access to drugs, including for non-LIS beneficiaries who may have previously not been able to afford their drugs; drug costs; and beneficiary premiums. Commissioner Dr. Brian Miller said he hoped the Commission would broaden the chapter to include a more diverse set of views than are currently present.

In addition, multiple commissioners suggested further examining rebate structures and the issues that arise from them. Commissioners also suggested considering how Medicare Plan Finder could be better improved and assessing the impacts of workforce shortages on pharmacies. Some commissioners suggested eliminating the late enrollment penalty for Part D. While not yet publicly available, the Part D status report chapter in the March report will include information on vertical integration. Commissioner Dr. Cheryl Damberg noted that MedPAC needs to make headway on understanding vertical integration and the impacts on the marketplace.

Chair Commissioner Dr. Michael Chernew closed the session by noting that it is unlikely the Commission would make any recommendations on Part D changes at this time, as Part D is in the midst of many transitions, and MedPAC needs a sense of the impact of current changes before suggesting providing new recommendations.

MEDPAC PROVIDES STATUS REPORT ON AMBULATORY SURGICAL CENTERS, NOTING DATA LIMITATIONS MAKE IT DIFFICULT TO ASSESS PAYMENT ADEQUACY

In this session, MedPAC presented a status report on Ambulatory Surgical Center (ASC) supply, volume of services provided to fee-for-service (FFS) beneficiaries, and Medicare spending. Due to limitations from the lack of cost data, as of March 2023, MedPAC publishes a status report for ASCs rather than an update chapter. ASCs are considered standalone facilities, while hospital outpatient departments (HOPDs) are owned by and typically attached to a hospital. ASC payment rates are derived from outpatient prospective payment system (OPPS) payment rates and are the product of the relative weight and ASC conversion factor. Generally, ASCs offer lower payment rates for the same procedures than HOPDs, benefiting beneficiaries, physicians, and the Medicare Program.

In 2022, 6,088[1] ASC facilities operated under FFS Medicare, generating $6.1 billion from 6.2 million procedures and serving 3.3 million users. From 2021-2022, the number of ASCs, shares of FFS beneficiaries served, and volume per FFS beneficiary increased by 0.2 percent, 4.0 percent, and 2.8 percent, respectively. However, the number of ASCs varied widely among states, with Maryland having the highest number of ASCs per 100,000 beneficiaries, while Vermont had the lowest. Additionally, the ASC presence was much stronger in urban areas than rural areas, accounting for 93 percent. Finally, ASCs are more likely to exist in areas with low social risk factors.[2]

The rate of growth in ASCs’ FFS Medicare revenue has accelerated, mostly due to the provision of more complex surgeries in ASCs, such as implant spinal neurostimulators and knee and hip arthroplasty. However, assessing payment adequacy is challenging as ASCs do not submit cost and quality data. This restricts CMS’s ability to create accurate payment rates and a market basket for payment updates and limits the Commission’s informed assessments of ASCs’ financial standing. Concurrently, the evaluation of ASC quality relies on only three quality measures within Medicare programs. To address these issues, the Commission proposed enhancing the ASC Quality Reporting (ASCQR) Program by including measures applicable to both ASCs and HOPDs, such as claims-based outcomes, surgical-site infection rates, and specialty-specific guidelines for conditions, such as cancer screening. This comprehensive approach seeks to improve the assessment of both payment adequacy and quality in ASCs.

Since 2010, MedPAC has recommended that the Secretary of the Department of Health and Human Services (HHS) mandate ASCs to submit cost data. The Commission believes this requirement would contribute to improvements in evaluating the financial status of ASCs. While stakeholders have previously argued that submitting cost data would be overly burdensome on ASCs because they are small facilities, the Commission has noted that other small facilities such as rural health clinics, home health agencies, and hospices already adhere to similar cost reporting requirements.

Commissioners discussed their thoughts on again recommending mandatory submission of cost data by ASCs in its March 2024 Report to Congress. Overall, commissioners expressed general support for requiring ASCs to report cost data, emphasizing the potential for a more comprehensive understanding of the relative costs of identical procedures in different settings. However, concerns about administrative burdens were noted by some commissioners, while others contended that such concerns are insubstantial. Another commissioner opposed the recommendation, citing ASCs as one of the few competitive markets in healthcare delivery and emphasizing the importance of personalized care, which could be influenced by the reporting of cost data.

The Commission intends to use the feedback from this discussion to inform its recommendation in its March 2024 Report to Congress.

COMMISSION REVIEWS STATUS OF MEDICARE ADVANTAGE, NOTES CONCERNS WITH EXCESS PAYMENTS

MedPAC staffers reviewed the status of Medicare Advantage (MA), specifically examining concerns regarding quality, vertical integration, coding intensity, favorable selection, and comparison to fee-for-service (FFS) spending. MA enrollment has been steadily increasing over the past 13 years, reaching 52 percent of eligible beneficiaries enrolled in Medicare in 2023. There are several areas of concern with measuring quality in MA including using margins as the most relevant metric of financial health. When comparing MA and FFS Medicare, the main differences are related to benchmarks, intensity of MA coding (the financial incentive for MA to code more diagnoses), and favorable selection of beneficiaries into MA. MedPAC staffers also noted that MA is becoming increasingly vertically integrated.

