AARP Eye Center
Background
Medicare pays for hospital inpatient services using a prospective payment system (PPS). As a rule, the PPS makes a single payment for a group of related services, for example, all care related to a surgical procedure or a hospital stay for care of a medical condition. In addition to paying for beneficiary services, Medicare subsidizes teaching hospitals and covers uncompensated care costs of facilities that serve a disproportionate share of individuals with low incomes or those who are uninsured. Medicare also subsidizes certain rural hospitals, such as Critical Access Hospitals and certain comprehensive cancer hospitals that are not paid under the PPS. Subsidies for graduate medical education were designed to help pay for the cost of educating medical residents and create incentives for teaching hospitals to treat Medicare beneficiaries.
In its 2021 report to Congress, the Medicare Payment Advisory Commission (MedPAC) found that Medicare beneficiaries continued to have good access to hospital services in 2019, the most recent year for which the Commission had data. MedPAC reported that short-term acute care hospitals continued to have significant excess inpatient capacity in 2019, with an overall industry occupancy rate of 64 percent. It also reported that the volume of inpatient services Medicare beneficiaries used continued to decline while outpatient services rose as care shifted from inpatient to outpatient settings.
Under the Affordable Care Act, Congress has slowed Medicare payments to hospitals. It has reduced PPS payment updates to account for expected gains in productivity and lower future “disproportionate share hospital” payments. The latter reflects lower uncompensated care costs due to expected gains in the number of insured patients.
The Consolidated Appropriations Act (CAA) of 2021 created a new designation, the rural emergency hospital (REH), to address challenges many rural hospitals face. The goal was to assist rural areas in maintaining access to emergency care. Early data shows that the REH designation has allowed rural communities to overcome financial difficulties and retain local access to emergency and outpatient services in places that cannot support a full-service hospital. MedPAC will continue to monitor the new REH designation. This includes analyzing REH claims data and considering modifications.
TRADITIONAL MEDICARE PROVIDER PAYMENT—HOSPITALS: Policy
TRADITIONAL MEDICARE PROVIDER PAYMENT—HOSPITALS: Policy
Access to care
The Medicare Payment Advisory Commission and the Centers for Medicare & Medicaid Services should continue researching how Medicare payments to hospitals affect access to and quality of care in hospitals. Particular attention should be given to the potential impact on access and quality of care for people living in rural areas of closure of hospitals and other health care providers. The assessment should include appropriate access to needed primary, specialty, emergency, and other care, availability of other providers within a reasonable distance, and the reasons for closure.
For example, the Centers for Medicare & Medicaid Services (CMS) should monitor whether hospital closings and the reductions in the number of beds due to Medicare’s fiscal policies adversely affect access to care.
Policymakers should ensure comprehensive access to medical care including emergency, acute and subacute care, and behavioral health. They should carefully assess the impact of closures on beneficiary access and quality of care to ensure individuals have access to the health care they need.
Medicare should continue to support rural hospitals and other providers under existing programs. It should consider ways to expand these programs.
The Medicare Payment Advisory Commission, CMS, or both should continue monitoring the adequacy of Medicare subsidies to hospitals that treat a disproportionate share of patients with low incomes.