MedPAC Drafts Payment Recommendations for 2022

Members | December 09, 2020 | by

MedPAC is set to vote on recommendations to eliminate Medicare payment updates for hospice and skilled nursing facilities and reduce the base payment for home health by 5 percent, as well as wage adjust and reduce the hospice aggregate cap by 20 percent when the Commission meets in January.

The December meeting of the Medicare Payment Advisory Commission (MedPAC) focused on draft recommendations that will be voted on in January for inclusion in the annual March Report to Congress. Domains of analysis focus on beneficiary access to care, quality of care, providers’ access to capital, and Medicare margins. The recommendations emanating from these domains are purely advisory. They require Congressional action to be implemented, which more often than not fails to occur.


The presentation led with an acknowledgment that hospice has important benefits for Medicare beneficiaries at the end-of-life despite mixed evidence as to whether it has reduced overall Medicare expenditures. The largest issue expressed was the high degree of profitability for hospice providers who have long lengths of stay as well as surpassing their aggregate cap. With a correlation between rising Medicare margins and length of stay, the draft recommendation is to eliminate the fiscal year 2022 payment update and wage-adjust and reduce the aggregate cap by 20 percent. The rationale was that this approach will make payment more equitable across providers and focus payment reductions on providers with high margins and long stays.

Skilled Nursing Facilities

With the recognition that nursing homes are among the most impacted segments of the health care system due to the pandemic, the presentation notes that the data underpinning the recommendations largely predate COVID. Further, as the recommendations, if enacted by Congress, would not take effect until October 1, 2021, it was suggested that targeted, temporary funding policies are best suited to address nursing home needs due to COVID instead of permanent changes to provider rates for all skilled nursing facilities. With a call out to 20 years of aggregate Medicare margins of greater than 10%, despite nonprofit providers at 0.9% in the most recent data, the draft recommendation is for Congress to eliminate the base payment update for the fiscal year 2022.

Home Health

The presentation notes that the four focus areas (i.e., beneficiary access to care, quality of care, providers access to capital, and Medicare margins) are positive while projecting a downward margin trend for 2021. While there was general support for the draft recommendation to reduce the Medicare base payment by 5% in 2022, much of the discussion among the commissioners was positive towards home health. However, on a few occasions, there were thoughts that home health might not be “one thing” but several between the post-acute care delivered in addition to two-thirds of home health episodes occurring without a prior hospitalization.

Next Steps

MedPAC will meet again on January 14-15. At that meeting, commissioners will formally vote to approve the recommendations that will be included in the March Report to Congress. For those interested in more details of the December meeting the transcript is available.