Medicare Payment Cuts Urged for Nursing Homes, Other Providers

Andara Puchino

A key advisory panel to Congress on Tuesday recommended increasing Medicare payment rates for acute care hospitals, long-term care hospitals, and outpatient dialysis facilities next year, while calling for a 5% pay cut for nursing homes, home health agencies, and inpatient rehabilitation facilities.

The Medicare Payment Advisory Commission’s annual March report to Congress called for lawmakers to keep 2021 payment rates for ambulatory surgical centers, hospice providers, and clinicians paid under the physician fee schedule.

The commission, an independent congressional agency established by the Balanced Budget Act of 1997, advises Congress on issues related to the Medicare program. Lawmakers may or may not follow the commission’s recommendations, which are designed to provide quality care for beneficiaries and incentives for providers to constrain costs and reduce program spending.

Acute and long-term care hospitals would see a payment increase of about 2% while dialysis centers would receive a roughly 1% pay increase, James Mathews, the commission’s executive director, said during a press briefing Tuesday.

The report discusses the effects of the Covid-19 pandemic and some of the policies that resulted. But the panel’s charge is to evaluate whether Medicare payments support efficient care delivery and ensure access for beneficiaries.

“To the extent that the effects of the pandemic are temporary or vary significantly across providers in a sector, they are best addressed through targeted temporary funding policies rather than permanent changes to payment rates in 2023 and beyond,” the commission said in a statement.

More Information Sought

The panel also recommended that the secretary of health and human services require home health agencies, hospices, and physicians and other health professionals to provide more information about the telehealth services they provide in order to better assess the impact of the services on access, quality, and costs.

In addition, the commission recommended that ambulatory surgical centers provide annual cost reports to the Centers for Medicare & Medicaid Services. The commission has called on the HHS to require such reports from surgical centers since 2009.

Without the documentation of revenue and profit margins, the commission says it’s difficult to recommend payment rate adjustments for surgical centers. A commission analyst said the cost reports could be limited in scope to hold down administrative burden.

The commission recommended a 20% cut in Medicare’s annual per-patient payment limit, or “aggregate cap,” for hospice providers. The hospice aggregate cap is currently just over $31,000. If a hospice provider’s annual Medicare payments divided by the number of beneficiaries exceed the cap amount, the facility must repay the excess payments.

The commission also recommended that a wage adjustment, to reflect area pay differences, be added to the aggregate cap.

Lack of Medicare Advantage Savings

The report also estimates that 46% of Medicare beneficiaries were enrolled in private Medicare Advantage plans in 2021, a 10% increase over 2020, Mathews said. And the average MA plan bid was 15% less than what traditional Medicare spends for similar beneficiaries. But taxpayers and fee-for-service beneficiaries—who help fund the Medicare Advantage program with their Medicare outpatient, or “Part B,” premiums—“do not realize any savings from MA plan efficiencies,” the commission press release said.

“Instead, we estimate that Medicare spends 4% more for MA enrollees than it would have spent if those enrollees remained in FFS Medicare. In aggregate, for the entire duration of their Medicare participation, private plans have never produced savings for Medicare.”

Mathews said as MA enrollment grows “that overpayment will become more and more problematic,” given the effects on Medicare spending and the Medicare’s shaky trust fund solvency.

In light of Medicare’s financial concerns, Mathews reiterated prior commission recommendations that call for curbing intensive coding practices, or “upcoding,” by Medicare Advantage clinicians, and for changing the way Medicare calculates benchmarks, or spending targets, that are used to determine capitated payments to MA plans.

By reducing payments to MA plans, these prior recommendations would “help ensure the continued sustainability of the Medicare program and the solvency of its hospital insurance trust fund, which pays for stays in hospitals, skilled nursing facilities, and hospices for eligible beneficiaries, Mathews said.

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