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  • Washington Highlights

    MedPAC Issues Recommendations on Hospital, Physician Payment


    Shahid Zaman, Director, Hospital Payment Policy
    For Media Inquiries

    The Medicare Payment Advisory Commission (MedPAC) issued its March 2024 report to Congress, evaluating payment adequacy and issuing payment recommendations across seven Medicare fee-for-service payment systems, including hospital and physician payments. For hospital inpatient and outpatient services, MedPAC recommended that for fiscal year 2025, Congress update Medicare base payment rates by the statutorily required update plus 1.5%. The payment update recommendation was informed by the commission’s analysis of the effects of inflation on hospital margins — in 2022, hospitals’ aggregate all-payer operating margin fell to the lowest level since 2008, and their overall fee-for-service Medicare margin dropped to a record low. The commission also recommended that Congress transition to redistributing disproportionate share hospital and uncompensated care payments as an add-on payment to both inpatient and outpatient payments using the Medicare Safety-Net Index (MSNI), add $4 billion to the MSNI pool, and pay MSNI amounts for services provided to Medicare Advantage (MA) beneficiaries [refer to Washington Highlights, Jan. 13, 2023]. 

    On physician and other professional services, the commission recommended that in 2025, Congress update the 2024 Medicare base payment rate for physician and other health professional services by the amount specified in current law plus 50% of the projected increase in the Medicare Economic Index. MedPAC expects this update to be 1.3% above current law. The commission also urged Congress to enact its 2023 recommendation to establish safety-net add-on payments under the physician fee schedule for services delivered to low-income Medicare beneficiaries. 

    The report also contains chapters on MA, Medicare Part D, and rural emergency hospitals. The commission estimated that in 2024 MA plans would pay a projected $83 billion more for their enrollees than Medicare would have spent if these enrollees were paid through fee-for-service. Citing higher MA spending and other concerns, MedPAC continued to reiterate its previous recommendations to fully account for MA coding intensity, improve encounter data accuracy and completeness, replace the quality bonus program, and establish more equitable benchmarks.