Medicare Reimbursement

A Brief Look at the 2022 MedPAC Recommendations

The Medicare Payment Advisory Commission (MedPAC) has recommended a 2 percent increase in the Medicare hospital reimbursement rates in 2022 in its annual March report to Congress. There have been no changes in physician rates.

According to data from 2019, the most recent year for which MedPAC has complete data, hospitals have modestly improved access to care and quality of care while improving the Medicare margins.

Medicare hospital reimbursement

The aggregate Medicare margin slightly increased from -9.3 percent to -8.7 percent in all hospitals paid under the IPPS (Inpatient Prospective Payment System). In the case of relatively efficient hospitals, the margin increased from about -2 percent to -1 percent.

Despite the pandemic, MedPAC expects the IPPS hospitals to continue the margin improvements to around -6 percent in 2021. They want efficient hospitals to achieve positive margins this year.

The recommended hospital outpatient reimbursement update is less than the 2.4 percent that was estimated under the current law. However, MedPAC intends for the new rate update to “limit growth in the differential between rates paid for physician office visits on a hospital campus and rates paid for those visits at freestanding physician offices.”

In 2019, Medicaid paid out around $73.5B for clinical services including surgical procedures, office visits, and diagnostic and therapeutic services – totaling under 18 percent of traditional Medicare spending. The Commission’s analysis suggests that the aggregate payments of Medicare for clinicians are adequate. As a result, they have recommended updating the 2022 Medicare payment rates for physicians and other health professional services as per the amount under current law.

Apart from acute care hospitals, long-term care hospitals were the only ones to qualify for a reimbursement rate increase based on the payment adequacy indicators of MedPAC. A 2 percent increase in reimbursement rates was agreed upon in 2022.

The group has agreed to take a cautious, yet steady approach to long-term telehealth reimbursement policy, recommending that Congress extend few temporary coverage and payment policies for telehealth services for a year or two after the pandemic ends.

MedPAC also took into account the fact that Medicare reimbursement was significantly higher for Medicare Advantage enrollees than the traditional Medicare beneficiaries. They have indicated the need for an alternative benchmark policy for improved equity and efficiency in Medicare Advantage.