Medicare Payment Policy

law, but this slower pace is necessary to ensure that base
payments in 2014 are 1 percent higher than in 2013
after all adjustments. Because the policy environment is
fluid, we want to be clear: The recommendation should
be interpreted as a net increase in per case payments to
hospitals in 2014 relative to 2013. That is, when all policy
changes affecting base payments are made (i.e., recovery
of overpayment due to documentation and coding changes,
prevention of future overpayments, and the sequester), the
net increase in payment should be 1 percent.
For outpatient services, the Commission also recommends
a 1 percent increase in payment rates. On the one hand,
growth in the volume of outpatient services has been
strong, suggesting that the statutory outpatient update (2
percent) is too high. In addition, there has been particularly
strong growth in the volume of services such as evaluation
and management visits and cardiac imaging services for
which hospital payment rates exceed those in competing
physicians’ offices by a wide margin. On the other hand,
overall Medicare margins are negative, suggesting a
positive update is appropriate. A 1 percent update would
balance these two considerations and help limit the
disparity in payment rates between services provided in
outpatient departments and payment rates for the same
services provided in other sectors. The Commission
maintains, as in previous years, that Medicare should try
to pay similar amounts for similar services, taking into
account differences in the quality of care and the relative
risks of patient populations.
IMpLICAtIons 3
spending
• This recommendation would increase Medicare
spending relative to the scheduled updates by
between $750 million and $2 billion in 2014 and
by $5 billion to $10 billion over the next five years.
While the reduced update for outpatient services
reduces spending, slowing the pace of recoveries
due to documentation and coding increases spending
and more than offsets the outpatient savings. Note
that the Secretary has discretion in how to make the
recoveries during the four-year window. Our spending
implications assume that the overpayments are
recouped in equal amounts in each of the four years.
Beneficiary and provider
• The 1 percent increase in payment rates is adequate
to allow hospitals to continue caring for Medicare
beneficiaries. The recommendation will increase
payments to providers but should not materially affect
beneficiary access to care or the financial viability of
providers. ■
Report to the Congress: Medicare Payment Policy | March 2013
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