On Friday, March 15th, the Medicare Payment Advisory Commission (MedPAC) released the first of its two annual reports to Congress on Medicare payment policy. MedPAC is a nonpartisan Congressional agency that advises Congress on Medicare payment policy. The Commission’s recommendations to Congress are non-binding; however, they are highly influential.

MedPAC’s annual March Report asses the adequacy of Medicare payments and provides policy recommendations to Congress on how to improve Medicare payment systems.

MedPAC defines the “adequacy” of Medicare payments by evaluating beneficiaries’ access to care, the quality of care received, and clinicians’ revenues and costs. Based upon the Commission’s annual access to care survey and assessment of data from 2022, the MedPAC determines by their own definition that current Medicare payments are “adequate.” Their findings include that the number of clinicians per Medicare beneficiary is steady, and that patient experience scores remained stable between 2021 and 2022.

Despite assessing Medicare payments to physicians as “adequate,” the Commission also acknowledges that updates to the physician fee schedule have not kept up with the growth of input costs to provide services. MedPAC makes two recommendations for physician and other health professional services based on these findings.

MedPAC recommends that Congress update the Medicare base payment rate by the amount specified in current law plus 50% of the projected increase in the Medicare Economic Index (MEI). At the time of the report, the MEI is projected to grow by 2.6% in 2025, translating to a 1.3% increase in the physician fee schedule under this recommendation. MedPAC estimates that implementing this increase would increase program spending between $2 billion and $5 billion in 2025 and between $10 billion and $25 billion over the next five years. MedPAC issued a similar recommendation last year.

Additionally, MedPAC reiterated last year’s recommendation to implement a safety-net add-on payment for the physician fee schedule for services provided to dual-enrolled Medicare beneficiaries. This add-on payment would be a 15% increase for primary care clinicians and a 5% increase for all other clinicians. This additional payment intends to increase revenue for treating patients who are dually enrolled in Medicare/Medicaid and therefore, close the gap for patients who are underserved. This recommendation is estimated to increase the fee schedule for primary care clinicians by 4.4% and for non-primary care clinicians by 1.2%.

Turning to the future of Medicare Advantage (MA), MedPAC proposed four suggestions to improve the MA program. These recommendations include building more equitable coding between fee-for-service (FFS) beneficiaries and MA plan enrollees, enacting more transparency in MA data and spending, restructuring the MA Quality Bonus Program (QBP) with a budget neutral or budget savings program as an alternative, and implementing better benchmarks for MA plans. The MedPAC report also suggests decreasing the concentration of MA plans to provide better market competition and earn enrollees more generous rates when weighing their plan options.

MedPAC also discusses how favorable selection results in MA plans generating higher Medicare spending compared to the actual cost of enrollees. Risk scores are calculated based on the average cost of an individual in FFS Medicare, but the skewed pool of low beneficiaries and high-risk patients is increasing costs as MA plan enrollment grows. In addition, MedPAC data and analysis show that enrollees who are higher-spending ultimately leave MA plans, while lower-spending enrollees are more likely to remain, again resulting in higher estimated MA costs than actual spending.

Finally, MedPAC analyzes how dual-eligible beneficiaries may struggle to receive adequate care from both Medicare and Medicaid programs separately. They propose that Dual Eligible Special Needs Plans (D-SNPs) may be viable alternatives, but data and analysis results are mostly unclear about the success of these programs. MedPAC uses this to comment on its larger issue with the lack of performance results for MA plans, and the struggle of understanding the degree of their quality of care.

ADVOCATE will share additional information with clients and friends as it becomes available on this and other Federal Health Policies.


Kirk Reinitz, President