Medicare payments “are still adequate to cover the costs of efficient hospitals,” despite negative Medicare margins, Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission, testified before the House Ways and Means Health Subcommittee.
Hackbarth found himself sparring with Rep. Wally Herger (R-Calif.), the subcommittee’s ranking member, who argued that Medicare was underpaying hospitals and physicians, leaving those with private insurance to subsidize “these drastic underpayments.”
Average Medicare margins for hospitals are projected to be negative 6.9% in 2009, compared with negative 5.9% in 2007, Hackbarth conceded. Yet, MedPAC’s research has shown that hospitals under the greatest financial pressure are able to constrain their costs and increase their Medicare margins, whereas hospitals with the highest private payments and the “most non-Medicare sources of revenues” have the lowest Medicare margins, he said.
Other indicators of payment adequacy for hospitals are positive, Hackbarth noted. As an example, “access to hospital services continues to be good with more hospitals opening than closing.”
For these reasons, “I don’t see a need for a large-scale increase of Medicare payments to providers,” Hackbarth said, although payment boosts in specific instances may be warranted, as in the case of primary-care physicians whose services are undervalued and are at risk of being underprovided.
In its March 2008 report, MedPAC recommended increasing payment rates for inpatient and outpatient hospital services at the full rate of inflation in 2010 (projected to be 2.7%) concurrent with the implementation of a quality incentives program.
