MedPAC recommends raises for physicians, hospitals getting Medicare reimbursement

The Medicare Payment Advisory Commission (MedPAC) has recommended Congress increase payments for physicians and hospitals in 2024.

Even so, the American Medical Association (AMA) and the American Hospital Association (AHA) said the payments are not keeping up with the costs of doing business.

In late 2022, the Medicare Physician Fee Schedule prompted numerous calls for larger reimbursement rates for physicians who treat Medicare beneficiaries. It remained a sticking point for doctors even as health care organizations praised some provisions in the $1.7 trillion federal budget Congress approved late last year.

MedPAC, a nonpartisan agency that advises Congress on Medicare policy, met Jan. 12 and 13, with presentations about payments to physicians, other health professionals, hospitals, and more.

Physician payments

Physicians would receive pay increases linked to 50% of the Medicare Economic Index (MEI). AMA said the association supports that connection, but “50% of MEI does not go far enough."

"As the only Medicare provider without an inflationary payment update, physicians have waited a long time for this change,” AMA President Jack Resneck Jr., MD, said in a news release. “When adjusted for inflation, Medicare physician payment has declined 22% from 2001 to 2021.”

Meanwhile, physicians have struggled to keep practices open while dealing with rampant inflation, COVID-19, and growing costs, but Medicare payments have not responded adequately, capped off most recently by a 2% payment reduction in 2023, according to AMA.

"These increasingly thin operating margins disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or other historically minoritized or marginalized patient communities,” Resneck said. “Seniors and physicians deserve a stable Medicare payment system that ensures access for future generations. The AMA and others are asking Congress to reform Medicare to make it more rational and serve patients better. As part of this, Congress should adopt a 2024 Medicare payment update that recognizes the full inflationary growth in health care costs.”

Hospitals react

AHA thanked MedPAC for recommending a 2024 payment update of market basket plus 1% for hospital inpatient and outpatient prospective payment systems (PPS). But AHA called for an increase of market basket plus 2.8% for inpatient and outpatient PPS hospitals and 2.7% for long-term care hospitals facing “unprecedented financial pressures due to inflation and almost two decades of negative Medicare margins.”

“Simply put, Medicare’s payments to hospitals are inadequate,” said a Jan. 3 letter to MedPAC from Ashley B. Thompson, AHA senior vice president for public policy analysis and development.

AHA outlined how “Medicare payments have remained far below the cost of providing care for many years – a fact that the Commission recognizes.” MedPAC’s data book shows Medicare has not covered costs of serving Medicare patients since 2002, Thompson said.

AHA urged the commission to update laws for inpatient rehabilitation facilities and hospital-based skilled nursing facilities.

Medicare volume

The MedPAC presentations included data about the volume of Medicare services for 2021.

The Medicare payments cover about 8,000 types of clinician services and 1.3 million clinicians billed Medicare’s Physician Fee Schedule in 2021. Medicare paid $92.8 billion for services in 2021, $84.7 billion in 2020, and $97.2 billion in 2019.

The MedPAC information indicated the total number of clinicians is stable, but primary care providers are declining. Clinician encounters per beneficiary declined in 2020, but “partially rebounded” in 2021, and physicians’ median compensation grew an average of 3% a year from 2017 to 2021.

The hospital payments involved 3,170 hospitals with 7.1 million inpatient stays and receiving $107.9 billion in fee-for-service payments. There were 3,370 outpatient hospitals that received $49.9 billion for 135.7 million services.

More to come

MedPAC generally issues its recommendations in reports to Congress each March and June. MedPAC’s next public meeting is scheduled March 2-3. Meetings are available online.