MedPAC recommends smaller updates for FY04 - Updata - the Medicare Payment Advisory Commission formulates the recommendations it will send to Congress - Brief Article

Healthcare Financial Management, March, 2003

At its January meeting, the Medicare Payment Advisory Commission (MedPAC) formulated most of the recommendations it will send to Congress in March. The recommendations included updating hospital payments in FY04 with the market-basket (MB) rate of inflation minus 0.4 percentage points and hospital outpatient payments by MB minus 0.9 percent. After much discussion, MedPAC also recommended the extension of the transfer policy to an additional 13 DRGs in 2004. The commission also advised against an update for skilled nursing facilities (SNF) and home health services and recommended directing SNF funding to more complex cases. MedPAC recommended that Congress update payments for physician services based on the change in input prices less an adjustment for productivity growth. The commissioners discussed the importance of a modest positive increase by Congress for physicians in 2003 and expect that the 2004 recommendation may need modification if that doesn't occur.

Last year, CMS administrator Tom Scully was dissatisfied with MedPAC, saying it had shown an amazing lack of restraint with 2003 recommendations to Congress. Those fairly liberal recommendations were stalled in Congress, passing only in the House. Consequently, the 107th session ended without final action on payment legislation. Although the prospect of provider-friendly payment adjustments may be less favorable in the 1 08th Congress than it was in the 107th, with less favorable MedPAC recommendations and a growing budget deficit, legislative "fixes" proposed in January in the Senate would keep the physician fees at the 2002 levels from March 1, 2003 (when the 2003 fee schedule was to become effective), to September 30, 2003. That same legislation would also raise the inpatient base rate for hospitals in rural and small urban areas to the same rate as that in large urban areas for the last six months of FY03.

To read about the recommendations, go to www.medpac.gov/public_meetings/transcripts.cfm.