MedPAC Says Yes to Increasing Medicare Physician Pay Based on Healthcare Inflation

 Medicare fee-for-service payments to physicians should be based on the Medicare Economic Index (MEI), a measure of healthcare inflation, according to a recommendation approved unanimously Thursday by the Medicare Payment Advisory Commission (MedPAC).

"I think it's so important that there be a predictable inflation-based formula for updating the fee schedule," said Larry Casalino, MD, PhD, of Weill Cornell Medical College in New York City, who was attending his last meeting as a MedPAC commissioner. "I'm willing to vote for the recommendation and the principle on which it stands."

The recommendation stated that "Congress should replace the current-law updates to the Physician Fee Schedule (PFS) with an annual update based on a portion of the growth in the [MEI] (such as MEI minus 1 percentage point)." The recommendation would increase federal spending by $15 billion to $30 billion over 5 years compared with current law, according to commission staff.

Although Casalino voted for the recommendation, he did have a slight quibble with it. "The recommendation mentions 'such as the Medical Economic Index minus 1%' -- it isn't specifically for MEI minus 1%," Casalino said. "If I had my way, the [recommendation] would be a payment update equal to or only slightly below the MEI; 1% is a bit more than that."

In addition, "I encourage Congress to follow the MedPAC 2023 recommendation for higher payments when a physician sees a low-income beneficiary," he said. "I think that's really important."

Commission member R. Tamara Konetzka, PhD, of the University of Chicago, praised the draft report -- which was unavailable to the public -- for its inclusion of a discussion of payment ceilings and floors, even though they weren't included in the final recommendation. "Personally, I think I would have liked this recommendation even more if it had alluded to not a specific number, but to a [payment] ceiling and floor as possibilities," she said. "But I am totally fine with the way it's written now, because I think the text goes into this nuance."

Consideration of a payment ceiling is important, she added, because "if you can imagine a crazy high inflation rate -- like 7% or 8% -- if it's MEI -1% ... All of that [6% payment increase] burden is going to go to beneficiaries. The chapter does a great job of explaining that there is beneficiary burden associated with this recommendation."

Commissioner Betty Rambur, PhD, RN, of the University of Rhode Island in Kingston, agreed. "We hear providers screaming about inadequate reimbursement, and we hear people screaming about the lack of ability to pay for care," she said. "This issue of increased cost-sharing ... I think is really serious, so I support the ceiling and floor."

Commission member Brian Miller, MD, MBA, MPH, of Johns Hopkins University in Baltimore, also praised the idea of payment ceilings and floors; he highlighted a letter that the American Occupational Therapy Association sent to the commission. The letter included a chart showing that from 2016 to 2024 -- a period when Medicare reimbursement rates for occupational therapy remained relatively flat -- applications for occupational therapy schools dropped by 50%.

Miller reminded commissioners that occupational therapists have to accept Medicare rates if they want to treat Medicare beneficiaries; they must treat Medicare's payment -- plus the beneficiary copay -- as payment in full. "This is, I think, a sign that when you have flat fee rates ... the labor force responds appropriately," said Miller. "So I think that that is a further evidence that we need to think carefully [about] a PFS update having a floor and a ceiling."

The commissioners also unanimously approved a recommendation to have Congress "direct the [HHS] secretary to improve the accuracy of Medicare's relative payment rates for clinician services by collecting and using timely data that reflects [sic] the costs of delivering care." In a staff presentation, MedPAC principal policy analyst Geoffrey Gerhardt, MPP, noted concerns about the accuracy of the relative value units (RVUs) used as part of the formula that determines fee schedule payments. This recommendation would not have any effect on Medicare spending due to budget neutrality requirements, he said.

MedPAC made similar recommendations in 2006 and 2011 to no avail, said commission member Robert Cherry, MD, MS, of UCLA Health in Los Angeles, California. "One of the reasons why we're still using outdated data is because this is a very laborious, detailed process," he said. "Hopefully, we'll be able to use AI [artificial intelligence] tools to actually apply to the data and be able to update the RVUs in a way that makes sense and makes it less laborious ... I just wanted to mention that because I think they'll still have trouble unless some of those newer tools are utilized."

The recommendations approved on Thursday will be included in the commission's June report to Congress.

https://www.medpagetoday.com/publichealthpolicy/medicare/115066