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January 18, 2024 – Congress is on its way to extending the stop-gap funding bills into March (and may have already done so by the time you read this). Absent from the legislation to continue funding the federal government is a “doc fix” that would prevent some or all of the 3.37% cut to the Medicare Physician Fee Schedule (MPFS) conversion factor (CF) from taking effect on January 1, 2024.
So, what happens now? By law, Medicare Administrative Contractors (MACs)—the Centers for Medicare & Medicaid Services (CMS) contractors that pay Medicare fee-for-service claims—cannot pay claims for 14 days after receiving a claim from a provider or facility. Thus, for the first two weeks of January, MACs held claims with dates of service beginning January 1, 2024, without having to delay any payment. As we pass the two-week mark, however, MACs will need to start paying claims they received at the start of 2024—and that means they will pay at the lower MPFS rate that includes the 3.37% cut to the CF. Many stakeholders believe that a 3.37% cut to Medicare provider payments will have significant impacts on providers and their practices, causing some group practices to struggle financially. As the cut goes into effect, these practices will have to figure out, at least in the short term, how to meet their financial obligations with fewer resources.
Although Congress hasn’t acted yet, there are ongoing discussions about a fix at some time later this year. Such a fix could take two forms: a retrospective fix that corrects all payments as of January 1, 2024, or a prospective fix that only pays at a higher rate going forward.
A retrospective fix has its challenges, since it would require MACs to reprocess all the claims they paid the lower rate. It might also require providers to collect additional cost-sharing from Medicare beneficiaries if Congress did not exempt beneficiaries from the additional cost-sharing they would owe from the higher service price (Medicare beneficiaries typically pay 20% of the cost of a MPFS service). The following example illustrates the potential difficulties in this approach:
The example above suggests that this process could create a lot of administrative burden. First, MACs would have to reprocess thousands of claims (which could take them months to do and could be expensive) and pay providers the difference between what providers received at the lower MPFS CF and what they are owed under the higher CF. Then, providers (or their staffs) may be required to go back to the beneficiaries they already billed and ask for the additional co-insurance. The cost for staff to work on getting this additional amount from beneficiaries may be more expensive than the amount they would collect. It also could be confusing for beneficiaries to receive an additional bill for services that they thought they had already paid for in full.
This brings us to the second possible approach: a prospective fix based on or around the date Congress passed the legislation. For example, if legislation was passed in February or March, Congress could provide a fix applicable to all services delivered on or after March 1, 2024. If Congress originally planned to provide a 1.25% fix, it could make up the difference by providing a 1.5% fix for the remaining 10 months of 2024. A 1.25% doc fix for 12 months and a 1.5% fix for 10 months would yield the same annualized increase in payment. (Please note that this just an example—Congress could provide no fix or a higher or lower fix at some other point in the year).
A prospective fix would not result in the same challenges as a retrospective fix, and it’s been done before by Congress in some instances. For example, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (enacted on June 25, 2010) increased the MPFS payment update for June through November 30, 2010, from 0% to 2.2% (the Physician Payment and Therapy Relief Act of 2010, which was enacted later in 2010, extended the 2.2% update through the end of the calendar year). And when the Medicare Access and CHIP Reauthorization Act (MACRA) was enacted in April 2015, Congress provided a higher MPFS CF update of 0.5% that was applicable only for half the calendar year (July 1, 2015, through December 31, 2015) and then extended through the end of 2019. While there have been many other doc fixes throughout the years (read this Regs & Eggs blog post for a summary of the doc fixes since 2020), these two examples represent the kind of prospective fix Congress could exact that would only be applicable for part of the year.
No matter what approach Congress takes going forward, many will likely continue to argue that there needs to be a better way to update Medicare provider payments going forward. As stated in a previous Regs & Eggs blog post, there are many perceived issues with the current MPFS payment structure, including a lack of an inflationary update and a budget neutrality requirement that causes CMS to make across-the-board cuts to the CF when it increases payment rates for individual MPFS services. Congress has introduced legislation to address these issues, and at a meeting last week, the chair of the Medicare Payment Advisory Commission (MedPAC) stated that the Commission will conduct an analysis of the MPFS this spring to develop recommendations for comprehensive reforms.
As we wait to see what Congress will do in the next few months, McDermott+Consulting will keep you updated! In the meantime, please let me know if you have any questions.
Before concluding, I wanted to discuss MedPAC and its meeting last week. MedPAC is a commission funded by US taxpayers whose purpose is to provide recommendations to Congress and CMS about how to improve the Medicare Program. It includes 17 commissioners who are physicians, economists and other health policy experts from across the country, as well as a sizable staff that conducts the research necessary to carry out MedPAC’s work. MedPAC issues annual reports and routinely responds to congressional requests about Medicare spending and payment policy.
MedPAC’s recommendations are not binding. Congress and CMS can choose to accept them, adopt pieces of them or not adopt them. For example, a few years ago, MedPAC recommended that the Merit-based Incentive Payment Program (MIPS) be eliminated and replaced with an alternative program that measures quality improvement at a population level rather than the individual patient level. While Congress and CMS probably will not completely scrap MIPS any time soon, CMS did incorporate part of MedPAC’s recommendation related to the use of population health measures into its new MIPS Value Pathways framework.
During the public meeting last week, MedPAC provided the following recommendations for 2025 payment updates for providers under the MPFS and other facilities:
MedPAC staff also provided an update on the status of Medicare Parts C (Medicare Advantage) and Medicare Part D (prescription drug benefit) and presented the commissioners with policy options for standardizing benefits in Medicare Advantage.
It is important to note that the number of beneficiaries enrolled in Medicare Advantage plans is growing significantly and has exceeded 50% of the Medicare population. Providers who treat Medicare beneficiaries enrolled by Medicare Advantage plans are not paid under the MPFS, but directly by the plans. Thus, the discussion above related to the 3.37% cut to the MPFS CF only applies where providers treat beneficiaries in Medicare fee-for-service (and not who are not enrolled in Medicare Advantage). Medicare Advantage and private insurance plans sometimes base payment rates on the MPFS rates, however, so a cut to the CF could eventually affect reimbursement rates on a more global scale.
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.
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