In its annual report, the Medicare Payment Advisory Commission (MedPAC) asserted that Medicare could reduce its spending by $30 billion over the next five years through provisions in the Affordable Care Act and if Congress follows MedPAC’s recommendations.

The report noted that although Medicare spending will be lower over the next 10 years than the previous decade, overall Medicare spending will continue to rise as more beneficiaries enter the program and obesity levels put more patients at risk of chronic diseases. Without policy changes, Medicare’s hospital insurance trust fund will be depleted by 2024.

The commission offered several recommendations for savings:

  • Requiring outpatient care rates at hospitals to match the same care given at lower rates at physician offices, which could result in $10 billion in savings over five years;
  • Reducing payments for treatment at skilled nursing facilities, which could save $250 to $750 million in 2013 and up to $10 billion over five years;
  • Implementing an ACA provision requiring Medicare to review hospice providers with a large number of patients who are treated for longer than six months, which could save between $1 billion and $5 billion over five years; and
  • Enforcing another ACA provision that allows the government to withhold payment because of patterns of fraudulent activity, which could lead to savings between $750 million and $2 billion in 2014.

The commission advised that the recommendations be combined with ACA initiatives that already are saving money, such as provisions that aim to limit unnecessary medical procedures and give providers bonuses for delivering high-quality care. The report also recommended eliminating more fee-for-service programs through the ACA.

MedPAC Chair Glen Hackbarth also reiterated calls to repeal the sustainable growth rate (SGR) formula, which sets Medicare physician reimbursement rates, saying that payment reform is the “single most important way” to ensure quality care and reduce costs.