Lawmakers postponed that cut in the year-end fiscal deal, but it's scheduled to begin March 1 for all Medicare providers unless Congress again acts to avert it.
In the case of inpatient and outpatient hospital services, the panel urged Congress to prevent HHS Secretary Kathleen Sebelius from implementing more than a small amount of an additional cut included in the fiscal agreement.
Under the American Taxpayer Relief Act of 2012, Sebelius is required to find another $11 billion in savings from hospitals within four years through rate reductions. If the cut was evenly spread out over the four years—as the Congressional Budget Office assumed it would be—then it would reduce the fiscal 2014 update to a 0.6% cut.
Instead, MedPAC urged a 1% increase for hospitals' inpatient and outpatient prospective payments. That figure is technically a reduction, according to Medicare's complex accounting rules, because under a pre-existing legislative formula, hospitals should receive a 1.8% increase in October. But if the MedPAC recommendation is followed, Medicare hospital spending would increase in the next fiscal year by up to $2 billion, according to the advisory body.
“The context has changed since our December discussion; a proposal that would have saved money relative to the current law baseline in December now costs money relative to the new baseline as amended by the Taxpayer Relief Act,” said Glenn Hackbarth, chairman of MedPAC. “The fact that the legislative context has changed does not alter our conclusion that the base rate should increase by 1%, regardless of the Taxpayer Relief Act, regardless of sequestration that may happen in the future.”
The recommendation drew immediate praise from the American Hospital Association. Chantal Worzala, director of policy at the AHA, said the group also continues to dispute that coding-related reductions are needed to recover overcompensation.
Similarly, MedPAC urged Congress to keep pay rates unchanged for inpatient rehabilitation facility services, home health services, outpatient dialysis services, long-term-care hospital services and hospices next fiscal year, even if the sequester cut goes into effect.
MedPAC also recommended that Medicare rates for ambulatory surgery centers remain unchanged, deviating from the 0.5% increase that Hackbarth recommended in December. MedPAC members rejected increasing surgery centers' rates, instead basing the rate recommendation on its standard measures of industrywide supply and demand as part of an attempt to close the reimbursement gap between ASCs and similar hospital settings.