The Medicare Payment Advisory Commission (MedPAC) will recommend Congress bump Medicare pay rates for hospitals in 2026.
In a public meeting held Thursday, the group’s commissioners voted in favor of draft recommendations to increase general acute care hospitals’ base payment rates by the amount specified in current law plus an additional 1%. Such an increase would apply to inpatient and outpatient services reimbursed by Medicare.
MedPAC also voted to again recommend that Congress redistribute existing safety-net payments, or those for disproportionate share hospitals and uncompensated care, and add $4 billion to that pool of funds.
The commission’s preferred approach, outlined back in 2023, would use a proposed mechanism called Medicare Safety-Net Index that would direct higher payments to hospitals with relatively more fee-for-service Medicare patients—which would mean that some hospitals could lose some Medicare revenue.
MedPAC’s recommendations would increase spending by $5 billion to $10 billion within a single year and $25 billion to $50 billion over half a decade. This is about 2.2% over the current law.
The commission aims to strike a balance between payment increases that maintain Medicare beneficiaries’ access to care and sustain hospitals that typically take losses on Medicare patients; and to maintain pressure on hospitals to constrain their own costs while prioritizing targeted safety-net pay bumps over blanked rate increases. It does so by reviewing changes in recent years to hospitals’ quality of care, Medicare margins, facility closures and other relevant metrics.
A final report outlining its recommendations and the supporting data will be released in June, though it is up to Congress to decide whether to follow MedPAC’s suggestions in legislation.
In comments submitted in response to the draft recommendations but ahead of Thursday’s vote, the American Hospital Association said the 1% plus current law increase is appreciated and necessary, but that “even after the recommended payment update, Medicare’s payments to hospitals would remain inadequate.” The lobby stressed that even the industry’s highest performers lose money providing care for Medicare and pushed MedPAC to recommend bringing the payments back to even.
Meanwhile, America’s Essential Hospitals, which represents safety-net facilities, said in its own comments ahead of the vote that it appreciated the proposal for an additional $4 billion in safety-net funding but took issue with the “flawed” Medicare Safety-Net Index. Citing its own analysis of the metric, the group said the approach would shift funding from large providers serving the highest numbers of low-income Medicare patients.
“When adding additional funding to support safety net hospitals, policymakers should supplement rather than redistribute existing Medicare disproportionate share hospital and uncompensated care payments,” America’s Essential Hospitals wrote.
MedPAC’s other provider recommendations this time around will include a physician pay update that changes the current law out for a single update equal to the Medicare Economic Index minus 1 percentage point. The advisory committee will also again recommend establishing safety-net add-on payments within the physician fee schedule, which would not be budget neutral.
In a Friday morning meeting, the group also moved forward with—but did not vote on—in-development draft recommendations looking to reduce beneficiary’s cost-sharing when receiving outpatient services at critical access hospitals.
Unlike prospective payment system hospitals, these facilities do not have a cap on coinsurance and base their coinsurance on 20% of charges rather than 20% of rates—with commissioners saying they are interested in addressing both of those differences with future recommendations.
The commissioners also reviewed similar trends and potential fixes among rural health centers, though the commission was hesitant to move as quickly on the issue without receiving further data on current practices and the potential impacts on policy changes.