Trump Administration’s Medicare Payment Plan Sparks Debate

Reshaping Medicare Payments

The Trump administration has introduced a plan to alter Medicare payment structures for outpatient care. Officials assert that this could lower costs for older Americans, yet hospitals caution it may affect funding for providers serving low-income and vulnerable patients.

Details of the Proposed Rule

Released on Thursday by the Centers for Medicare and Medicaid Services (CMS), the proposed rule aims to reduce Medicare payments for hospitals in the 340B drug discount program. It also plans to expand site-neutral payment policies for certain outpatient services. The objective is to make healthcare more economical and address payment disparities.

CMS Administrator Dr. Mehmet Oz stated, “This proposed rule focuses squarely on patient affordability by strengthening our utilization management tools, aligning drug payments with actual acquisition costs, and removing site-of-care disparities that have unnecessarily driven up costs for millions of seniors.”

Importance of Healthcare Costs

Healthcare costs are a significant concern for many older Americans. Medicare beneficiaries face rising premiums, deductibles, and prescription drug prices. While Dr. Oz emphasized patient affordability, hospitals worry that the proposed cuts could undermine safety-net providers catering to underserved communities.

“The proposed OPPS rule from CMS takes an axe to critical funding that supports essential hospitals without concern for how it will affect the patients they serve,” said Jennifer DeCubellis, President, and CEO of America’s Essential Hospitals.

Specifics of the New Rule

If finalized, the rule would be implemented in 2027, potentially affecting out-of-pocket costs for beneficiaries for certain drugs and outpatient procedures. The rule proposes a 2.4 percent increase in outpatient care pay, slightly below last year’s 2.6 percent update.

According to Kevin Thompson, CEO of 9i Capital Group, short-term lower out-of-pocket costs could be beneficial as reimbursement aligns closer to hospital expenses for drugs. However, in the longer term, revenue losses for hospitals may lead them to seek compensation elsewhere.

340B Drug Payment Adjustments

CMS proposes reducing Medicare reimbursement for drugs bought through the 340B program, aimed at supporting hospitals serving low-income populations. Starting in 2027, Medicare would pay less for such drugs, intending to cut both Medicare spending and beneficiary cost-sharing.

“The goal is to lower Medicare drug costs, not eliminate the 340B program,” Thompson explained, highlighting concerns over who would absorb reduced reimbursements.

Expanding Site-Neutral Payments

Another proposal includes expanding site-neutral payment policies to certain imaging services performed in hospital outpatient departments. Under the current system, Medicare often pays hospitals more than physicians’ offices for identical services.

The new rule suggests reimbursing certain imaging procedures at physician-office rates. Patients currently incur higher costs in hospital outpatient settings, even for identical care. Site-neutral payments aim to correct this.

“The 20 percent coinsurance would be calculated from a payment closer to what 340B hospitals actually paid,” said Alex Beene, a financial literacy instructor, focusing on savings related to specific Part B drugs.

Potential Benefits for Medicare Beneficiaries

The foremost potential advantage for patients is reduced out-of-pocket costs. Lowering payments for 340B drugs should decrease beneficiary cost-sharing. Furthermore, site-neutral payment initiatives might lower costs in hospital-owned outpatient settings.

• Lower cost-sharing for specific outpatient medicines.
• Reduced pricing for some imaging services in outpatient settings.
• More consistent pricing between hospital outpatient departments and physician offices.

Much of the impact remains contingent upon patient service usage and if the rule is finalized without significant changes.

Next Steps for the Proposal

The proposal, part of CMS’s draft 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center payment rule, awaits public comment before finalization. Once finalized, changes would apply next year.

Beene questioned, “The long-term question is whether Medicare can eliminate expensive markups without weakening the safety-net hospitals that use 340B revenue to support care for beneficiaries.”