Medicare Compliance & Reimbursement

Industry orgs argue it’s not enough.

Pandemic fallout combined with rampant inflation have put undue financial constraints on many healthcare providers. In a rare move, an influential advisory board is asking Congress to increase physician payment rates by connecting them to the Medicare Economic Index (MEI).

Context: On March 15, the Medicare Payment Advisory Commission (MedPAC) released its “March 2023 Report to Congress.” Due to rising costs and inflation, MedPAC recommends legislators “update the 2023 Medicare base payment rate for physician and other health professional services by 50 percent of the projected increase in the MEI,” the Commission notes in Chapter 4 of the report.

MedPAC reasons that “because clinicians’ practice expenses account for about half of the MEI, this recommendation would help ensure that payment rates keep pace with the growth of clinicians’ practice costs.” Using current MEI projections from the Centers for Medicare & Medicaid Services (CMS), the Commission maintains that would amount to a 1.45 percent increase for 2024 versus the expected 1.25 percent increase under the current law, the report says.

Here’s the Problem

Though MedPAC’s recommendation would offer providers some relief, industry stakeholders assert much more needs to be done, particularly after years of struggle and the 2 percent decrease outlined in the Medicare Physician Fee Schedule for CY 2023 (see Medicare Compliance & Reimbursement, Vol. 49, No. 1).

“Having surveyed the health care landscape, MedPAC recognized that physician pay has not kept up with the cost of practicing medicine. Yet, we feel strongly that an update tied to just 50 percent of MEI will cause physician payment to chronically fall even further behind increases in the cost of providing care,” warned AMA President Jack Resneck Jr., MD in a release on the report. “Congress should adopt a 2024 Medicare payment update that recognizes the full inflationary growth in health care costs,” he advised.

In response to the MedPAC report, AMA and 143 other medical organizations sent congressional leaders a letter urging them to permanently fix the problem “plaguing the Medicare Physician Fee Schedule.” The stakeholders argued that inflation is just one part of the issue, citing rising practice costs, a broken system, and years of declining Medicare spending. “We feel strongly that implementing an inflation-based update based on only half of the full MEI growth rate would be a missed opportunity to meaningfully address this perennial issue of Medicare physician underpayment that threatens stable access to care for millions of Medicare beneficiaries,” the organizations cautioned in the letter. “MedPAC’s rationale that half of MEI is sufficient because the practice expense component of physician payment accounts for approximately half of total Medicare physician payments reflects an incomplete picture.”

The groups encouraged Congress to go one step further and codify an “inflation-based update” that ties physician payment to the full MEI instead of just 50 percent, the letter explains.

Resources: Review the MedPAC report at www.medpac.gov/document/march-2023-report-to-the-congress-medicare-payment-policy/ and the stakeholders’ letter to legislators at https://searchlf.ama-assn.org/letter/documentDownload?uri= /unstructured/binary/letter/LETTERS/lfdr. zip/AMA-Inflation-Payment-Update-MEDPAC-sign-on-letter-FINAL-3-15-23.pdf.