On October 10-11, 2024, the Medicare Payment Advisory Commission (MedPAC) held a virtual public meeting, which included the following sessions:

• Medicare beneficiaries in nursing homes;
• Findings from MedPAC’s annual beneficiary and provider focus groups;
• Supplemental benefits in Medicare Advantage (MA);
• Work plan for a mandated final report on the impact of recent changes to the home health prospective payment system; and
• Initial estimates of home health care use among Medicare Advantage enrollees

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

MEDPAC Examines Medicare Nursing Home Population

At MedPAC’s April 2024 meeting, the Commission expressed interest in developing a better understanding of Medicare beneficiaries living in nursing homes. While Medicare does not cover long-term nursing home care, many Medicare beneficiaries reside in nursing homes, and stakeholders have raised concerns about the quality of care. This meeting was the first step in this process, which will culminate in an informational chapter in MedPAC’s June 2025 Report to Congress.  The presentation began with an overview of the long-stay nursing home population and nursing home industry, and challenges to improving care.

MedPAC Staff Review Nursing Home Population and Industry

Roughly 1.2 million Medicare beneficiaries, or 1.7 percent of the Medicare population, were considered part of the long-stay nursing home population[1]  in 2022. This population is much more likely to be eligible for Medicaid, with 82 percent of long-stay residents being eligible as compared to 13 percent of other beneficiaries, have much higher mortality rates, at 25 percent compared to 4, and have much higher CMS hierarchical condition category (HCC) risk scores. The high Medicaid eligibility in this population is driven primarily by the fact that many Medicaid programs require higher-income beneficiaries to “spend down” their assets on nursing home care in order qualify for coverage, meaning that they can eventually qualify for Medicaid after exhausting their assets via a nursing home stay.

There are roughly 15,00 nursing homes in the U.S., the vast majority of which are free standing and participate in both Medicare and Medicaid. In 2023, 72 percent of nursing homes were for profit, 21 percent were nonprofit, and 6 percent being government owned. Regarding payer mix, Medicaid patients accounted for 63 percent of patient days in 2022, fee-for-service (FFS) Medicare accounted for 10 percent, and other payers, including Medicare Advantage (MA) accounted for 27 percent.[2]

The Commission staff identified a number of challenges to improving care for nursing home residents, including financial incentives to hospitalize long-stay residents, low base payment amounts that lead to understaffing and high turnover, high rates of avoidable hospitalization, and questionable quality reporting measures.

Commissioners Discuss Future Analysis

In their discussion of the presentation, the Commissioners identified opportunities for future analysis. Many Commissioners supported examining disparities in beneficiaries’ nursing home conditions by income, as well as geographic variation in access to nursing home care and how workforce issues interact with this access. The Commissioners also identified potential data challenges, such as how to get improved patient reported quality measures from a population with high rates of dementia. The next step in this analysis will be two presentations next spring examining efforts to improve care for long-stay nursing home residents, one covering efforts in managed care, and one covering efforts in FFS.

Medpac discusses findings from annual beneficary and provider focus groups

MedPAC staff presented findings from the Commission’s annual beneficiary and provider focus groups. These focus groups allow the Commission to investigate questions that are difficult to quantify and provides important real-life anecdotes that contextualize the Commission’s work.

Beneficiaries were generally satisfied with both their MA and FFS coverage, with the majority of focus group participants rating their coverage as either “excellent” or “good.” However, the beneficiary focus groups highlighted concerns about confusion when selecting Medicare coverage, with the variety of options, both in plan types in MA and in supplemental coverage in FFS, being overwhelming for some beneficiaries. This was supported by the provider focus groups, with one clinician noting that the excessive number of products and constantly changing rules seemed “designed to confuse people.”  When choosing coverage, beneficiaries reported prioritizing maintaining relationships with their current clinicians and prescription drug costs.

While access to care measures were generally positive – the majority of beneficiaries reported that they could access primary care when needed – several beneficiaries reported long wait times for specialty care. Both focus groups highlighted the utility of telehealth, with beneficiaries reporting that it often allowed them to get an appointment more quickly and providers noting its ability to increase access. Providers also noted that they believed that the proportion of visits that were telehealth had reached a steady state following the pandemic. Both beneficiaries and providers highlighted frustrations around prior authorization in MA, which delayed care for beneficiaries and increased administrative burden for providers. The presentation also touched upon accessibility of complex care in rural areas and provider perceptions and engagement with Accountable Care Organizations (ACOs).

