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Rural hospitals' ability to bill fee-for-service Medicare patients and the uninsured on a "cost-plus" basis -- essentially setting their charges at whatever level they think is appropriate -- is untenable and must be changed, several members of the Medicare Payment Advisory Commission (MedPAC) said Thursday.

"Charges are made up, inflated in ways that are unbelievable," said Stacie Dusetzina, PhD, of Vanderbilt University Medical Center in Nashville, Tennessee, during a meeting to discuss MedPAC's work plan on rural hospital and clinician payment policy for 2024-2025. "The fact that anybody is still paying based on charges -- uninsured people, too, but people with Medicare coverage -- it's just unbelievable that this still happens. That needs to be reformed urgently."

"It would be wrong to ignore unintended consequences of Medicare policies and other people and paying based on charges, to the extent that we're doing that, which can really, really hurt not just Medicare beneficiaries but also people who don't have insurance," said Lawrence Casalino, MD, PhD, of Weill Cornell Medicine in New York City. "The hospital charges whatever it wants, but if you don't have insurance, that's what they expect you to pay."

Commissioner Kenny Kan, CPA, CFA, of Horizon Blue Cross Blue Shield in Newark, New Jersey, said he also was "not a fan" of charge-based pricing, adding, "I'm really concerned about potential skipped or deferred care that is needed by Medicare beneficiaries ... We should really explore the copay/coinsurance dynamic, which is actually very complicated."

Commission member Jonathan Jaffery, MD, of the Association of American Medical Colleges, said it was "unconscionable" for Congress to continue perpetuating charge-based payment. "It can and should be fixed," he added.

Commissioner Scott Sarran, MD, MBA, of Triple Aim Geriatrics in Cook County, Illinois, said the commission's mindset "should be on putting out potential solutions around leveling the playing field," such as allowing Medicare beneficiaries to see any rural provider who is willing to accept the program's fee-for-service rates, or limiting Medicare Advantage plans' ability to require prior authorization for inpatient care, acute care, or the first 5 days of skilled nursing care.

The interplay between fee-for-service Medicare and Medicare Advantage was also on commissioners' minds. Gina Upchurch, RPh, MPH, of the nonprofit Senior PharmAssist in Durham, North Carolina, took issue with materials provided by MedPAC staff, which asserted that Medigap plans were usually more expensive than Medicare Advantage. "I have a problem with that," she said, adding that it may not be true for someone who is chronically ill and goes in and out of the hospital and also has physical therapy and occupational therapy.

"The maximum in-network out-of-pocket for many Medicare Advantage plans in 2024 is $8,850," she continued, noting that plans in her area usually have a lower out-of-pocket maximum, around $3,500 to $4,000. A 75-year-old senior in the same area with traditional Medicare would pay around $200 per month -- or $2,400 per year -- for a Medicare supplement plan, plus another $200 per year for their Medicare Part B deductible, for a total of $2,600. "So if you have to use a lot of services, you save a lot of money by being in original Medicare and having a supplement."

Commissioners also were interested in data presented by MedPAC staff showing the growth in Medicare Advantage enrollment and noting that fewer enrollees were switching out of Medicare Advantage and back to traditional Medicare -- possibly because they like the extra benefits that some Medicare Advantage plans provide, or because they had trouble enrolling in a Medicare supplement plan. (Although Medicare supplement insurers can't use medical underwriting on brand-new Medicare enrollees when they enroll in traditional Medicare for the first time, in all but a few states they can medically underwrite beneficiaries who try to switch out of Medicare Advantage and back to traditional Medicare.)

The fact that Medicare beneficiaries can't automatically get a supplemental policy -- a process called "guaranteed issue" -- when they leave Medicare Advantage "seems mostly an historical accident," said Commissioner R. Tamara Konetzka, PhD, of the University of Chicago. "I assume the original intention was so that people wouldn't wait till they're sick to spend money on a Medigap policy. But I think that this consequence of not being able to switch or not finding an affordable Medigap policy is probably out of alignment with that original intention. And so I'd love to see some exploration of policy options to change that."

Dusetzina said it seemed as if there was "a lot of switching" to Medicare Advantage from fee-for-service Medicare, "and I really want to know why ... [If] we could talk to the beneficiaries who are switching, that would be really helpful for this analysis ... Are people getting outreach that is prompting them to switch? Or is it just, you know, they've decided the coverage doesn't work the way that they thought?"

"My impression is that most Medicare beneficiaries, when they choose [Medicare Advantage] -- or if they decide they want to switch out -- they don't have a clue about the consequences of that, which basically are prohibitive in most cases, unless you're a very, very healthy person," said Casalino, referring to the fact that enrollees might not be able to get a Medicare supplemental policy, or may be charged high rates due to their pre-existing medical conditions. "I don't know if there is any literature on that ... I'd like to know more about the extent to which Medicare beneficiaries do have a clue ... There might be some thought given to, if they don't have a clue, how they can be given a clue."

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