The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on Medicare payment policy, including payment update recommendations for all the major Medicare fee-for-service payment (FFS) systems, limited recommendations related to the Medicare Advantage (MA) program, and a status report on the Medicare Part D program. The following are highlights of the recommendations for 2015 (many of which were recommended previously):

  • MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates, concurrent with two changes that would institute site-neutral payments among settings. First, Congress should direct the HHS Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for long-term care hospital (LTCH) services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients.
  • Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory updates that includes a higher update for primary care services than for specialty care services. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments from overpriced to underpriced services; and relative value unit reductions to achieve fee schedule savings.
  • Congress should eliminate the ambulatory surgical center (ASC) payment update for 2015, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
  • Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs. Moreover, Congress should direct the Secretary to reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization during Medicare-covered stays.
  • MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use. In addition, Congress should direct the Secretary to reduce payments to home health agencies with relatively high risk-adjusted rates of hospital readmission.
  • Congress should eliminate the update to hospice rates for FY 2015 and adopt a series of previous MedPAC payment reform recommendations.
  • Congress should eliminate the 2015 updates for outpatient dialysis services and direct the Secretary to establish a quality measure that assesses poor outcomes related to anemia in the End-Stage Renal Disease Quality Incentive Program, revise the low-volume adjustment, and audit dialysis facilities’ cost reports.
  • Congress should eliminate the FY 2015 payment updates for inpatient rehabilitation facilities and LTCHs.
  • With regard to Medicare Advantage (MA), MedPAC recommends that Congress: (1) direct the Secretary to determine payments for employer-group MA plans in a manner more consistent with the determination of payments for comparable non-employer group plans; and (2) include the Medicare hospice benefit in the MA benefits package beginning 2016.

Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.