On January 12, 2017, Medicare Payment Advisory Commission (MedPAC) members unanimously voted to maintain Medicare’s existing updates (i.e., maintain the increases Congress and the HHS Secretary have already established) to hospital and physician service payments. Members also voted to eliminate updates for ambulatory surgical centers (ASCs) and hospices (i.e., no rate increases). The only actual increase to payment rates, above current updates, was recommended for outpatient dialysis. MedPAC generally found Medicare payment rates to be too high for post-acute care and called for payment reductions and rebasing of some of those payment systems. Although unclear precisely what happens if and when Congress repeals (or replaces) the Affordable Care Act, MedPAC estimates that, under current law, hospitals will have “negative Medicare margins,” but expects access to be preserved in the hospital setting under current rates. These recommendations will become part of the report MedPAC submits to Congress later this year.
MedPAC came to these recommendations by assessing provider capacity, service volume, access to capital, quality of care, and providers’ costs and payments for Medicare services. MedPAC estimated that hospital spending recently increased by approximately three percent per beneficiary, due to inpatient price growth, outpatient price growth, increase in outpatient volume, and increase in Part B payments for separately payable drugs. Nonetheless, a MedPAC staffer stated the current payment update (an approximately 1.85 percent increase) “will balance the need to have payments high enough to maintain access to care and low enough to maintain fiscal pressure on hospitals to control their costs” and MedPAC members unanimously voted to maintain that update. MedPAC voted that the estimated current law update of a 0.5 percent increase for physician services was likewise sufficient. MedPAC also recommended that CMS require hospitals to add a modifier to submitted claims related to off-campus, stand-alone emergency departments, which would allow CMS to track such departments’ expansion.
In the ASC context, MedPAC expressed concern that the current quality measures are insufficient and suggested two new measures. Furthermore, it unanimously voted to recommend that Congress eliminate the payment rate update for ASCs in 2018 (currently two percent) and require ASCs to submit cost data. MedPAC estimated that hospices would make a 7.7 percent margin in the Medicare context in 2017, and thus recommended unanimously that Congress eliminate the 2018 payment update. By comparison, MedPAC estimated a negative one percent margin for outpatient dialysis services in 2017, and thus unanimously recommended that Congress increase the payment rate update for 2018.
Lastly, MedPAC found that Medicare payments for post-acute care (home health, skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs), and to a smaller extent long-term care hospitals (LTCHs)) were high, compared to the costs of caring for beneficiaries. In years past, MedPAC has recommended lowering or freezing Medicare payment rates for post-acute care. Looking ahead, MedPAC unanimously voted to recommend the following:
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For home health, that Congress reduce payments by five percent in 2018 and then require a rebasing of payment rates, and make the system fully prospective based on patient characteristics (and not, e.g., based on therapy visits as a payment factor);
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For SNFs, that Congress eliminate the market basket update for 2018/2019 and require the Secretary to revise the prospective payment system;
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For IRFs, that Congress reduce the 2017 payment rate by five percent; and
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For LTCHs, that Congress eliminate the update to payment rates under the LTCH prospective payment system for 2018.
A transcript of the MedPAC meeting is available here. The meeting brief is available here.
