While Centers for Medicare & Medicaid Services (CMS) has made improvements following previous recommendations from the Medicare Advisory Commission (MedPAC), the Medicare Advantage (MA) program and the value-based purchasing program still suffer from “design flaws,” according to the organization.

MedPAC is calling attention to what it perceives as design flaws in the programs, including incentives that are too small to influence behavior among nursing home operators. In its June report to Congress, MedPAC called on Congress to enact meaningful reform of MA plans.

According to MedPAC, MA may sometimes use home health care as a substitute for skilled nursing stays following hospitalization in order to cut down on costs. The adjusted probability of home health care use was 3.2% higher among MA enrollees than FFS beneficiaries, MedPAC noted, a comparison between 41.7% and 40.4%.

CMS previously sought to take steps on diversions from nursing homes to home health as far back as 2022, to ensure that patients are not inappropriately denied coverage by Medicare Advantage organizations (MAOs).

MedPAC said institutional special needs plans (I-SNPs) currently cover about 12% of Medicare nursing home residents. These MA-based plans are used to improve care quality and reduce costly services like re-hospitalizations.

MedPAC has seen I-SNPs aid in on-site coordinated care from physician and nurse practitioner teams. These reimbursement models encourage in-facility care, but data on patient experience and other metrics is “limited,” the commission said.

MedPAC reported about 1.2 million Medicare beneficiaries with functional or cognitive impairments reside in nursing homes, and nearly all such facilities operate both as long-term care and as short-term, post-acute care facilities, reimbursed by both Medicaid and Medicare. More than 80% of Medicare beneficiaries are dual-eligible for Medicaid, MedPAC found.

The industry reported 0.4% overall margins across all payers in 2023, but a 22% margin on Medicare skilled nursing care, indicating “possible payment imbalance,” MedPAC said.

In terms of the Five-Star Rating System for nursing homes, MedPAC told Congress its impact has been “modest.” Evaluations show inspections related to Five-Star miss serious issues at times, and fail to lead to meaningful change.

The commission recommended Five-Star weigh staffing levels more heavily and encouraged broader use and oversight of I-SNPs, given their potential to improve outcomes and lower costs.

The commission also found that rural skilled nursing facilities have a lower rate of publicly reported quality results compared to urban facilities. MedPAC attributes this gap to smaller patient volumes and resource limitations which in turn hinder participation in Medicare quality reporting programs.