In its March report to Congress, the Medicare Payment Advisory Commission (MedPAC) issued recommendations for payment updates in the Medicare fee-for-service payment systems, including for hospital inpatient and outpatient services.
In addition to its annual payment update recommendations, the MedPAC report outlines Medicare coverage of telehealth services during the COVID-19 public health emergency (PHE) and options for continuing flexibility after the expiration of the PHE.
In the report, MedPAC also assesses the status of Medicare Advantage and Medicare Part D , which covers prescription drugs, but does not offer any recommendations.
Payment Updates
Based on its analysis that hospitals’ Medicare margins are projected to increase in 2021, MedPAC recommends Congress update the 2021 base payment rate for Medicare inpatient and outpatient hospital payments by 2 percent. The 2 percent base payment update, in addition to a statutorily mandated 0.5 percent increase in Medicare payments and a 0.8 percent increase associated with MedPAC’s recommendation to replace quality program penalties with a new hospital value incentive program, would result in a net inpatient update of 3.3 percent.
Hospital outpatient payments would see a net increase of 2 percent instead of the expected 2.4 percent. CMS notes growth in hospital outpatient payments was slower in 2019 than in previous years, partly because of steeper cuts to hospitals in the 340B Drug Pricing Program resulting from the transition of a large number of Part B drugs from pass-through status to non–pass through status. While pass-through drugs are exempt from the 340B payment cuts, separately payable non–pass through drugs are subject to the cut, thus resulting in a larger payment reduction to 340B hospitals in 2019.
Telehealth Coverage
The report also covers telehealth policies implemented during the PHE, including an increase in the number of telehealth services reimbursed by Medicare, lifting of geographic restrictions related to telehealth, and the option for providers to reduce or waive beneficiary cost-sharing for telehealth services.
MedPAC proposes — but does not formally recommend — a transitional one- or two-year period during which the Centers for Medicare & Medicaid Services could continue to reimburse providers for an expanded list of telehealth services regardless of where the beneficiary is located and also pay for certain audio-only services. During this transitional period, MedPAC suggests policymakers gather data on how telehealth affects access, quality, and cost.
Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.
