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Medicare adviser recommends 2.8% payment rate increase for acute care hospitals

In their March reports to Congress, a Medicare advisory group recommended a payment rate increase for acute care hospitals, and its counterpart on Medicaid recommended that lawmakers restructure billions of dollars in reimbursement reductions for hospitals with high amounts of uncompensated care.

The Medicare Payment Advisory Commission, or MedPAC, proposed that acute hospitals receive a 2.8% increase in payments for fiscal year 2020, with a portion of that payment rate increase going to a new quality program.

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MedPAC advises Congress about potential payment rate and policy changes for Medicare, the federally run health insurance program primarily for Americans 65 and older. The commission delivers a March and June report to Congress with its recommendations; it does not have legislative authority.

Under current law, acute care hospitals are set to receive a 2.8% increase in Medicare payments. While MedPAC is recommending the same total increase, the commission suggests that payments increase by 2% and the remaining 0.8% should go toward a new quality program called the Hospital Value Incentive Program, which is outlined in the report.

The new quality program combines four existing quality reporting programs together in order to increase accuracy and decrease complex, redundant processes, according to the commission.

Along with the payment rate increase, MedPAC also recommends ending two hospital penalties. Removing the penalties would total between $750 million and $2 billion in 2020 and bring the net payment increase for acute care hospitals to 3.3%.

The March report also includes recommendations to increase payments for home health agencies and inpatient rehabilitation facilities by 5%, decrease payments for hospice care by 2%, and freeze reimbursements for skilled nursing facilities and ambulatory surgical centers.

Slowdown for DSH reductions

The Medicaid and CHIP Payment and Access Commission, or MACPAC, recommended in its March report that Congress slow down over $40 billion in payment reductions for disproportionate share hospitals, facilities that serve a large number of uninsured patients.

MACPAC is a congressional advisory commission for Medicaid, the joint state and federal government insurance program for low-income Americans. Like MedPAC, the Medicaid commission provides Congress with recommendations in March and June reports and has no congressional authority.

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Disproportionate share hospitals are scheduled to receive a payment reduction of $4 billion in 2020 and an $8 billion reduction every year from 2021 to 2025. The program's funding is then expected to return to their previous levels.

The cuts, which have been delayed for the last five years, were outlined in the Affordable Care Act and are meant to balance out the anticipated decrease in the uninsured rate due to the expansion of Medicaid. However, the report says that despite a decrease in the number of uninsured individuals, hospitals "continue to have substantial levels of uncompensated care."

With no current scheduled delay for fiscal year 2020, the commission is recommending a slowdown to ease the impact on hospitals.

MACPAC proposes that reductions begin at $2 billion in fiscal year 2020, stepping up to $4 billion in 2021 and $6 billion in 2022. According to the commission's recommendation, reductions will then total $8 billion each fiscal year between 2023 and 2029. Allotments will return to their previous levels in 2030.

The payment cuts have been a contentious issue between Congress and the hospital industry, which says the cuts will hurt facilities that depend on the extra funding. A lawsuit challenging the payment reductions even reached the U.S. Supreme Court. The court heard the case Jan. 15 and has not made a ruling yet.

MACPAC is also proposing a new metric to determine states' allotment levels under this payment model, which is more than 27 years old.

The disproportionate share hospital model is a single capped Medicaid fund. Medicaid gives states a specific allotment amount and states then provide money to hospitals that qualify for funding to cover uncompensated care costs. The allotment rates were set in 1993 using hospitals' data from the previous year. According to the report, states' allotment levels "currently have little meaningful relationship to the level of uncompensated care in a state."

The commission recommended that allotments be made according to the number of nonelderly, low-income people in a state, a figure the commissioners chose as a signifier for uncompensated care.