The commissioners first discussed the driving factors behind rural beneficiaries opting to drive further for care circumstances of more serious health issues. The presenters highlighted the limitations of rural health care facilities in providing complex care. Commissioners then questioned the methodology of the study with a particular concern regarding the generalizability of the results due to the small sample size and the possibility for sampling bias in the selection of the focus group. One commissioner commented on the lack of distinction between disabled and non-disabled participants in the focus group and requested future studies consider this distinction.

Commissioners went on to discuss the role of brokers as a resource in selecting coverage and expressed concern regarding their financial motivation to sway beneficiaries in their selection of coverage. Other Commissioners expanded upon this topic by emphasizing the need for transparency between brokers and beneficiaries during the health care selection process. Commissioners questioned why the study did not inquire about beneficiary perceptions of ACOs and suggested such questions be incorporated in future studies.

Overall, commissioners emphasized the importance of qualitative data in identifying and understanding issues surrounding Medicare coverage, and that the role of focus groups was an instrument for learning and discussion, not as a pipeline for generalizable conclusions.

MedPAC discusses supplemental benefits in medicare advantage

While supplemental benefits are a key component of Medicare Advantage (MA), little is known about the utilization of these benefits. To address this, MedPAC conducted a review of the supplemental benefits offered by Medicare Advantage (MA) plans. The Commission highlighted the current scope of these benefits and spending trends, provided an outlook for the coming years, and identified key gaps in the program. This presentation will be followed next spring by a presentation analyzing supplemental benefits using MA encounter data and an informational chapter in the Commission’s June report to Congress.

Review of Medicare Advantage Payment Policy

Medicare Advantage (MA) plans cover Medicare Part A and Part B services and often offer supplemental benefits such as dental, vision, and hearing. A key trade-off for beneficiaries deciding between MA and Traditional fee-for-service (FFS) Medicare is access to MA’s supplemental benefits in exchange for a more limited choice of providers and more utilization management such as prior authorization.

Medicare pays MA plans based on a system of bids and benchmarks. Bids represent what each plan expects it will cost to cover Part A and Part B services, while benchmarks are based on FFS spending and serve as the maximum amount Medicare will pay for MA plans in a given county. Most plans bid below their benchmark.  When they do, they receive a base payment equal to their bid, plus a rebate accounting for a portion of the difference between the bid and the benchmark. These rebates must be used to provide supplemental benefits.

Rebates have been increasing, with the gap between bids and benchmarks widening. Since 2018, rebates per member in conventional MA plans have more than doubled, reaching $2,329 per member in 2024. Medicare is estimated to have paid approximately $83 billion in rebates to MA plans in 2024. The high spending on MA reflects both growth in enrollment and the increasing rebates paid per enrollee.

What Are Supplemental Benefits?

Medicare Advantage (MA) plans offer supplemental benefits that fall into four main categories. First, Enhanced Part D benefits, which may include reduced basic Part D premiums, lower cost-sharing, and coverage for additional prescription drugs. Second, Reduced Cost Sharing, which offers lower cost-sharing for Part A and Part B services, as well as a maximum out-of-pocket limit for beneficiaries. Third, Non-Medicare Services, which encompass benefits like dental, vision, and hearing coverage. Finally, some plans provide a Reduced Part B Premium, though significant reductions in Part B premiums are relatively rare among plans.

Projections for Supplemental Benefit Use

Medicare Advantage (MA) plans are projected to use a smaller share of their rebates to reduce cost-sharing for beneficiaries in 2024 than in the past, with the allocation decreasing from 52% to 39%. Instead, an increasing portion of rebates is expected to be directed towards financing coverage for non-Medicare services, such as dental, vision, and hearing benefits. This shift highlights a trend towards expanding the scope of non-Medicare services as a key focus of MA plan benefits.

However, there is limited data on how MA enrollees use these supplemental benefits. The currently available data, which comes from plan bids and benefit submissions, provides only aggregated information about spending and utilization at the plan and service-category level. For non-Medicare services, the data is broadly grouped into categories like dental, vision, and transportation, leaving gaps in understanding how enrollees’ access and benefit from these services. Moreover, the data lacks details about the actual usage of these benefits by MA enrollees, limiting insights into their impact on health outcomes.

