The Medicare Payment Advisory Commission recommended to Congress that Medicare eliminate indirect medical education payments built into its managed-care program, saving up to $600 million per year. The recent Medicare Modernization Act added the Medicare Advantage payments, but teaching hospitals already are paid for education costs through regular Medicare, MedPAC said. The report, on issues created by the act, formalized recommendations and analysis approved by MedPAC in March. The commission backed several steps to equalize program costs under traditional Medicare and the managed-care program and to ensure spending doesn't grow as enrollment in Medicare Advantage increases. Those steps include eliminating a $10 billion "stabilization" fund for PPOs meant to attract plans to the program.
MedPAC also identified drawbacks in Medicare's critical-access hospital program, created by a 1997 law to financially bolster hospitals in underserved areas. Some critical-access hospitals appear to be gaining market share over competitors that lack the advantageous designation, the report said. In addition, cost-based reimbursement may be creating financial incentives for critical-access hospitals to continue offering services that would be better discontinued. Some 1,055 hospitals had critical-access status at the start of 2005, up from 41 in 1999. Read the report. -- by Tony Fong