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MedPAC Releases Medicare Payment Recommendations

March 20, 2020

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CONTACTS
Andrew Amari, Hospital Policy and Regulatory Specialist

The Medicare Payment Advisory Commission (MedPAC) released on March 13 its March 2020 Report to Congress recommending payment updates for Medicare’s payment systems in fiscal year (FY) 2021, including a 2% update to the base payment rate for hospital inpatient and outpatient services.

The base payment update would pair with MedPAC’s previous hospital value incentive program (HVIP) recommendations, which would provide an additional 0.8% increase [see Washington Highlights, Mar. 22, 2019], and an additional 0.5% increase from eliminating penalties under the current hospital quality reporting program [see Washington Highlights, Jan. 17].

Together, these recommendations would provide hospitals with a 3.3% update to aggregate payments. If Congress does not adopt MedPAC’s HVIP recommendations, the currently scheduled FY 2021 update of 2.8% for acute care hospitals would go into effect. 

The commission also recommends that Congress should update the Medicare payment rates in calendar year (CY) 2021 for physicians and other health professional services by the amount determined under current law. Current law does not provide an update to the conversion factor for CY 2021.

In addition to the payment recommendations, MedPAC’s report also details the status of the Medicare Advantage (MA) program. As discussed during its November meeting [see Washington Highlights, Nov. 7, 2019], MedPAC details its concerns with the current MA quality bonus program. The commission highlights a potential model for a MA value-incentive program (MA-VIP) that is still being developed and will continue to be discussed in future meetings. The MA-VIP would aim to be more consistent with current Medicare fee-for-service quality payment programs and account for differences in social risk, among other features.

MedPAC’s report also provides a status update on the Medicare prescription drug program (Part D). Noting that Part D has been among the fastest growing components of Medicare spending, increasing from $46.2 billion in 2007 to $83.4 billion in 2018, the commission provides an overview of several potential approaches to address increased program spending. Among other topics, MedPAC provides an overview of potential changes to address increased spending, such as changes to Part D’s defined standard benefit — as applied to beneficiaries both with and without Medicare’s low-income subsidy — and the structure of Medicare Part D reinsurance [see Washington Highlights, Jan. 17, 2020].

Finally, the report includes a chapter on health care provider consolidation that looks at the effects of hospital mergers. This chapter, requested by Congress, also examines incentives for hospitals in the 340B Drug Pricing Program to use high cost Part B drugs, consistent with discussion during the January 2020 meeting [see Washington Highlights, Jan. 17].

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