New York Times Examines Reaction to Recent Medicare Payment Advisory Commission Recommendations

The New York Times on Tuesday examined reaction to the Medicare Payment Advisory Commission's recommendations to Congress, which include a lower payment increase for hospitals and a freeze in payments to nursing homes and home care agencies in 2006 (Pear, New York Times, 1/18).

The recommendations, which will be formalized in a March report to Congress, include:

• An increase in Medicare's physician payment rate of 2.7% in 2006;
  


• Establishment of a quality incentive payment policy for hospitals, home care facilities and doctors;
  


• An increase in payments to hospitals for both inpatient and outpatient care by market basket minus 0.4 percentage points in 2006 -- resulting in an increase in payments by 2.9%, instead of the full market-basket update of 3.3%;
  


• A freeze in prospective payment rates for home care agencies and skilled nursing facilities in 2006;
  


• Establishment of a quality incentive payment policy for hospitals, home care facilities and doctors;
  


• An increase in the reimbursement rate for providers of kidney dialysis services by market basket minus 0.4 percentage points, resulting in a net increase of 2.5%; an extension of the existing moratorium on construction of doctor-owned specialty hospitals until Jan. 1, 2007;
  


• Establishment of standards for providers of diagnostic-imaging services and physicians who interpret the images; and
  


• The creation of a monitoring system for physicians' use of tests and procedures (California Healthline, 1/14).

Carmela Coyle, senior vice president of the American Hospital Association, said her group is "very disappointed" about the proposal to increase Medicare hospital payments by market basket minus 0.4 percentage points.

She said, "The commission's own data show that the financial condition of hospitals is worsening and that hospitals lose money treating Medicare patients," adding, "Congress may use this recommendation as a rationale for budget cuts that address the deficit, not Medicare policy."

Daniel Sisto, president of the Healthcare Association of New York State, said, "We are outraged," adding that the group would lobby against the recommendations.

Ralph Muller, a member of MedPAC and a CEO of the University of Pennsylvania Health System, said he advocated for a full market-basket update for hospitals, noting, "Malpractice insurance premiums have been going up 30% to 40% a year for three years. Nursing costs have been increasing because there's clear evidence that mortality is lower when hospitals have more nurses and better-educated nurses. Prescription drug costs have been going up 10% to 15% a year. Diagnostic-imaging services have been going up at double-digit rates."

However, MedPAC Chair Glenn Hackbarth said hospitals that consistently lose money on Medicare beneficiaries often are "poor performers" that "may not meet the congressional standard of efficient providers" (New York Times, 1/18).