MedPAC Releases 2022 Medicare Report

The Medicare Payment Advisory Commission (MedPAC) released its biannual report yesterday. The report includes analysis and recommendations to improve the Medicare program, including recommendations that would lower health care costs and extend the solvency of the Medicare Hospital Insurance Trust Fund

The report includes a broad overview of Medicare's finances. Over the next 10 years, gross Medicare spending is projected nearly double from $900 billion to $1.7 trillion. The average annual spending increase is projected to be 3.8 percent for Part A (inpatient hospital care), 6.0 percent for Part B (outpatient care), and 3.5 percent for Part D (prescription drugs). The report points out that there will be approximately 2.5 workers per Medicare beneficiary in 2030, compared to 2.9 in 2020 and 4.6 at the time of Medicare’s enactment.

This imbalance between the growth of spending and the reduction of workers paying Medicare taxes is why the Medicare Part A trust fund is projected to become insolvent by 2026, which would result in an immediate 9 percent cut to the program.

Addressing these and other concerns, MedPAC recommends to: 

  • Make payments site neutral
  • Improve the accuracy of physician fee schedule payments and increase payments to primary care providers
  • Strengthen Medicare’s payment systems to address rising drug prices and costs  
  • Scrutinize claims more closely to reduce overutilization, fraud, and abuse   
  • Encourage better integration between Medicare and Medicaid  
  • Modify beneficiary cost-sharing to incentive high-value care   
  • Collect more complete Medicare Advantage (MA) data   
  • Set appropriate payment levels for plans   
  • Incentivize proving population-based outcomes

Some of these recommendations align with policies put forward by our Health Savers Initiative, including site-neutral payment reform and reducing Medicare Advantage overpayments. These two proposals could reduce Medicare spending by up to $153 billion and $355 billion respectively. Some of the other recommendations were also recently discussed during a Senate Finance Committee hearing in testimony by MedPAC chairman Michael Chernew.  

This report also makes specific recommendations regarding 2023 provider payments, including some with significant federal savings. For example, MedPAC recommends reducing most post-acute care payments by 5 percent, freezing payments for ambulatory surgical centers, and reducing payment increases related to hospice care. MedPAC estimates these proposals would save a combined $25 to $40 billion over five years. All FY 2023 recommendations made in the report were voted on with unanimous support by the commission members.

MedPAC acknowledges the dramatic increase in the use of telehealth services in Medicare during the pandemic. They recommend that clinicians be required to use a claims modifier to identify when a service is audio-only versus audio and video telehealth in order for policymakers to better understand the use, quality, and cost of telehealth services in the Medicare population. They also suggest that hospices report their telehealth services on Medicare claims.

The report acknowledges the dramatic short-term impact of the COVID-19 pandemic on Medicare and its beneficiaries. However, they point out that access to care was maintained during the pandemic, especially due to the use of telehealth, although elective procedures were delayed. According to the report, “the pandemic is not expected to have a long-term financial impact on the Medicare program.”  

While the proposals made by MedPAC have been discussed in prior reports, it is important to continue discussing policies that will stabilize the Medicare program as the trust fund heads towards insolvency. Lawmakers would be wise to use these recommendations to enact reforms that would help stabilize the trust fund for years to come.  

Read more about Medicare trust fund solutions here.