The Medicare Payment Advisory Commission (MedPAC) has released its annual recommendations to Congress on Medicare policies, including Medicare fee-for-service (FFS) payment updates and a status report on the Medicare Advantage and Medicare Part D programs.  The following are highlights of the recommendations for 2017 (some of which were recommended previously):

• Congress should direct the Secretary of the Department of Health and Human Services (HHS) to increase inpatient and outpatient hospital payments by the amount specified in current law (MedPAC projects that to be a 1.75% increase).
• With regard to the 340B drug program, Congress should direct the Secretary to reduce Medicare payment rates for 340B hospitals’ separately-payable 340B drugs by 10% of the average sales price (ASP). The resulting savings (estimated to be $300 million) should be redirected to the Medicare uncompensated care pool and distributed based on reported uncompensated care costs on hospital cost reports’ Worksheet S-10 (the use of S-10 uncompensated care data should be phased in over three years to allow for audits and improvement of data). MedPAC notes pharmaceutical companies would still have to provide hospitals with the same 340B discounts (estimated to be 34%) as they currently provide.
• With regard to physician services, Congress should increase payment rates for physician and other health professional services by the amount specified in current law (0.5%) for calendar year 2017.
• Congress should eliminate the skilled nursing facility (SNF) market basket update for 2017 and 2018.  Congress also should direct the Secretary to revise the SNF prospective payment system (PPS) to rely on patient care needs, with 2018 as “feasible implementation date.” In 2019, the Secretary should report to Congress on the effects of the reformed PPS and make any additional adjustments needed to more closely align payments with costs.
• Congress should eliminate the fiscal year (FY) 2017 Medicare rate update for inpatient rehabilitation facilities (IRFs). In addition, the Secretary should conduct focused medical record reviews of IRFs that have unusual case mix and coding patterns. In addition, the Secretary should expand the IRF outlier pool to redistribute payments more equitably across cases and providers.
• Congress should eliminate the ambulatory surgical center (ASC) payment update for 2017 and require ASCs to submit cost data. 
• Congress should direct the Secretary to eliminate the home health payment update for 2017, rebase rates over two years beginning in 2018, and revise the PPS to eliminate the use of therapy visits as a factor in payment determinations, concurrent with rebasing.
• Congress should increase the outpatient dialysis base payment rate by the update specified in current law for 2017 (market basket, net of a productivity adjustment, minus 1.25 percentage points). MedPAC also makes recommendations for redesigning the low-volume payment adjustment and auditing dialysis facilities’ cost reports. 
• Congress should eliminate the 2017 update for long-term care hospitals and hospices.
• With regard to Medicare Advantage, Congress should eliminate the cap on benchmark amounts and the doubling of the quality increases in specified counties. Congress also should direct the Secretary to (1) develop a risk adjustment model that uses two years of FFS and MA diagnostic data and does not include diagnoses from health risk assessments from either FFS or MA, and (2) then apply a coding adjustment that fully accounts for the remaining differences in coding between FFS Medicare and MA plans.

While MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.