Some health care providers deserve larger Medicare payments in 2025, some should receive payment cuts, and others should see their payments go unchanged according to new recommendations from the Medicare Payment Advisory Commission to Congress.

  In its annual report to Congress, MedPAC recommended the following changes in Medicare rates for 2025:

• Medicare inpatient rates – the rate increase currently scheduled by law for 2025 plus 1.5 percent.
• Medicare outpatient rates – the rate increase currently scheduled by law for 2025 plus 1.5 percent.
• Medicare physician rates – the rate increase for physician and other health professional services currently scheduled by law plus 50 percent of the projected increase in the Medicare Economic Index.
• Medicare skilled nursing facility rates – a three percent reduction from 2024 rates.
• Inpatient rehabilitation facility rates – a five percent reduction from 2024 rates.
• Home health services rates – a seven percent reduction from 2024 rates.
• Hospice services – a scheduled rate increase for 2025 should be eliminated.

MedPAC no longer makes rate recommendations for long-term-care hospitals and now declines to make recommendations for ambulatory surgical centers as well, for the latter citing the lack of cost data from such facilities that it has asked the Department of Health and Human Services to require of such facilities since 2022.

MedPAC’s recommendations for hospitals and physicians, however, are more nuanced and complex:  it reiterates its 2022 proposal to establish a new Medicare Safety-Net Index.  As the MedPAC report to Congress states:

The Commission contends that increased support is needed to ensure that Medicare beneficiaries continue to have access to ACH [acute-care hospital] services. Therefore, the Commission recommends that, for FY 2025, the Congress update the 2024 Medicare base payment rates for general ACHs by the amount reflected in current law plus 1.5 percent.  The Congress should also redistribute existing safety-net payments to hospitals using the Commission’s Medicare Safety Net Index (MSNI) and increase the MSNI pool by $4 billion (which would be distributed to hospitals for both their FFS [fee-for-service] and MA [Medicare Advantage] patients).  

In offering this suggestion, MedPAC explains that

This recommendation would better target limited Medicare resources toward those hospitals that are key sources of care for low-income Medicare beneficiaries and are facing particularly significant financial challenges.

MedPAC proposes a similar approach to addressing Medicare’s physician rates, writing that

To maintain adequate access to care for all Medicare beneficiaries, we also recommend that the Congress establish safety-net add-on payments for clinician services furnished to FFS Medicare beneficiaries with low incomes, with higher add-on payments for primary care clinicians. We estimate that the recommended safety-net add-on policy would increase the average clinician’s fee schedule revenue by an additional 1.7 percent. When combined with our above-current-law update for the physician fee schedule (a 1.3 percent update), we estimate the average clinician would receive 3 percent higher Medicare payments. For hospital services, we also recommend redistributing existing disproportionate share hospital and uncompensated care payments through the Medicare Safety-Net Index (MSNI); adding $4 billion to the MSNI pool; scaling fee-for-service MSNI payments in proportion to each hospital’s MSNI and distributing the funds through a percentage add-on to payments under the inpatient and outpatient prospective payment systems; and paying commensurate MSNI amounts for services furnished to Medicare Advantage (MA) enrollees directly to hospitals and excluding these payments from MA benchmarks.

When MedPAC introduced its Medicare safety-net index concept in 2022 the Alliance of Safety-Net Hospitals expressed support for the general idea but conveyed its objections to specific aspects of the proposal in a letter to MedPAC.  In that letter, ASH wrote that it believes the MedPAC proposal could seriously jeopardize access to care for Medicare beneficiaries by cutting critical funding for many of the very safety-net hospitals to which many Medicare beneficiaries turn for care and possibly lead to their closure because of the Medicare DSH and Medicare uncompensated care payments they would lose.

ASH also noted that it was concerned that MedPAC’s definition of safety-net hospital does not incorporate care for Medicaid recipients.

Finally, ASH expressed concern that MedPAC proposed financing its new add-on payment for Medicare safety-net hospitals by “repurposing” current Medicare DSH and Medicare uncompensated care payments.  This would be extremely damaging for many underfunded community safety-net hospitals that depend on Medicare DSH and Medicare uncompensated care payments, ASH observed.  Learn more about the concerns ASH expressed and how it proposed MedPAC could address those concerns, from this 2022 letter from ASH to MedPAC.

In addition to offering rate recommendations, MedPAC’s annual report to Congress reviews the status of ambulatory surgical centers, Medicare Advantage, and the Medicare Part D prescription drug program and responds to congressional mandates for a review of special needs plans for dually eligible Medicare and Medicaid individuals and its perspectives on the new Medicare “rural emergency hospital” concept.

MedPAC is an independent congressional agency that advises Congress on issues involving Medicare. While its recommendations are not binding on either Congress or the administration, MedPAC is highly influential in governing circles and its recommendations often find their way into legislation, regulations, and new public policy.

Learn more from MedPAC’s report to Congress and the news release that accompanies it.