MedPAC Considers 1.0 Percent Update for Physician Services and Full Market Basket Update for Hospitals in 2011

The Medicare Payment Advisory Commission (MedPAC), which advises Congress on physician payment rates and other issues, met on December 10-11, 2009 to assess the adequacy of Medicare payments for physician and hospital services in 2011. The Commission is considering draft recommendations to Congress that would provide a 1.0 percent increase in physician reimbursement and a full market basket update for both inpatient and outpatient hospitals.

Physician Services
During the meeting, several factors were examined by the Commission, including access to services, quality of care and volume growth to determine the adequacy of Medicare payments for physician services in 2011. Analysis presented by MedPAC staff showed that access to care is generally good and quality indicators are improving. A comparison of private insurance and Medicare payment rates were also reviewed in preparation for making a recommendation.

A draft recommendation calling for a 1.0 percent update in payments for physician services in 2011 was broadly discussed by the Commissioners. If approved by Congress, the increase would avert steep cuts in physician payment rates projected for 2011. Payment adequacy and updates for physician services will be further analyzed in the Commission’s March 2010 report to Congress.

 Hospital Inpatient and Outpatient Services
MedPAC also discussed two draft recommendations for hospital outpatient and acute inpatient services in 2011. The first draft recommendation called for inpatient and outpatient service payment rate updates by the projected market basket increase index concurrent with the implementation of a quality incentive program. It is not clear whether or not a productivity adjustment will be included in the update recommendation.

The second draft recommendation would transition over an extended period of time, the statutory mandate for Medicare to recoup over payments from documentation and coding improvements that resulted from the Centers for Medicare and Medicaid Services (CMS) implementation of Medicare-Severity Diagnosis Related Groups (DRGs) in 2008. According to the mandate, base payment rates would be reduced by 5.9 percent during 2011 and 2012. The draft recommendation, if it passes, will extend the time frame so that the annual reductions will be closer to 1.0 percent. The Commission also decided not to repeat a recommendation to reduce the IME adjustment from 5.5 percent to 4.5 percent. Instead, the 2010 IME recommendation will be discussed in the spring and included in MedPAC's June report to Congress.

The draft recommendations will be voted on during January's MedPAC meeting and will also be included in the Commission's report to Congress in March 2010