The Medicare Payment Advisory Commission (MedPAC) has released recommendations to Congress regarding how Medicare fee-for-service payment system rates should be adjusted in 2018. One of the focus areas for MedPAC is post-acute care (PAC), which includes skilled nursing facility (SNF), home health agency (HHA), inpatient rehabilitation facility (IRF), and long-term care hospital (LTCH) services.  According to MedPAC, the “unnecessarily high level of spending and the inequity of payments across different types of patients” necessitate changes to both payment levels and overall system design.  MedPAC therefore reiterates its previous recommendation for a uniform Medicare PAC prospective payment system (PPS) that bases payments on patient characteristics; MedPAC believes that transition to the PAC PPS could begin as early as 2021. In the meantime, MedPAC recommends that Congress:

  • Eliminate SNF PPS increases for fiscal years (FY) 2018 and 2019 and implement previous SNF PPS reform recommendations intended to increase equity in payments for different types of stays. Congress should revisit the reforms in 2020 to determine if additional adjustments are needed to more closely align payments with the costs of efficient providers.
  • Reduce home health payment rates by 5% in 2018, rebase payments beginning in 2019, and eliminate the use of the number of HHA therapy visits as a factor in payment determinations.
  • Reduce Medicare IRF PPS rates by 5% for FY 2018.
  • Eliminate the LTCH PPS update for FY 2018.

The Commission estimates that its PAC recommendations would reduce Medicare spending for these four payment systems by more than $30 million over the next 10 years. In other areas, MedPAC recommends that Congress:

  • Direct the Secretary of the Department of Health and Human Services to increase inpatient and outpatient hospital payments by the amount specified in current law (MedPAC projects a 1.85% hospital update, subject to change). MedPAC also endorses requiring hospitals to add a modifier on claims for all services provided at off-campus stand-alone emergency department facilities.
  • Increase payment rates for physicians and other health professionals by the amount specified in current law (0.5% for calendar year 2018).
  • Eliminate the ambulatory surgical center (ASC) and hospice payment update for 2018 and require ASCs to submit cost data.
  • Increase the outpatient dialysis base payment rate by the update specified in current law for 2018 (market basket, net of a productivity adjustment, minus 1 percentage point).

Finally, the MedPAC report includes data-rich chapters on the status of the Medicare Advantage and Medicare Part D prescription drug programs. MedPAC recommends that the Secretary calculate Medicare Advantage benchmarks using fee-for-service spending data only for beneficiaries enrolled in both Part A and Part B.  MedPAC also reiterated its June 2016, recommendations to address Part D spending growth.

MedPAC’s recommendations are not binding, but Congress and CMS consider these options when updating Medicare payment policies.