(WASHINGTON, D.C.) – Today, U.S. Senators Tom Coburn (R-OK) and Richard Burr (R-NC) offered reaction to the release of a Government Accountability Office (GAO) report at the Senators’ request to review legislation that altered Medicare payments to hospitals over time.  The GAO report concludes that the report’s findings “suggest that the way Medicare currently pays hospitals may no longer ensure that the goals of the inpatient prospective payment system—cost control, efficiency, and access—are being met.” 

“Today’s GAO reports show how changes made to benefit some facilities have undermined the integrity of the payment system for all facilities,” Dr. Coburn said.  “Congress has a duty to responsibly reform Medicare so it can serve current and future seniors in a more financially sustainable manner.  As GAO shows, carving out exemptions has unfortunately become the norm for Congress.  Comprehensive reform should reject a system of parochial patchwork payments and instead adopt a hospital payment model that is more equitable, transparent, competitive, and accountable.” 

“When the exceptions are swallowing the rule—as this GAO report clearly concludes with respect to how hospitals are paid under the Medicare program—it’s another indicator of the need to strengthen and improve Medicare to better serve seniors and taxpayers ,” Senator Burr said.  “Decades of patchwork fixes to Medicare have failed to put the Medicare program on a sustainable course.  We have a moral responsibility to take action to strengthen and improve the Medicare program so that we may keep our promise for seniors and future generations.” 

Medicare reimburses most hospitals under the inpatient prospective payment system (IPPS), which pays hospitals a flat fee, per stay, set in advance, with different amounts for each type of condition. Congress created the IPPS in 1983, but in the last 30 years, Congress has increased Medicare payments to certain hospitals by changing the qualifying criteria for IPPS payment categories, creating and extending exceptions to IPPS rules, or by exempting certain types of hospitals from the IPPS. 

GAO identified numerous statutory provisions Congress has passed into law that individually increased Medicare payments to a subset of hospitals under the IPPS.  GAO found that during the period from 1997 to 2012 a total of 15 changes have been made that individually increased Medicare payments to a subset of hospitals under the IPPS.  While the payment modifications passed by Congress may have been intended to affect only a subset of hospitals, nine out of the 10 hospitals reviewed qualified for an adjustment or exemption from the IPPS in 2012—about 91 percent of hospitals were subject to an IPPS payment adjustment or were excluded from the IPPS entirely.  GAO found that the majority of hospitals, nearly two-thirds qualified for at least one of four categories of increased payment. 

The Institute of Medicine (IOM) and the Medicare Payment Advisory Commission (MedPAC) have suggested that continual and wide-ranging modifications to the payment system undermine the integrity of the IPPS.  IOM found that the methods CMS uses for determining how Medicare pays hospitals for the same services in different parts of the country did not accurately reflect regional differences in expenses. MedPAC found that some special payment changes did not even adequately target isolated small rural providers, while other payments changes had overlapping purposes.

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You can read the full report here. 

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