In a January 2022 meeting of the Medicare Payment Advisory Commission (MedPAC), commissioners reviewed various recommendations related to the Medicare fee schedule for various health sectors, and unanimously agreed to update Medicare payments to hospitals and keep physician payment rates the same for 2023. This Health Capital Topics article will review the recommendations made by MedPAC for each of the health sectors and their respective payment systems.

As noted in another article in this Health Capital Topics issue,¹ MedPAC is an independent congressional agency that advises the U.S. Congress on issues affecting the Medicare program, such as “payments to private health plans participating in Medicare and providers in Medicare’s traditional fee-for-service program, [as well as] access to care, quality of care, and other issues affecting Medicare.”² Additionally, MedPAC is required by law to annually assess the adequacy of Medicare payments for various healthcare delivery sectors and make payment update recommendations.³ In making that assessment, the commission analyzes factors such as patient access to care, quality of care, hospital access to capital, Medicare payments, and hospital costs.⁴  During their January 13-14, 2022 meeting, MedPAC reviewed the payment adequacy of:

1. Hospital inpatient and outpatient services;
2. Physician and other health professional services;
3. Ambulatory surgical center (ASC) services;
4. Outpatient dialysis services
5. Hospice services;
6. Skilled nursing facility (SNF) services;
7. Home health agency services;
8. Inpatient rehabilitation facility services; and,
9. Long-term care hospital services.⁵

Regarding hospital inpatient and outpatient services, the commissioners approved the recommendation by MedPAC staff to update the base payment rates for acute care hospitals.⁶ While MedPAC staff acknowledged that the COVID-19 public health emergency (PHE) has had “material effects on payment adequacy indicators, making them more difficult to interpret,” they stated that “[t]emporary or highly variable coronavirus effects are best addressed through targeted, short-term funding policies rather than permanent changes to all providers’ payment rates in 2023 and future years.”⁷ Commissioners ultimately approved an update of 2% for both inpatient and outpatient payments for hospitals for fiscal year 2023, in accordance with current law,⁸ but expressed concerns that the recommended payment update “may not be adequately reflected in the FY 2023 market basket update” due to the disruptions emanating from COVID-19.⁹

However, when it came to payment rates to physicians, MedPAC commissioners were not as generous. Commissioners voted, despite “concerns about the long-term viability of the current physician fee schedule model” to recommend keeping the physician fee schedule payment stagnant for 2023.¹⁰ This recommendation is consistent with the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which dictates a 0% update for physician pay (although physicians can receive enhanced reimbursement through participation in quality payment programs).¹¹ Despite this vote, commissioners expressed concern that the physician payment update is not “keeping up with inflation during a particularly volatile time for healthcare providers,” which may “lead to underpaying providers in the current high-inflation environment.”¹² Many of the commissioners’ comments regarding the physician fee schedule centered on the prospective need for more wholesale changes to the physician payment system. For example, nearly half of physician fee schedule payments are comprised of the practice expense (the overhead involved in providing a given service), but that practice expense is not tied to a market basket update (similar to the payment system for hospitals) that accounts for inflation. This could lead to the two payment systems experiencing payment update differentials in coming years.¹³

Provider organizations quickly spoke out in opposition to MedPAC’s recommendation, asserting that keeping physician payments unchanged (not even keeping payments on par with inflation) ignores the reality that “[p]hysician practices are dealing with massive staffing shortages and skyrocketing expenses.”¹⁴

For SNFs, home health agencies, and inpatient rehabilitation facilities, MedPAC agreed to recommend a base payment decrease of 5% to those organizations.¹⁵ Further, MedPAC recommended that home health agencies be required to report telehealth services provided during a 30-day care period. For long-term care hospitals and dialysis facilities, however, MedPAC voted to suggest an increase in reimbursement.¹⁶ MedPAC did not recommend a payment increase or decrease for ASCs or hospices, but it did recommend an elimination of the 2022 ASC conversion factor.¹⁷

The recommendations made by MedPAC during its January 2022 meeting will be included in its annual March report to Congress on Medicare payment policy.¹⁸