MedPAC Annual Report, Part II

About 850,000 clinicians bill Medicare for outpatient services; 550,000 of these are physicians, the rest are nurse practitioners and other health professionals.  These services are paid on a fee-for-service basis, currently under the besieged SGR formula, which Congress and everyone else knows must be replaced, but hasn’t been yet.  Theoretically the formula calls for an impending 25% plus cut in payments.  Medicare’s payments are around 80% of average private plan payments, and the Commission believes current payments support adequate access to care.  The Commission did, however, express concern about future access issues, especially to primary care, given the surge both in Medicare enrollment and retirements of existing physicians.  Quality of outpatient care remained steady.  Costs for outpatient providers were projected to grow about 2.3%, but that seems a likely understatement given all the regulatory requirements impinging on physician practices.  The Commission reiterated its past call for repeal of SGR and replacement with a new system of updates, but that requires Congressional action.  In regard to ambulatory surgery centers, the Commission recommended no change to payment rates, believing that current payments provided an adequate return to these centers.  The Commission also asked CMS to require them to submit cost data so that margins can be ascertained and suggested that Congress and CMS implement value-based purchasing for ASC services no later than 2016.  Similarly, the Commission recommended no change in payments for outpatient dialysis services, in this case because margins seem positive.  Post-acute care has been a troublesome area for Medicare, with high rates of fraud in items like home health care.  In regard to skilled nursing facility care, no payment increase was recommended, largely because these services seem to carry a very high margin, well over 10% for several years.  The Commission reiterated its call for reform of the payment method in a manner that would create savings for Medicare.  Home health care is another sector with very high margins, and the Commission also repeated its call for reform and reduction of those payments.  Hospice care is somewhat similar, with high single-digit Medicare margins.  Because of the current payment system, there is some suggestion that providers game length-of-stay and other aspects to maximize payments.  The Commission has recommended changes to the payment formula to limit this activity and it advised no payment update for 2014.  In regard to most providers, one senses some frustration by the Commission at the lack of change by CMS in situations where the provider class is making ample margins on Medicare business.