MedPAC proposes 3.3% boost in hospital payments in 2021, with some going to quality programs

Medicare spending costs money
MedPAC passed a recommendation to Congress to give hospitals a 3.3% payment boost in 2021, but with some of it going to quality programs. (Getty/zimmytws)

A key Medicare advisory board wants to give acute care hospitals a 3.3% raise in Medicare payments next year but shift 1.3% of it to quality programs.

The Medicare Payment Advisory Commission voted unanimously on Thursday to make the recommendation to Congress as part of its March report. The panel also unanimously voted to keep physician Medicare payments at the same rate as current law for 2021.

Current law calls for hospitals to get a 2.8% increase in 2021 to Medicare payments. But MedPAC wants to give hospitals 3.3%.

RELATED: MedPAC: Hospitals got $201B in Medicare payments last year, a 3.6% bump from 2017

The commission wants to give hospitals a 2% boost overall and devote the other 1.3% to quality programs that give hospitals a greater incentive to reduce mortality and improve patient satisfaction.

Overall, MedPAC’s latest payment recommendation would increase spending between $750 million and $2 billion in 2021 and by $5 billion to $10 billion over five years. Another reason for the shift to quality programs is to minimize the difference in payments across sites of care, part of a larger effort to install site-neutral payments.

"Current law updates for physicians has a zero percent update for them," said MedPAC staff member Jeff Stensland. "Any increase to hospital outpatient rates will increase the differential in payment rates between physician offices and hospital outpatient departments."

MedPAC staff reported that Medicare payments still didn’t cover all of hospitals’ costs. In 2018, Medicare margins for hospitals were negative 9.3%. MedPAC expects that margin to improve this year, but only to negative 8%.

RELATED: MedPAC: Lack of site-neutral payments driving physician-hospital mergers

To be sure, Congress could choose not to take up the recommendation. If this happens, hospitals would be paid 2.8% in 2021 based on current law.

Meanwhile, MedPAC did not recommend any change to the Medicare payment rate for physicians for 2021.

While there is no increase in Medicare payments, MedPAC staff noted that a majority of clinicians could see changes to their payments based on the Merit-based Incentive Payment System (MIPS) that pays physicians based on healthcare performance.

MedPAC estimates that about 1 million clinicians will receive additional payments via MIPS or Advanced Alternative Payment Models, which can include accountable care organizations.

But the commissioners did say they wanted to see how physicians are faring now that MIPS has been in effect for a few years. MIPS went online in 2017 and was approved as part of the Medicare Access and CHIP Reauthorization Act of 2015.

“We really need to get a better handle on physician expenses in 2020 and beyond,” said Karen DeSalvo, MedPAC member and chief health officer at Google. “What I know anecdotally is it is expensive to move to MIPS and alternative payment models.”