Medicare advisory group: Pay physicians more, keep 1.8% increase for dialysis
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Key takeaways:
- The Medicare Payment Advisory Commission released its biannual report to Congress in March.
- The commission indicated that some dialysis providers may have overcapacity.
In its biannual report to Congress, the Medicare Payment Advisory Commission recommended that payments to physicians should increase but a planned 1.8% boost in the bundled payment rate for dialysis services was adequate for 2025.
“Given that our indicators of payment adequacy are generally positive, the recommendation is that, for calendar year 2025, the Congress update the 2024 [End-Stage Renal Disease] ESRD [Prospective Payment System] PPS base payment rate by the amount determined under current law,” the commissioners wrote in the report.
Last year, dialysis providers received a 2.1% increase in the bundled payment rate after CMS heard from members of Congress that the proposed 1.6% increase could be hurting innovation in dialysis care.
The commission is an independent congressional agency established by the Balanced Budget Act of 1997 to advise Congress on issues affecting the Medicare program, including payments, access to care, quality of care and other issues affecting Medicare.
Physician payment
The commission advised Congress in the report that Medicare payments to physicians were inadequate. “In 2022, spending on clinician services by [fee-for-service] FFS Medicare and its beneficiaries was $1.1 billion lower than it was in 2021,” the commissioners wrote. “This decline represents a 1.2% decrease in fee schedule spending and is attributable to a 3.9% decline in the number of beneficiaries enrolled in FFS Medicare, as enrollment in Medicare Advantage continued to grow.”
While FFS payments have declined, physicians’ costs to practice have increased. “Clinicians’ costs, as measured by the Medicare Economic Index (MEI), grew by 1% to 2% per year for several years before the coronavirus pandemic,” the commissioners wrote. “MEI growth then increased to 2.5% in 2021 and to 4.6% in 2022.
“However, MEI growth is expected to moderate: It is projected to be 4.1% in 2023, 3.1% in 2024 and 2.6% in 2025, although these projections are subject to change,” the commissioners wrote. “These expected increases in clinicians’ input costs are larger than the increases in FFS Medicare payment rates scheduled under current law.”
To compensate for those changes, the commissioners recommend that Congress update the 2024 Medicare base payment rate for physician and other health professional services by the amount specified in current law “plus 50% of the projected increase in the MEI,” the commissioners wrote. “Based on CMS’s MEI projections at the time of this publication, the recommended update for 2025 would be equivalent to 1.3% above current law.”
The commissioners wrote that the recommended update to the Medicare physician fees “would be a permanent update that would be built into subsequent years’ payment rates, in contrast to the temporary updates specified in current law for 2021 through 2024, which have each increased payment rates for [1] year only and then expired.”
Dialysis services
The Medicare Payment Advisory Commission estimated in its report that about 290,000 Medicare beneficiaries received dialysis care in 2022 from 7,800 dialysis facilities. In that year, FFS Medicare expenditures for outpatient dialysis services totaled $8.8 billion, according to the report.
The commissioners estimated that dialysis providers earned 18% marginal profit in 2022, suggesting that “dialysis providers have a financial incentive to continue to serve Medicare beneficiaries,” according to the report.
The commissioners wrote that capacity at those dialysis facilities was adequate to treat the number of patients needing dialysis; in fact, there may be overcapacity, the report indicated.
“The capacity of dialysis facilities appears to exceed demand. Between 2021 and 2022, the number of incenter treatment stations was steady while the number of Medicare beneficiaries on dialysis (in both FFS Medicare and Medicare Advantage) declined (which is partly linked to the excess mortality experienced by [patients with ESRD] during the coronavirus pandemic), and the share of total treatments furnished by freestanding dialysis facilities in the home continued to increase,” the commissioners wrote.
Reference:
Medicare Payment Advisory Commission’s March 2024 report to the Congress: Medicare payment policy. https://www.medpac.gov/document/march-2024-report-to-the-congress-medicare-payment-policy. Published March 15, 2024. Accessed March 19, 2024.