Medicare Compliance & Reimbursement

Congress must put the brakes on health care spending, and Medicare should lead the way.

Payment systems for eight different provider types may begin major reconstruction in 2007--if the Medicare Payment Advisory Commission has its way.

In MedPAC's March 1 Report to the Congress: Medicare Payment Policy, the commission focuses on "improving Medicare payment accuracy and calibrating payment adequacy to the efficient provider." MedPAC defines "efficient providers" in its report as providers who "use fewer inputs to produce quality outputs."

The report outlines recommendations for payment system changes that would affect physicians, inpatient hospitals, outpatient hospitals, dialysis, skilled nursing facilities, home health, long-term care hospitals and inpatient rehabilitation facility services. MedPAC advises a payment freeze for SNFs, HHAs, LTCHs and IRFs for 2007.

The MedPAC report follows closely on the heels of a recent Centers for Medicare & Medicaid Services report on health care spending; CMS projects that health care spending will surpass $2 trillion in 2006, despite its slowing growth rate. This would result in the health care portion of the Gross Domestic Product to climb from 16 percent in 2004 to 20 percent by 2015, according to a recent Health Affairs report.

Rising health care spending, the new Medicare drug benefit and the oncoming wave of retiring baby boomers are a lethal combination--one that could cause Medicare to soak up an even more substantial share of the GDP than it does already, warns MedPAC.

The best way to avert the problem is to continue pulling back the reins on spending growth and to implement greater efficiencies within the system, says MedPAC. In the MedPAC report, the commission recapitulates its proposals to improve Medicare's program value and efficiency through resource measurement and quality improvement initiatives. But these initiatives can't wait--policymakers need to act now, the commission urges.

RVU System Flaws Overvalue Some Services

The report also points out serious flaws in the Relative Value Unit system that CMS uses to calculate physician reimbursement. The current RVU system "does not do a good job of identifying services that may be overvalued," charges MedPAC. To address the problem, the commission recommends setting up a panel of experts to help CMS identify these "overvalued" services.

MedPAC suggests a 2.8-percent update to physician payments based on practice costs--a move that American Medical Association Board chair Duane Cady calls "plain common sense," in a March 1 statement.

The commission's recommendations didn't fail to ruffle other providers' feathers, however. "For MedPAC to suggest anything that continues to undercut the financial underpinnings of the home health benefit is simply beyond the pale at a time when the first wave of the baby boomers will begin retiring in the next 18 months and will be depending on Medicare," criticizes American Association for Homecare's COO Sue Mairena [...]