The number of enrollees in MA plans offering coverage for dental, vision, hearing, and transportation services has grown significantly since 2014. While the availability of these services varies across different plans, studies suggest that utilization, particularly for dental services, remains low, though much of the data comes from earlier years. Knowledge about the use of other non-Medicare services, such as hearing and transportation, is still limited, indicating a need for more comprehensive data on the effectiveness and reach of these supplemental benefits.

In recent years, Medicare has expanded the types of supplemental benefits that MA plans can offer and how they can be targeted. Initially, these benefits had to be “primarily health-related” and uniformly available to all enrollees, but plans now have more flexibility. The definition of “primarily health-related” has been broadened, and plans can now target benefits to specific health conditions or statuses. Special Supplemental Benefits for the Chronically Ill (SSBCI) allow for services such as food, non-medical transportation, and pest control, which are increasingly offered but still relatively rare. Meanwhile, the Medicare Advantage Value-Based Insurance Design (VBID) model enables plans to tailor services based on socioeconomic factors.

The share of MA enrollees in plans offering fitness benefits, annual physical exams, and over-the-counter (OTC) items has also grown in recent years. Additionally, more plans now offer SSBCI benefits, such as food and produce or general living supports, particularly for chronically ill enrollees. Although the number of enrollees in these plans is increasing, the overall proportion remains relatively low. MA plans are also moving toward more “combined” benefit arrangements, integrating both medical and non-medical services to better address the comprehensive needs of their enrollees.

Data Limitations for Assessing Supplemental Benefits

A key challenge in evaluating Medicare Advantage (MA) supplemental benefits is the lack of comprehensive data on how enrollees use non-Medicare services, such as dental, vision, and hearing care. Despite Medicare spending an estimated $83 billion on these supplemental benefits in 2024, there is little information available on how these benefits impact enrollees or the value they provide. Without sufficient data, it is difficult to assess the effectiveness of cost-sharing reductions and coverage for non-Medicare services in improving health outcomes.

To address these gaps, CMS is implementing new policies aimed at improving data collection. New encounter-data submission requirements will offer more detailed information at the claims level, and reporting requirements will provide plan-level insights into enrollees’ use of non-Medicare services and plan spending. While these measures may help fill current data gaps, the new data won’t be available until next year, leaving some uncertainty in the short term. Further exploration of encounter data will be crucial for understanding how enrollees utilize services like vision, hearing, and transportation in the future.

Commissioners Underscore Importance of Understanding Low Supplemental Benefit Utilization

Commissioners raised several key issues regarding MA plans and their administration of supplemental benefits. One topic was the process by which plans determine eligibility, particularly for Special Needs Plans (SNPs) versus conventional MA plans. Commissioners highlighted the burden on plans to apply their own guidelines and diagnostic criteria to classify enrollees, emphasizing the need for clarity on who qualifies for certain benefits, especially for people with specific disease states. Currently, data on how beneficiaries are notified of their eligibility is limited, though a new rule in 2026 will require plans to provide mid-year benefit notices.

Another concern was the lack of transparency in MA plans, especially around who provides services like dental, vision, and hearing care. Commissioners noted that while some plans contract these services out to vendors, others use networks of providers, but there is limited data on how well these services are integrated. There was also a call to frame MA benefits as a holistic package, with key services like drug coverage and maximum out-of-pocket caps being critical, non-optional elements.

A recurring theme was the low utilization of supplemental benefits, despite their appeal to beneficiaries. Commissioners expressed the need to understand why this is the case, questioning whether it is due to insufficient benefits, network limitations, or other barriers. Additionally, they discussed the potential for managed care and MA to be more efficient, though concerns were raised about whether running benefits through insurance companies is the most effective approach. The conversation underscored the need for more data and research, including the use of surveys, to better understand spending and the value of supplemental benefits.

Work Plan for a final report on the impact of recent changes to home health prospective payment system

The Bipartisan Budget Act (BBA) of 2018 mandated changes to the home health prospective payment system. With these changes, the BBA required the MedPAC commission to assess the impact of the changes and provide an interim and a final report to Congress. In the October MedPAC meeting, staff reviewed the overall changes made to the home health program, reviewed their findings from the interim report, and discussed a potential plan for the final report.

