The Medicare Payment Advisory Commission (MedPAC), an independent Congressional agency established to advise Congress on issues affecting the Medicare program, released their latest report to Congress in early
March.

A key MedPAC recommendation for physician fee schedule payments is that Congress increase payment rates for physician and other health professional services by the amount specified in current law for calendar year 2018 (0.5%).

As part of the 2017 report, MedPAC also addressed a variety of issues including:

• Information on Medicare and total health spending and it’s impact on federal spending;
• Information to assist Congress in assessing Medicare provider payment adequacy;
• Recommendations on fee-for-service payment updates;
• Information on trends in Medicare enrollment, plan offerings and MA payments; and,
• Recommendations aimed at finding ways to provide high-quality care while giving providers incentives to constrain cost growth.

MedPAC is charged by Congress with making recommendations for annual payment updates for providers paid under the fee-for-service portion of the Medicare program. For the past several years, annual update
recommendations became meaningless in light of the problems with the Sustainable Growth Rate (SGR) formula. Now that the SGR has been repealed and replaced by MACRA, MedPAC’s recommendations take on
renewed significance.

It should be pointed out that in making the transition from SGR to MACRA, Congress mandated annual
updates, regardless of MedPAC recommendations, through 2019. However, this does not prevent MedPAC
from making recommendations or educating Congress on the status of provider payments relative to the cost of providing care.

In making their determinations on updates, MedPAC first assesses the adequacy of Medicare payments for
providers in the current year (2017) by considering beneficiaries’ access to care, the quality of care, providers’
access to capital, and Medicare payments and providers’ costs.Next, Commissioners assess how those providers’ costs are likely to change in the year the update will take effect (for purposes of this report, 2018).

Finally, MedPAC examines whether payments will support the efficient delivery of services.

Although the March Report looks at a variety of different provider types: hospitals, physicians and other health
professionals, ambulatory surgical centers, outpatient dialysis facilities, skilled nursing facilities, home health
care agencies, inpatient rehabilitation facilities, long-term care hospitals, and hospices, this article will only
highlight findings and recommendations relative to “physician and other health professional” payments.

Beneficiary Access
Overall, MedPAC concluded that beneficiaries “access to physician and other health professional
services is comparable with prior years, although their access survey shows a slight decline compared
with last year in the share of beneficiaries reporting that they never had to wait longer than wanted for
regular, routine, illness, or injury care.”

Quality of Care
The quality reporting requirements are confusing and burdensome to providers, the process does not
allow for comparability across providers, many measures are not linked to patient outcomes, and few
measures assess low-value care. MedPACs results show substantial use of low-value care in FFS Medicare.

Medicare Payments and Providers Costs
MedPAC found that in 2015 (the most recent year for which payment data is available), Medicare payment rates for physician and other health professional services were 78 percent of commercial rates for preferred provider organizations. This was the same percentage as in 2014. In addition, MedPAC reports that average annual physician compensation increased by four percent in 2015. Primary care physicians experienced a lower average than physicians in specialties such as radiology and nonsurgical, procedural specialties. Current projects indicate that the 2018 increase in the Medicare Economic Index (which measures input prices) will be 2.4 percent.

MedPAC also warns Congress that the aging of the baby-boom generation will have a profound impact on the
Medicare program “and the taxpayers who support it.” One of the more interesting statistics identified in the
MedPAC report has to do with the work/beneficiary ratio.

According to MedPAC, the number of workers per Medicare beneficiary has already declined from about 4.6
workers per beneficiary in 1965 to 3.1 workers per beneficiary in 2015. And over the next 15 years, as
enrollment surges, the number of workers per beneficiary is projected to decline further. Citing a recent
Medicare Trustees report, by 2030 there will be just 2.4 workers for each Medicare beneficiary.