The Medicare Payment Advisory Commission (MedPAC) has issued its annual report to Congress with recommendations for updates to Medicare fee-for-service rates for 2020.

With regard to hospital services, MedPAC recommends that Congress update Medicare inpatient and outpatient prospective payment system (PPS) rates by 2% in 2020.  MedPAC also proposes a new hospital value incentive program (HVIP) to replace Medicare’s current inpatient hospital quality programs.[1]  In short, the HVIP would include a small set of population-based outcome, patient experience, and value measures; score all hospitals based on the same prospectively-set performance targets; and account for social risk factors by distributing payment adjustments through peer grouping.  MedPAC believes the HVIP “will be simpler and will produce more equitable results compared with existing quality payment programs.”

MedPAC recommends no change to Medicare physician fee schedule rates in 2020, in accordance with the Medicare Access and CHIP Reauthorization Act of 2015.  MedPAC reiterates its criticism of current Merit-based Incentive Payment System measures, stating that they “are neither effective in assessing true clinician quality nor appropriate for Medicare’s value-based purchasing programs.”

MedPAC continues to call for implementation of a unified PPS for post-acute care (PAC) providers, including skilled nursing facilities (SNFs), home health agencies (HHAs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs).   Acknowledging that implementation of a unified PAC PPS “is on a longer timetable,” MedPAC recommends the following setting-specific interim payment updates for 2020:

  • A 5% reduction in base payment rates for HHAs and IRFs.
  • A 2% reduction in base payment rates for hospice providers.
  • A 2% increase in base payment rates for LTCHs.
  • Elimination of the SNF PPS market basket increase and implementation of previously-adopted case mix reforms (with annual recalibration of case mix group relative weights to maintain alignment of payments and costs).

With regard to other Medicare fee-for-service payment systems, MedPAC recommends:

  • Eliminating the ambulatory surgical center (ASC) update for 2020 and requiring ASCs to submit cost data.
  • Increasing the outpatient dialysis base payment rate in 2020 by the update specified in current law for 2019 (the end stage renal disease market basket index, less a productivity adjustment, for an estimated update of 1.9%).

MedPAC also assesses the status of Medicare Advantage and the Medicare prescription drug benefit, and renews calls for measures to increase the financial risk that Part D plan sponsors bear as a way to keep the drug program financially sustainable.  Furthermore, MedPAC includes a Congressionally-mandated report on how Medicare pays for opioid and non-opioid pain management treatments in hospital inpatient and outpatient settings, existing incentives for prescribing pain treatment under those systems, and how opioid use is monitored through Medicare claims data.

MedPAC recommendations are not binding on Congress or the Centers for Medicare & Medicaid Services, but offer a roadmap of options for policymakers.

[1] The Hospital Inpatient Quality Reporting Program, Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program, and Hospital Value-Based Purchasing Program.