The Medicare Payment Advisory Commission (MedPAC) released its June report to Congress, recommending increasing physician payments and discussing payment incentives in Medicare, improper payments and Medicare Advantage. MedPAC is an independent, nonpartisan agency that advises Congress on Medicare policy, including provider payments.

The following items may be of interest to ASTRO members:

Improving Payment Incentives in Medicare (Chapter 1)

MedPAC recommends slightly increasing some payment rates for the physician fee schedule as well as hospital outpatient and inpatient payment programs above current law to line up payments closer to provider costs. The report focused on traditional fee-for-service (FFS), alternative payment models (APM) and Medicare Advantage (MA) programs. MedPAC reported that in 2025, less than a fifth of Medicare beneficiaries received their coverage only through FFS. MedPAC noted that Medicare spending and beneficiary cost sharing may be higher than necessary. The Commission also stated that setting prices for FFS is challenging due to potentially making average prices too high and marginal costs too low. The Commission recommendation to improve the basic design of FFS is to lower or eliminate cost-sharing designs for high-value services, while maintaining it for low-value care, and adding an out-of-pocket maximum.

MedPAC reported that the majority of beneficiaries are enrolled in APMs to ensure more efficient care. This leads to providers using a range of mixed services to prevent low-quality care. However, MedPAC revealed that APMs lack mechanisms to directly adjust payments for particular services and items, including Part B drugs. Rather, they seek to reduce costs by encouraging providers to make more economical treatment and purchasing decisions. The Commission has raised concerns that ACO spending targets are often lowered as organizations improve efficiency, potentially weakening incentives for continued savings. In response, CMS has begun addressing this issue by implementing prospective growth rates for spending targets across all ACO models, including MSSP, LEAD and AHEAD.

MA spends 15-18% less than FFS; however, Medicare spends more for MA enrollees than if they were enrolled in traditional FFS. Additionally, the higher payments to MA plans allow for additional benefits that are not offered under traditional FFS. The Commission has recommended revising benchmark calculations to better reflect MA-eligible beneficiaries, blending local and national spending rates, eliminating certain bonus and benchmark provisions, removing quality scores from rebate calculations, and applying a benchmark discount rate to lower overall payment levels.

Medicare payment operations and their role in identifying proper payments (Chapter 3)

According to the Department of Health and Human Services' (HHS) FY 2025 financial report, Medicare accounted for an estimated $56.7 billion in improper payments, including $28.8 billion in FFS Medicare, $23.7 billion in MA, and $4.2 billion in Part D. Improper payments include overpayments, underpayments, payments for ineligible services or beneficiaries, and payments lacking adequate documentation. Across the Medicare program, most improper payments stem from documentation deficiencies or administrative errors, although some result from fraud involving the intentional misrepresentation of information submitted on claims. While improper payments are not necessarily fraudulent, they represent a significant program of integrity concern.

Estimated association between Medicare Advantage enrollment and hospitals "and post-acute care providers" finances (Chapter 4)

Hospital representatives interviewed by MedPAC reported that growing MA enrollment has negatively affected hospital finances, citing higher rates of claim denials and downgrades, challenges in discharging patients to post-acute care, and reimbursement levels they viewed as lower than FFS Medicare. In contrast, MA plans argued that utilization management tools help reduce inappropriate or unnecessary care, that provider billing practices can contribute to payment disputes, and that MA payments generally align with or exceed FFS rates when accounting for additional payments tied to diagnostic coding and quality performance incentives.

The analysis found that MA beneficiaries had hospital stays that were 11.2% longer on average than FFS beneficiaries after adjusting for patient and hospital characteristics, with larger differences among patients discharged to post-acute care settings. Higher MA enrollment was also associated with increased Medicare uncompensated care (UC) add-on payments, suggesting that UC funds may be disproportionately directed to hospitals with larger MA patient populations. However, the study found no statistically significant relationship between market-level MA penetration and hospitals' overall operating margins, revenues or costs from 2013–2024, indicating that increased MA enrollment did not appear to materially affect hospital financial performance on average.