2013 MedPAC Report to Congress, Part I

The Medicare Payment Advisory Commission’s annual report to Congress is lengthy, but also contains a great deal of useful information.  The primary purpose of the report is to set forth the Commission’s recommendations for payment changes (usually, but not always, increases) for various provider types for fiscal 2014, but it also gives the Commission’s perspective on the state of national health care and spending.   (MedPAC Report)   This year’s report notes that while Medicare spending growth is projected to be lower in the next decade than in the past one, on a current basis the program is not taking in as much funds as it expends and its “trust” funds will be depleted within the decade, if not sooner.  While the number of eligible persons will increase at a rate of about 3% a year during that decade, per beneficiary spending will increase at 6-8% per year.  In the Commission’s view much of this growth is due to an aging Medicare population with greater incidence of chronic disease.

In making recommendations on provider payments, the Commission is guided by concerns about the impact on beneficiary access, especially to primary care, equity across provider types and settings, and incentives for providers to render more efficient and appropriate care.  The Commission seems to have as an assumption that there is significant geographic variation in care that is evidence of inappropriateness, and not accounted for by beneficiary health status or demographics.  This view is increasingly contested in the research literature, as shown by the recent Institute of Medicine interim report on the topic.  In regard to hospital services, the Commission noted that quality is improving, at least by CMS’ measures, that beneficiaries appear to have good access to hospital services, that hospitals have good access to capital, but that Medicare margins have declined and appear to be negative for the average hospital, although efficient hospitals have a small positive Medicare margins.  The low or negative Medicare margins obviously drive up private insurance rates.  The Commission recommended only a 1% increase in both inpatient and outpatient rates, driven in large part by a probably accurate perception that hospitals’ coding practices generate greater reimbursement than is justified.