In 2020, CMS implemented the required changes from the BBA, which included a new 30-day period as the unit of payment (instead of 60 days) and a new patient classifications system called the Patient-Driven Groupings model. The Commission completed their interim report in March 2020 which described the recent changes in costs. They noted that a huge impact in changes was confounded by the COVID-19 public health emergency, which may skew results. After discussing the interim report, MedPAC staff presented their preliminary workplan for the final report required by the BBA.

The Commission’s final report to Congress is due on March 15, 2026, but their preliminary results will be presented during a meeting in the fall 2025 cycle.

Commission Discussion

During the discussion, the MedPAC Commissioners gave their feedback on the preliminary workplan and offered new suggestions as to what the staff could include in the final report. The discussion started with multiple Commissioners expressing that the year 2020 should be excluded from the time series as COVID-19 had a significant impact on the home health industry Instead of cutting the year out completely, some commissioners suggested that staff could look at the probability of the use of home health before and after the pandemic and match data points. These recommendations follow the skewed results from the interim report in 2022.

Another concern the Commissioners discussed is the usage of the home health program in rural areas and how they can make sure the final report accurately reflects the situation. Some Commissioners suggested that staff use county level data but stratify by the rurality of patients, so that degrees of rurality are examined, and not just urban versus rural. This means that even in large counties, the access and usage differences in rural areas will be reflected in the analysis. Other suggestions to address the rural problem in home health were looking at population density and stratifying for socio-economic status instead of controlling for it.

Other suggestions to the final report workplan that the Commissioners discussed included separating large home health agencies from smaller home health agencies, looking at subgroups of differences in home health for different clinical conditions, and including qualitative data to the report. MedPAC staff will take the Commissioner’s comments into account when moving forward with the final report on the home health prospective payment system changes.

Medpac Reviews Initial estimates of home health care use among Medicare Advantage enrollees

For the last portion of the October 2024 meeting, MedPAC staff reviewed the use of home health care by MAenrollees. While home health care patterns for FFS beneficiaries are well understood – roughly 3 million FFS beneficiaries utilized roughly $16.9 billion in home health care services in 2021 – data limitations have prevented stakeholders from developing a similar understanding of MA care patterns. However, recent improvement in MA encounter data allowed MedPAC staff to better examine MA care patterns and make comparisons to FFS.

The staffers found that that, in 2021, 9.1 percent of MA enrollees used home health care, as compared to 10.1 percent in FFS. Visits per beneficiary were lower in MA than FFS, at 20.0 and 25.8 respectively, though the staffers noted that the analysis did not account for differences in beneficiary health. The distribution of the types of services provided (e.g. skilled nursing, physical therapy, occupational therapy) were extremely similar between MA and FFS, with skilled nursing accounting for a higher percentage of services in FFS (47 percent) than MA (42 percent.  Future work will focus on adjusting the analysis for enrollee characteristics such as presence of prior hospitalizations, and expanding the analysis to include broader post-acute care services.

In their discussion, the commissioners emphasized the need to clarify the timeframe for prior hospitalizations in future analysis—whether to analyze those within a specific period, perhaps 14 days, or to include referrals from a hospital as well. Commissioners also raised concerns about the potential of MA plans diverting patients from skilled nursing facilities to less expensive home health care, as not accounting for this trend in the analysis could cause misleading conclusions. Additionally, the conversation highlighted the influence of MA plans on post-discharge referral decisions, with suggestions to examine discharge rates from hospitals to home health in both MA and FFS settings. The commissioners called for a deeper analysis of the data, including the characteristics of patients excluded from certain samples and the quality of home health agencies used by MA beneficiaries versus FFS. Stratification based on dual eligibility, health plan type, and geographic areas was deemed necessary for a nuanced understanding of the patient population, emphasizing the complexity of home health utilization and the interplay between different health care delivery models.

The discussion concluded by emphasizing that, despite data improvements, there are still a number of problems with MA data that need to be addressed to draw meaningful conclusions.

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This Applied Policy® Summary was prepared by Will Henkes with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact him at whenkes@appliedpolicy.com or at (202) 558-5272.

[1] As defined as being in a nursing home for over 90 days

[2] This analysis was based off Medicare Cost Reports, meaning that facilities that did not participate in the program were not included.