MedPAC Staff Proposes 2% Update to Hospital Payment Rates

December 16, 2019

At its December 5-6 public meeting, the Medicare Payment Advisory Commission (MedPAC) discussed payment adequacy across provider settings. The staff presented the Commission with draft recommendations for 2021 payment update factors, which it will vote on at its January 2020 meeting. Payment adequacy indicators included beneficiaries’ access to care, quality of care, access to capital and Medicare payments, and provider costs.

MedPAC staff proposed a 2% payment update for hospital inpatient and outpatient services, plus the value of an additional 0.8% to be funded through MedPAC’s recommended hospital value incentive program (HVIP) (Note: the HVIP would restructure Medicare’s performance-based payment programs). Some commissioners suggested adding the caveat that if Congress does not enact the HVIP, the recommended update should be 2.8%, as specified under current law. It was also suggested that the recommendation provide the full current law market basket update (2.8%) and that any HVIP funding be incremental.

MedPAC staff noted that while hospital payment adequacy indicators were positive for access to care, quality of care, and access to capital, the results of the analysis of Medicare payments and hospitals’ costs were mixed. Overall hospital Medicare margins were -9.3% in 2018, and staff projected that Medicare margins would be -8% in 2020. Even relatively efficient hospitals had Medicare margins of -2%.

MedPAC staff also presented draft update recommendations for other provider settings:

  • Physicians and other professional health services: No update (current law)
  • Ambulatory surgical centers (ASCs): No update
  • Skilled nursing facilities: No update
  • Home health care services: Reduce rates by 7%
  • Inpatient rehabilitation facilities (IRFs): Reduce rates by 5%
  • Long-term care hospital services: 2%
  • Hospice services: No update

The staff presented a draft recommendation that the Secretary of Health and Human Services (HHS) require ASCs to report cost data. Staff also reiterated the 2016 IRF recommendations that the HHS Secretary conduct a focused medical record review of IRFs that have unusual patterns of case mix and coding, and expand the IRF outlier pool to redistribute payments more equitably across cases and providers.

At its November 2019 public meeting, MedPAC discussed provider consolidation and increasing the supply of primary care physicians. A full summary is here.