The group that advises Congress on Medicare shook up the hospital lobby last week when it told policymakers that over the past 10 years the federal government has overcompensated hospitals for inpatient care.
The memo from the Medicare Payment Advisory Commission, likely requested by the House Ways and Means Committee, said that over the past decade payments per discharge increased 27.2%, while costs per discharge increased only 14.3%.
Hospital advocates expressed concern last week that the congressional committee negotiating a final Medicare reform bill will view MedPAC's memo as a rationale for reducing the payment increase hospitals receive in coming years.
"It's unfortunate because (the memo) could end up misleading lawmakers as they're trying to make some important decisions," said Carmela Coyle, senior vice president of policy at the American Hospital Association. By looking only at inpatient prospective payment system payments, MedPAC's analysis doesn't explain that on an aggregate basis Medicare pays 98 cents for every dollar of expense, nor does it show that Medicare margins have dropped every year for the past five years, Coyle said.
The MedPAC memo "is a look back, not a look forward," said Herb Kuhn, vice president of advocacy for the Premier hospital alliance.
Holding a meeting of MedPAC commissioners last week in Washington, MedPAC Chairman Glenn Hackbarth told Modern Healthcare that he was aware of the memo but declined to say whom or which committee requested the information.
Although the three-paragraph memo was blandly addressed to "All committee staff," lobbyists and congressional aides speculated that the Ways and Means panel, chaired by Rep. Bill Thomas (R-Calif.), requested it. Thomas also is the chairman of the House-Senate conference committee that continued last week to work on reconciling the two chambers' $400 billion Medicare reform and prescription drug bills.
The House version would increase hospital payments at a rate of 0.4 percentage points below inflation in 2004 and 2005. Although Sen. Charles Grassley(R-Iowa) and others have protested that provision as representing too small an increase, last week's MedPAC memo could lead the conference committee to institute an even smaller increase.
"What surprises me is that nobody has proposed cutting the outpatient (rate of increase), which MedPAC claims is even more overpaid than the inpatient," said Alec Vachon, president of Hamilton PPB, a Washington-based health policy consulting firm.
Several calls to the Ways and Means Committee were not returned by deadline.
On the Senate side, there is continued resistance to further reductions in the rate of increase for hospital payments, a Democratic aide said last week, adding that MedPAC's analysis "gives a national average and doesn't consider who's above and below."