March 17, 2017

MedPAC calls for 2018 post-acute care payment cuts, freezes

Daily Briefing

The Medicare Payment Advisory Commission (MedPAC) on Wednesday delivered its annual report to Congress detailing the potential for $30 billion in savings over a decade by freezing or cutting Medicare post-acute care payments.

MedPAC's annual report offers lawmakers policy recommendations and can provide backing for controversial payment cuts for Medicare providers, according to CQ News.

Report details

In this year's 483-page report, MedPAC urged lawmakers to change Medicare payments across all four post-acute care settings:

  • Home health agencies;
  • Inpatient rehabilitation facilities (IRFs);
  • Long-term care hospitals; and
  • Skilled nursing facilities (SNFs).

MedPAC said the changes are needed to address "chronic overpayment." It wrote, "By sending the wrong price signals, current payments encourage providers to furnish unnecessary care and to prefer to treat some patients over others." The panel recommended Congress:

  • Keep payment rates at current levels for long-term care hospitals in 2018;
  • Keep payment rates at current levels for SNFs in 2018 and 2019;
  • Reduce payments to home health agencies in 2018; and
  • Reduce payments to inpatient rehabilitation facilities in 2018.

MedPAC said companies and organizations that provide post-acute care should be able to adjust to the payment changes, noting that payments have outpaced costs in such settings for more than a decade. MedPAC added that HHS should be required to submit a report to Congress detailing the effect of payment freezes on its prospective payment system.

Further, to improve payment accuracy, MedPAC said:

  • Ambulatory surgical centers should be required to submit costs data;
  • CMS should revise the payment system for SNFs;
  • CMS should revise the base payment system for home health agencies to exclude therapy visits; and
  • The inpatient rehabilitation facility's "outlier pool" should be expanded.

MedPAC also recommended Congress not implement currently mandated payment updates for ambulatory surgical centers and hospices. But the panel said Congress should implement mandated increases for dialysis facilities, hospitals, and physicians and other health professionals.

However, MedPAC recommended that Medicare lower payments for hospital outpatient departments for services that could be provided in a physician's office.

Overall, MedPAC estimated that Medicare could save $30 billion over the next 10 years if Congress implements the panel's recommendations for post-acute care.

Drug costs

MedPAC reprinted its 2016 recommendations on Medicare Part D, a program that costs roughly $100 billion a year. It suggested that Medicare gradually reduce how much it pays when a Part D beneficiary's prescription drug costs rise into the so-called catastrophic range from 80 percent to 20 percent. The reduction would give insurers added incentive to negotiate on drug prices, MedPAC said.

Hospital closures

MedPAC in the report also detailed some hospital closure information. According to the report, 16 of the 24 hospitals that shutdown in 2015 were in states that chose not to expand their Medicaid programs under the Affordable Care Act. MedPAC found that since 2010, 127 urban and rural hospitals have closed, largely because of low patient volume and because they were not profitable (Nather, "Vitals," Axios, 3/16; Young, CQ News, 3/15 [subscription required]; Firth, MedPage Today, 3/15).

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