The Medicare Payment Advisory Commission (MedPAC) released its 2021 Medicare provider rate update recommendations on March 13, 2020 – the same day President Trump declared a national emergency due to COVID-19.  MedPAC’s recommendations were based on an assessment of various Medicare “payment adequacy indicators” that are unlikely to reflect the state of the health care industry in 2021, given the tremendous strain COVID-19 is placing on hospitals, nursing homes, clinicians, and other provider types nationwide.  Furthermore, as part of the pending stimulus legislation packages, Congress is likely to legislate 2021 Medicare payment updates and/or other funding policies that recognize the unique costs the health system has incurred during the COVID-19 crisis.  Nevertheless, we highlight below key MedPAC recommendations that may help guide the Congressional Medicare policy debate once the public health situation normalizes.

  • Inpatient and outpatient hospital services: MedPAC recommends that Congress update acute care hospital base rates by 2%.  Additional payment would be available through a proposed hospital value incentive program that would replace current hospital quality programs (which is expected to raise aggregate Medicare payments by 3.3% compared to the 2.8% update projected under current law).
  • Physicians: MedPAC recommends no change to Medicare physician fee schedule rates in 2021.  Current law provides no conversion factor update for 2021, although performance-based adjustments may be made under the Quality Payment Program.  Note that the Centers for Medicare & Medicaid Services (CMS) announced on March 22, 2020 that it is granting various exceptions and extensions related to Medicare quality reporting requirements as part of its COVID-19 response.
  • Post-acute care providers: MedPAC reiterated its prior recommendation that Congress implement 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).  In the meantime, MedPAC recommends the following payment updates for 2021: 
    • A 7% reduction in base payment rates for HHAs.
    • A 5% reduction in base payment rates for IRFs.
    • Elimination of the SNF rate update.
    • A 2% increase in base payment rates for LTCHs.
  • Hospices: MedPAC recommends no update to hospice rates in 2021.  Furthermore, MedPAC calls for wage adjusting the hospice aggregate cap and reducing it by 20%.  The report includes a discussion of preliminary results of MedPAC’s Congressionally mandated review of the expansion of the hospital PAC transfer policy to hospice.
  • Ambulatory surgical centers (ASCs): MedPAC recommends no ASC update for 2021.  MedPAC also recommends that CMS require ASCs to submit cost data.
  • Outpatient dialysis services. MedPAC recommends that Congress update the Medicare end-stage renal disease prospective payment system base rate by the amount determined under current law (projected to be 2.0%).

MedPAC also assesses the status of Medicare Advantage and the Medicare prescription drug benefit.  Finally, MedPAC includes Congressionally mandated reports on health care provider consolidation and the potential impact of the 340B Drug Pricing Program on drug spending.