AHA Urges MedPAC to Consider Higher Medicare Payment Updates for 2024

January 06, 2023 - The American Hospital Association (AHA) has asked the Medicare Payment Advisory Commission (MedPAC) to consider higher Medicare payment updates before issuing its final recommendations, including greater market basket updates and increased physician reimbursement.

AHA’s comments are in response to MedPAC’s proposed Medicare payment recommendations for 2024. The commission proposed to update Medicare payment rates for hospital inpatient and outpatient services by the current market basket plus 1 percent.

It also proposed a 7 percent payment rate reduction for home health agencies, a 3 percent reduction for skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs), and a boost in Medicare payment for physicians by 50 percent of the Medicare Economic Index.

AHA appreciated MedPAC’s recommendation to increase hospital inpatient and outpatient payment rates by the current market basket plus an additional 1 percent. However, the organization noted that this update is insufficient, given the challenging financial environment in which hospitals are operating.

As hospitals experience consistent negative margins, AHA maintained that Medicare’s payments to hospitals are inadequate. The organization asked MedPAC to recommend a higher payment update, consisting of the market basket plus the difference in what hospitals received in 2022 and what they should have received.

This update amounts to the market basket plus 2.8 percent for inpatient and outpatient hospitals and 2.7 percent for long-term care hospitals.

The letter noted how many hospitals have negative Medicare margins, as Medicare only pays an average of 84 cents for every dollar hospitals spend on care for Medicare beneficiaries.

“We continue to urge the commission to start to bring Medicare payments back to the level where they cover the cost of providing care and ensure patients have adequate access to care,” AHA wrote.

AHA also urged MedPAC to recommend current law updates for IRFs and hospital-based SNFs that would increase their reimbursement rates in 2024, noting the critical role the facilities played during the COVID-19 pandemic.

Regulatory waivers have allowed IRFs to treat a broader array of patients, helping to increase capacity at acute-care hospitals. Furthermore, AHA cited data that found that 45 percent of all IRFs have margins below 5 percent; thus, a 3 percent reduction in Medicare payments would lead to negative or low margins for almost half of all IRFs.

Similarly, hospital-based SNFs have treated medically complex patients during the pandemic, alleviating capacity for the rest of their host hospital. SNFs have also faced negative margins during the pandemic.

“Therefore, AHA encourages MedPAC to recommend a current law update for SNFs, especially hospital-based SNFs, in order to ensure they can meet the expected challenges of this coming year as well as continue to provide critical care capacity for their communities,” the letter stated.

Regarding physician reimbursement updates, AHA supported the recommendation to boost reimbursement outside budget neutrality parameters and make add-on payments for safety-net primary care and specialty care clinicians outside budget neutrality.

However, the organization urged MedPAC to recommend a higher update to physician reimbursement to account for inflation and the payment cuts included in the Physician Fee Schedule.

The letter noted how the proposal to increase payment rates by 50 percent of the Medicare Economic Index will not offset the impact of rising input costs or the 2 percent reimbursement cut occurring in 2023 and the estimated 3.25 percent cut in 2024.

“In fact, data from the Medicare Trustee’s Report indicate that physician reimbursement has dropped over 20 percent over the last 20 years when accounting for inflation,” AHA wrote.

AHA also asked MedPAC to release additional analysis on the distribution and amount of add-on payments for safety-net clinicians.