The Medicare Payment Advisory Commission recommended eliminating outlier payments for hospital outpatient services. Outlier payments compensate hospitals for cases in which the cost of care significantly exceeds the DRG payment. In its March report to Congress, MedPAC said several factors make outlier payments for hospital outpatient services unnecessary. The factors include: low variability in costs for many outpatient services; the payment system's susceptibility to manipulation by hospitals; distortions created when one hospital outpatient setting is subject to outlier payments and another is not; and the additional payment system complications that arise from outlier payments. Outlier payments for outpatient services represent 2% of Medicare hospital outpatient spending. "The outpatient (prospective payment system) pays for services that are generally narrowly defined and low cost, suggesting that the (outlier) policy is not needed to protect hospitals from financial risk," MedPAC said in its report. The commission also said hospitals' overall access to capital remains good and that aggregate Medicare payments to hospitals in 2004 will cover "efficient providers' costs." Read the MedPAC report.
In other news, the CMS said 3.7 million Medicare Advantage enrollees will receive better benefits because of increased federal payments to their health plans. Previously known as Medicare+Choice, Medicare Advantage has received benefit proposals from 146 managed-care plans serving 4.6 million beneficiaries. Based on the proposals, 1.9 million beneficiaries will see their premiums decline, and 2 million beneficiaries will pay less out of pocket, the CMS said. Under the new Medicare reform law, Medicare Advantage payments were scheduled to increase an average of 10.6% as of today. The law requires health plans to use the money to lower premiums, enhance benefits or raise provider payments. -- by Jeff Tieman