As required by law, the Medicare Payment Advisory Commission (MedPAC) reviews Medicare’s fee-for-service payment policies every year and makes payment update recommendations to Congress. In preparation for its March 2023 Report, MedPAC reviewed whether Medicare inpatient and outpatient payments to general acute care hospitals are adequate. The Commission voted for a slight increase in physician and hospital payment rates in 2024 — a 1% increase to hospitals and a 1.25% for doctors — with additional payments allowed for safety-net primary and specialty care providers.
MedPAC reported its recommendations to Congress, as required by law, on March 15, 2023.
For hospitals, MedPAC recommended increases to hospital inpatient and outpatient Prospective Payment Systems (PPS) payments by the current-law market basket plus an additional 1% for 2024.
- The Commission also proposed a safety-net index, which would distribute add-on payments to disproportionate share hospitals for uncompensated care.
For physicians, MedPAC recommended adjusting the 2024 Physician Fee Schedule at 50% of the Medicare economic index (inflationary impact on physician operating costs) that would result in a 1.25% boost to payments for 2024.
- The Commission also proposed add-on payments for safety-net primary care (15%) and specialty care (5%) providers.
Not good enough
The American Medical Association (AMA) and the American Hospital Association (AHA) complained that the recommended payment increases are not enough to address inflation, the impact of the COVID-19 pandemic, and workforce challenges.
- The AHA asked MedPAC to recommend an increase of 2.8% for inpatient and outpatient hospitals, which would reflect the market basket plus the difference in what hospitals received in 2022 and what they should have received, based on the projected versus actual market basket for 2022.
- The AMA appreciated MedPAC’s first-time adjustment for inflation (physicians do not have an automatic adjustment for inflation like hospitals and nursing homes do). Yet, the AMA argues that a 1.25% increase is inadequate, as Medicare physician payments have decreased 22% since 2001.
Since Congress provided billions of dollars in relief funds during the pandemic and delayed planned Medicare cuts in 2022, it will need to contain costs moving forward. As a result, the lobbying efforts by the provider trade associations may not be heeded by policymakers.
As the 2024 presidential campaign kicks off, Medicare’s solvency will also be an issue — and increasing payment means new Medicare spending. One issue to watch is site-neutral payment reform, with Medicare paying the same rate for services regardless of the location — a hospital, ASC, or physician offices. It is important to keep an eye on Medicare reimbursement issues, as this may impact physician pay or force clinicians to sell their practices to hospitals or private equity firms.
Medical Economics. MedPAC Recommends Raises for Physicians, Hospitals Getting Medicare Reimbursement. Accessed April 7, 2023.
Committee for a Responsible Federal Budget. Equalizing Medicare Payments Regardless of Site-of-Care. Accessed April 7, 2023.