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  • Washington Highlights

    MedPAC Discusses Hospital and Physician Payment, Telehealth, and Behavioral Health


    Mary Mullaney, Director, Hospital Payment Policies
    Gayle Lee, Director, Physician Payment & Quality
    Ki Stewart, Senior Policy and Regulatory Analyst
    For Media Inquiries

    The Medicare Payment Advisory Commission (MedPAC) met on Jan. 12 and 13 to discuss a variety of policy issues, including recommendations for hospital payment, physician payment, telehealth, and behavioral health. 

    Hospital Payment 

    Two draft hospital recommendations for a future hospital payment update were presented. First, MedPAC recommended that for fiscal year 2024, Congress should increase the 2023 Medicare base payment rates for acute care hospitals by 1% above the amount specified in current law. Second, it was recommended that beginning in 2024, Congress begin a transition to redistribute disproportionate share hospital (DSH) and uncompensated care payments through what MedPAC describes as the Medicare safety-net index (MSNI) [refer to Washington Highlights, Sept. 30, 2022]. 

    Under the proposal, hospitals’ MSNI would replace the current DSH and uncompensated care formula for the distribution of add-on Medicare fee-for-service (FFS) payments. Also, the recommendation included the addition of $2 billion to the MSNI pool that would be available beginning in 2024, the first year of the transition to the MSNI. Fee-for-service MSNI payments would be scaled in proportion to each hospital’s MSNI and would be distributed through a percentage add-on to payments under the inpatient and outpatient prospective payment system. Lastly, MSNI amounts for services furnished to Medicare Advantage (MA) beneficiaries would be paid directly to hospitals, and these payments would be excluded from MA benchmarks.

    Commissioners unanimously supported both recommendations. 

    Physician Payment 

    MedPAC commissioners recommended that for calendar year 2024, Congress update fee schedule payment rates by 50% of the projected increase in the Medicare economic index (MEI). The MEI, which is a measure of inflation experienced by physicians (reflected in practice costs), is projected to grow 4.7% in 2022, 3.9% in 2023, and 2.9% in 2024. To promote access to care for low-income populations, MedPAC also recommended that Congress enact an add-on payment (not subject to beneficiary cost-sharing) under the physician fee schedule for services provided to low-income beneficiaries. The add-on payments should be equal to a clinician’s allowed charges for low-income beneficiaries multiplied by 15% for primary care clinicians and 5% for nonprimary care clinicians. Budget neutrality would not apply to the add-on payment.  

    Behavioral Health Services 

    MedPAC staff reviewed findings for a congressionally requested report to conduct an analysis of behavioral health services in the Medicare program. The purpose of this report is to address the current behavioral public health crises and the associated rising costs within the program. According to staff, Medicare FFS beneficiaries receiving Part B behavioral health services were more costly and more vulnerable overall. Staff noted that depression and anxiety account for the largest share of Part B spending and that psychotherapy and evaluation and management (E/M) visits account for the majority of behavioral health services by volume and spending. The utilization of behavioral health services is similar among FFS and MA beneficiaries. Staff also noted that there is a higher rate of emergency room and acute hospitalization before an inpatient psychiatric hospitalization stay. 

    Commissioners acknowledged the importance of behavioral health services and the increased demand due to the public health emergency. They also expressed concerns with the limitation of claims data due to underreporting of behavioral health diagnoses and dual diagnoses, and requested that additional information be provided to add greater context to the claims data used in this report.  


    MedPAC staff discussed findings for a report on telehealth that is due to Congress in June. The report will outline potential policy options for expanding payment for telehealth. Options discussed included: 

    • Medicare would return to paying the physician fee schedule’s facility rate for telehealth services. 

    • Not allowing providers to reduce or waive cost-sharing for telehealth services. 

    • Adding additional safeguards to protect the Medicare trust fund and beneficiaries from unnecessary spending and potential fraud  

    MedPAC staff found that spending for telehealth services peaked in the second quarter of 2020, reaching $1.9 billion and eventually leveling off in the fourth quarter of 2021 at around $827 million. E/M services accounted for the majority of telehealth services at 71% in 2020 and 67% in 2021, followed by behavioral health services at 17% in 2020 and 22% in 2021. Staff also reported on beneficiary and clinician experience-based feedback provided by telehealth focus groups that met in 2022. Beneficiaries reported that they were generally satisfied with the telehealth services that they received. Some clinicians reported that they appreciated the convenience, flexibility, and improved access of telehealth while others preferred in-person care due to perceived better quality of care or to provide procedures and testing. Commissioners noted that telehealth improves access and stated that it can be an effective tool when used appropriately. However, they continued to express concern with fraud and abuse and over utilization of telehealth services.