MedPAC Releases 2012 Recommendations

On March 12th, MedPac released its annual review of the Medicare program to Congress. The report, entitled, “Medicare Payment Policy“, provides Congress with a review of the current Medicare payment policies and their recommendations regarding the fee-for-service payments for 2013. MedPAC’s recommendations are based on an assessment of payment adequacy for each sector of the healthcare delivery system.

The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established by the Balanced Budget Act of 1997 to advise the U.S. Congress on issues affecting the Medicare program. Historically, many of MedPACs recommendations find their way into law or regulation.

The good news is that the Commission recommends that Congress repeal the sustainable growth rate (SGR) formula. The bad news is that in lieu of the SGR, MedPAC recommends a 10 year freeze in the Medicare Conversion Factor (CF) for primary care and a nearly 18% reduction in the CF for non-primary care over the next three years, followed by a seven-year freeze in the CF.

The Commission made the following specific recommendations to Congress:

• The Congress should repeal the sustainable growth rate (SGR) system and replace it with a 10-year path of statutory fee-schedule updates. Specifically, the Commission recommends a 10 year freeze in current Medicare Fee Schedule Conversion Factor for primary care services. This would lock-in the Conversion Factor at $33.98 for primary care services. For all other services, MedPAC proposes annual payment reductions of 5.9 percent per year for three years, followed by a freeze. This would result in a CF of $28.34 for non-primary care after the three years of reductions.

• MedPAC recommends that Congress direct the Secretary of Health and Human Services to reduce payment rates for evaluation and management office visits provided in hospital outpatient departments so that total payment rates for these visits are the same whether the service is provided in an outpatient department or a physician’s office.

• The Congress should direct the Secretary to regularly collect data – including service volume and work time – to establish more accurate work and practice expense values.

• The Congress should direct the Secretary to identify overpriced fee-schedule services and reduce their relative value units (RVUs) accordingly.

• Under the 10-year update path, the Congress should direct the Secretary to increase the shared savings opportunities for physicians and health professionals who join or lead two-sided risk Accountable Care Organizations (ACOs). The Secretary should compute spending benchmarks for these ACOs using 2011 fee-schedule rates.

Repealing the scheduled SGR cuts would result in an increase in Medicare expenditures over the next 10 years of approximately $300 billion. Freezing the primary care CF, or reducing and then freezing the non-primary care CF as recommended by MedPAC, would not offset the full cost repealing the SGR. The repeal/replace approach described by MedPAC would reduce outlays by about $100 billion over 10 years, leaving an additional $200 billion in cuts necessary to fully pay for the SGR repeal.

ADVOCATE will continue to provide updates as they become available.

Best regards,
Kirk Reinitz, CPA
President & CEO