MedPAC Discusses Further
IME Reductions
December 20, 2002 - Not deterred by the 15 percent
reduction in Medicare indirect medical education (IME) payments
that occurred on Oct. 1 (from 6.5 percent to 5.5 percent),
at its Dec. 12-13 meeting,
the Medicare Payment Advisory Commission (MedPAC) discussed
whether IME payments should be reduced further. Commission
staff reported that their most recent analysis indicates that
the empirical level of the IME adjustment is 2.7 percent,
compared to the 5.5 percent that is being paid to teaching
hospitals as set forth in current law for FY 2003. Staff draft
recommendations would lower the IME level to 2.7 percent,
either immediately in 2004 or phased in over several years.
The AAMC is advocating that Congress change the law so that
the IME level is maintained at 6.5 percent in 2003 - the level
that has been in place since 1999.
The foundation of the IME adjustment is a complex statistical
analysis that derives an "empirical" IME level.
Since the beginning of the Medicare program Congress has set
the IME adjustment above the empirical level. These payments
are intended to account for the higher Medicare inpatient
costs that occur in teaching hospitals. Any recommendation
on the IME level, as well as all other recommendations, will
be voted on at the commission's Jan. 15-16 meeting and included
in its March Report to Congress.
As part of the discussion, MedPAC staff noted that providing
IME payments above the empirical level contributes to major
teaching hospitals having Medicare inpatient margins that
are higher than other hospital groups. Preliminary data for
2000 indicate Medicare inpatient margins of 22.9 percent for
major teaching hospitals compared to margins of 10.2 percent
and 4.9 percent for other teaching and nonteaching hospitals,
respectively. At the same time, staff noted these payments
are important to maintaining total margins for teaching hospitals.
The 2000 preliminary data indicate total margins of 1.5 percent
for major teaching hospitals, compared to about 4 percent
for all other hospitals.
The commissioner's discussion focused, in part, on the role
of Medicare in supporting teaching hospitals. One view was
that Medicare should pay the empirical level and that additional
monies to support teaching hospitals should come from general
appropriations. Another view was that Medicare is more than
just an insurer and has a social responsibility to help fund
additional costs of teaching hospitals, as it has since the
beginning of the Medicare program.
In addition to IME, MedPAC also discussed potential update
recommendations for the hospital inpatient and outpatient
prospective payment systems (PPS). Staff presented a draft
recommendation to update inpatient payments by the increase
in the hospital market basket (MB) (currently forecasted at
3.3 percent for 2004) plus 0.5 percentage points for cost
increases due to technology less 0.9 percentage points for
productivity improvements. The result would be an update equal
to the MB increase minus 0.4 percentage points. The draft
outpatient PPS update would be the MB increase less the 0.9
percentage point productivity factor. No adjustment would
be made for new technologies under the outpatient PPS because
these items are accounted for separately under the payment
system.
Information:
Karen Fisher, Senior Associate Vice President
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
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