MedPAC suggests hike in payments for hospitals and doctors, who hoped for more

Hospitals and physicians say they are glad to see a call for more federal support, but they said the proposed increases are still insufficient.

The Medicare Payment Advisory Commission is recommending an increase in federal payments to hospitals, but it’s not quite what hospitals had sought.

The commission voted last week to call on Congress to provide a 1% increase in Medicare payment rates for inpatient and outpatient rates. The commission, known as MedPAC, also recommended an additional $2 billion to safety-net hospitals. MedPAC advises Congress on Medicare rates and policy.

The American Hospital Association said it appreciated the commission’s recognition that hospitals should get additional federal support. But Ashley Thompson, the hospital association’s senior vice president, said hospitals hoped for a recommendation for bigger increases.

“We believe an update above and beyond current law is absolutely necessary given the current inflationary environment, ongoing workforce challenges, and Medicare’s chronic underpayments to hospitals and health systems as detailed in our comments to MedPAC,” Thompson said in a statement.

The American Hospital Association had asked MedPAC earlier this month to recommend a 2.8% increase in inpatient and outpatient rates, and a 2.7% increase in payment rates for long-term care hospitals.

MedPAC also is recommending an increase in payments for physicians. Much like hospitals, doctors are welcoming recognition that they need greater payments, but argue the recommendation should have been bigger.

The advisory commission suggested that payments should be linked to the Medicare Economic Index, which reflects rising costs for physicians. The American Medical Association said it has long supported tying increases to the index. But MedPAC recommended the increase should be 50% of the index, which the AMA said is insufficient.

“We feel strongly that an update tied to 50% of MEI does not go far enough,” Jack Resneck Jr., the AMA president, said in a statement.

Hospitals and physicians have long complained that Medicare’s payment rates don’t adequately address the costs of care.

Medicare covers 84 cents for each dollar hospitals spend on caring for Medicare patients, according to the American Hospital Association. In its letter to MedPAC earlier this month, the association noted that MedPAC has recognized that Medicare hasn't fully covered the cost of caring for patients since 2002.

“We continue to urge the commission to bring Medicare payments back to the level where they cover the cost of providing care to ensure patients have adequate access to care,” Thompson said in a statement.

Health systems and the AMA have urged the federal government to do more for hospitals and physicians, which have seen increased financial pressures during the COVID-19 pandemic.

“Physicians have struggled to keep their practices open in the face of rampant inflation, COVID and growing costs of running a medical practice, and Medicare payments have not responded adequately, capped off most recently by a 2% payment reduction in 2023,” Resneck said.

Congress and President Biden’s administration signed off on a 2% reduction of Medicare payment rates for doctors in 2023. It actually could have been worse. The Centers for Medicare & Medicaid Services had initially sought a 4.5% reduction, but lawmakers agreed to a more modest reduction.

The AMA is pressing for Congress and the Biden administration to do more for 2024. Resneck argued that small, independent practices, as well as those in rural areas and practices serving underrepresented communities, are especially at risk.

“The AMA and others are asking Congress to reform Medicare to make it more rational and serve patients better,” Resneck said. “As part of this, Congress should adopt a 2024 Medicare payment update that recognizes the full inflationary growth in health care costs.”

MedPAC is also recommending Congress reduce 2024 payment rates for home health agencies by 7%, and a 3% cut in payment rates for skilled nursing facilities and inpatient rehabilitation facilities, the hospital association said.