MedPAC Says Managed Care Payment Formula Should be Re-linked to Local Costs

The Medicare Payment Advisory Commission (MedPAC) is advocating in a Mar. 1 annual report to Congress that it should "return to the pre-1997 policy of linking payments for Medicare managed care plans to local costs for the traditional fee-for-service program," CongressDaily/A.M. reports. Although such a payment system would generate "geographic variations" in payments that the Balanced Budget Act intended to minimize, the commission says that "gaps" between private plans in different regions of the county have had "unintended consequences." The report said, "Payments should be neutral between the [Medicare+Choice] and [fee-for-service] sectors within local markets, if they are not, local markets may become distorted, and the Medicare program may end up paying more than it should," adding, "Medicare+Choice payment policy is not an effective or appropriate means to address underlying variation in fee-for-service spending." The report is also recommending that lawmakers "scrap" the "sustainable growth rate" system for physician payments in favor of a system similar to the one used to determine payment increases for hospitals. MedPAC is not, however, advocating for a change in the formula for hospital payments for next year. MedPAC chair Gail Wilensky said, "We are seeing evidence that margins have improved substantially in 2000" (Rovner, CongressDaily/A.M., 3/1).