Medicare Compliance & Reimbursement

Over the past several years, numerous congressional Republicans have grumbled that the Medicare Payment Advisory Commission made too many recommendations that would cost the government more money. As fretting over budget deficits builds this year, those lawmakers should be happy with recommendations the panel voted for at its January meeting.

MedPAC voted Jan 12 to recommend no 2006 pay raises for skilled nursing facilities and home health agencies and a raise for hospitals of 0.4 percentage points less than the projected 2006 price increase of the so-called hospital marketbasket of goods and services. The recommendations will appear in final form in the panel's March 1 report to Congress.

Last month, the panel perused a draft recommendation to offer hospitals a full marketbasket update for 2006, and American Hospital Association Senior Vice President for Policy Carmela Coyle blasted the Commission at day's end Jan. 12 for cutting that back "without a thorough explanation" or an airing of data that led to the apparent change of heart. Despite hospitals' famous political clout in Washington, however, Congress seems likely to welcome MedPAC's cover to offer the lower update, as lawmakers seek any means to rein in swelling deficits.

If Congress follows the Commission, hospitals will get around a 2.9 percent pay hike next year, 0.4 percentage points down from the expected 3.3 percent increase in the marketbasket.

Current law would see hospitals updated by the full marketbasket for 2006. Thus, the recommendation would save between $200 million and $600 million in currently projected spending for 2006 on the inpatient side and between $50 million and $200 million for outpatient services. If Congress adopts the smaller update, it would cut Medicare inpatient spending by between $1 billion and $5 billion over five years, and cut outpatient spending by under $1 billion.

Margins hospitals gained from serving Medicare patients fell to 1.9 percent in 2003, but the cause of margin troubles is largely cost growth, according to the Commission. Many hospitals are experiencing less competition, and private-sector payers generally aren't exerting strong pressure to hold down costs, according to a staff analysis.

Regardless of whose fault it is that costs are burgeoning, however, hospitals in regions with high uninsured rates must rely on Medicare payments. Such facilities could suffer serious harm if updates are low, since they have few private payers to pick up the slack, said panel member Nick Wolter, MD, of Montana's Deaconess Billings Clinic. Montana's uninsured rate is 25 percent, he said.

But Chair Glenn Hackbarth argued that, unless cost growth is slowed, more people will be priced out of private coverage and the number of providers in similar jeopardy will only increase in a vicious spiral. That being the case, "I am reluctant to [...]