Coding intensity is generating excess payments for MA as risk scores were about 20.1 percents higher than if MA enrollees were enrolled in FFS Medicare. The Commission suggested assessing the root causes of coding intensity, which would include removing health risk assessments from risk adjustment and using two years of both MA and FFS diagnostic data. When examining favorable selection as a cause of excess payments to plans, MedPAC found evidence of favorable selection through plan networks and prior authorization, and higher cost sharing for most services compared to Medigap which causes self-selection into or out of MA based on the intensity of care the patient needs.

The commissioners first discussed the 85 percent guardrails for the Medical Loss Ratio and how it protects against carriers from heavily profiting off these plans. However, some commissioners argued that the 85 percent MLR is not acting as it should because of the lack of clarity of what counts as part of the 85 percent. The commissioners then discussed coding intensity, including clinically appropriate coding intensity, abuse and upcoding, and fraud. The Commission noted coding is different from looking at quality and is necessary for documentation purposes. Commissioners also suggested coding intensity is not a prevalent problem with smaller non-profits but rather at larger organizations.

One commissioner noted how favorable selection may not be the cause of an increase in beneficiaries moving to MA. The commissioner suggested that MA growth from 33 percent to 51 percent shows that favorable selection may not be the direct cause for an increase in MA beneficiaries since it suggests that MA populations have been historically sicker. Another commissioner noted that not all MA plans add value equally, as one study showed that integrated health plans owned by providers statistically outperformed other MA plans on 70 of the 114 measures.

Overall, the commissioners focused their conversation on why MA is being overpaid. Movement of people to MA plans and away from FFS Medicare may be partially due to favorable selection and coding intensity, as most MA plans are not significantly better than FFS Medicare plans with supplemental Medigap coverage. Chair Commissioner Dr. Michael Chernew noted that this is a complicated topic that has been made more complicated by the exponential growth seen in the last ten years.

MAJORITY OF COMMISSIONERS FAVOR SOME STANDARDIZATION OF MEDICARE ADVANTAGE PLAN BENEFITS

Medicare Advantage (MA) plans offer a wide range of services, but there is no standardization across cost sharing for Part A and B services, supplementary benefit coverage, provider networks, prior authorization use, and drug formularies. The range of offerings across the market, paired with the growth in the number of plans, makes it difficult to compare and select coverage options. To improve plan comparison, the Commission is interested in standardizing coverage of supplemental dental, vision, and hearing benefits as well as cost sharing for Part A and B services. MedPAC staffers provided three policy options for discussion, grounded in MedPAC’s potential framework for standardization. This framework’s common features include: 1) standardized benefits that would only be used in convention plans and excluded employer and special needs plans, 2) Part A & B cost sharing and supplemental dental, vision, and hearing benefits standardization, 3) insurers could offers plans with identical benefits but different types of provider networks, and 4) standards would be set through regulation to provide flexibility to periodically revisit and adjust, as needed.

MedPAC’s suggested policy options include:

• Option 1: An option that places no limit on the number of plans an insurer can offer, as permitted now. Plans would have standardized Part A & B cost sharing and dental, vision, and hearing benefits. Multiple plans could be offered with the same cost sharing and network type but could differ in other regards.
• Option 2: An option that places a limit of one plan per combination of Part A & B cost-sharing package and network type. The maximum number of plans would vary. A similar approach has been used to standardize some Exchange plans.
• Option 3: An option where an insurer could offer up to three plans in a county and decide their own cost-sharing packages and network types for each plan. A similar approach has been used to limit standalone Prescription Drug Plan (PDP) offerings.

Commissioners agreed that the current system creates a high burden for beneficiaries, potentially leading to suboptimal choices. However, it is unclear whether the best way to improve the system is through benefit design, standardizing plans, limits on the number of plans, or other mechanisms. Commissioners discussed how standardizing benefits will change the nature of competition and the implications on the beneficiaries and market. Several commissioners requested more information so they could better understand the potential market concentration coming from changes in competition. One commissioner, in noting support for limiting the number of plans per carrier, raised concern for carriers’ ability to game the system by using subsidiaries and making the process more convoluted. Another noted that competition only works well when the product is well defined.

Overall, most commissioners supported standardization of benefits as well as continued exploration and consideration to simplify the consumers’ choice process. Commissioners in support of standardization noted that asking plan sponsors to provide their top goods would create more transparency, increase competition, ameliorate the lack of symmetry, and restore meaningful differences among plans. However, others contended that overly restricted benefit standardization could lead to a race to the bottom, where smaller plans are unable to differentiate themselves and larger plans win. They also raised concern over market disruption and unintended consequences, such as stifling innovation. Commissioners will continue to flesh out benefit standardization and potential policy options.

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This Applied Policy® Summary was prepared by Emma Hammer with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at ehammer@appliedpolicy.com or at 202-558-5272.

[1] Due to data restrictions, the number of facilities is through the first quarter of 2022. All other figures are for all of calendar year 2022.

[2] Social risk is measured by income, unemployment, education, and housing quality.