MedPAC Recommendations for MPFS

As part of its government mandate, the Medicare Payment Advisory Commission (MedPAC) released its report to Congress, containing six chapters for Medicare Physician Fee Schedule (MPFS) recommendations. As taken directly from June 2024 MedPAC Report to Congress:  

  1. Approaches for updating clinician payments and incentivizing participation in alternative payment models – The Commission considers two approaches for updating fee-for-service (FFS) Medicare’s physician fee schedule (PFS) payment rates and contemplates temporarily extending the bonus for participation in advanced alternative payment models (A–APMs).
  2. Provider networks and prior authorization in Medicare Advantage – The Commission discusses the use of provider networks and prior authorization in Medicare Advantage (MA) plans, CMS’s regulation of these tools, and the data that MA plans currently report in these areas.
  3. Assessing data sources for measuring health care utilization by Medicare Advantage enrollees: Encounter data and other sources – The Commission assesses the relative completeness of MA encounter data and other data sources that contain information about MA enrollees’ use of services using data from 2020 and 2021.
  4. Paying for software technologies in Medicare – The Commission reviews the Food and Drug Administration’s (FDA’s) process for clearing software as a medical device (SaMD), examines Medicare’s current coverage process and payments for medical device software under the payment systems for Part A and Part B services, and discusses issues that policymakers should keep in mind when considering paying for medical software in FFS Medicare.
  5. Considering ways to lower Medicare payment rates for select conditions in inpatient rehabilitation facilities – The Commission considers alternative approaches to lower FFS Medicare’s payment rates to inpatient rehabilitation facilities (IRFs) for beneficiaries with select conditions.
  6. Medicare’s Acute Hospital Care at Home program – The Commission assesses the experience to date of hospitals and beneficiaries in the FFS Medicare Acute Hospital Care at Home (AHCAH) program and reviews considerations for Medicare policy.

The commission has suggested the 2025 payment rates remain “flat”, but starting in 2026, will increase 0.75 percent per year for qualifying physicians participating in A-APMs, and will increase by 0.25 percent per year for all other physicians.

However, the commission has expressed its concern whether physician payments will be sufficient in the future. From an inflation standpoint, the Medicare Economic Index (MEI), which measures practice cost information and hours spent in direct patient care, is expected to increase an average of 2.3 percent per year from 2025 through 2033. This increased growth would exceed the increases in the MPFS rates. The commission goes on to say this gap would incentivize physicians to either reduce the number of Medicare patients they treat; or stop participation in the Medicare program entirely. Moreover, the difference in payment rates when a service is billed in a freestanding physician office versus a hospital outpatient department (HOPD) could incentivize physicians to perform and bill those services in the higher reimbursed HOPD setting.

The commission offered alternative approaches to updating the payment rates to include updating the practice expense portion of the PFS payment rates by the hospital market basket, adjusted for productivity; and updating the total PFS payment rates by the MEI minus 1 percentage point. The commission pointed out the first approach would require significant operational changes in the way payments are set and updated over time; while the second approach would be simpler to implement, including the reduction or elimination of policymakers to reassess PFS policy in the future. The commission believes the second approach to be more “desirable and will continue to develop this option in the future.”