MedPAC recommends 1 percent increase for hospitals

The Medicare Payment Advisory Committee (MedPAC), the body charged with advising Congress about Medicare reimbursement issues, recommended that the hospital Medicare payment update for 2014 contain a 1 percent increase for inpatient and outpatient services. The annual update for inpatient services goes into effect Oct. 1, 2013, and the update for outpatient services takes effect Jan. 1, 2014.   

The update was scheduled to be an increase of 1.8 percent for hospital inpatient services and 2 percent for outpatient services, subject to certain adjustments. Among those adjustments was recovery of overpayments required by 2011 debt reduction legislation. At a meeting Dec. 5, 2012, MedPac members discussed a draft recommendation to raise inpatient rates and outpatient rates by only 1 percent, with the differential to be applied to recovery of overpayments.

However, according to a presentation to the committee members at a Jan. 10 meeting, the 2012 Taxpayer Relief Act passed in response to the “fiscal cliff’’ gives the Secretary of Health and Human Services four years to reduce inpatient rates to recover $11 billion in excess compensation to hospitals. The Congressional Budget Office had assumed that the $11 billion would be collected in equal increments over the four years; if so, this would have led to a reduction of about 2.4 percent in payments to hospitals for 2014, resulting in a net decrease of 0.6 percent (1.8 percent minus 2.4 percent).

After hearing about the implications of the Taxpayer Relief Act at the January meeting, the committee voted unanimously to stay with the recommendation of a 1 percent net increase, notwithstanding the requirements of the fiscal cliff legislation. “We’re saying at the end of the day, it ought to go up by 1 percent. And to the extent any of these other events … reduce it below this year’s base rate times 1.01, then it would be inconsistent with our recommendations,” said MedPAC chairman Glenn M. Hackbarth, JD, according to the transcript of the January meeting. “Adjustments for documentation and coding are needed to recover all overpayments and restore budget neutrality, but they should not cause a financial shock to hospitals,” he said.