WASHINGTON – The American Hospital Association says new data released at the Medicare Payment Advisory Commission (MedPAC) meeting suggests that Medicare payment for hospital services falls “woefully” short of covering costs.

Medicare covered significantly less patient care costs in 2008 than it did in 2007, according to information released at the MedPAC meeting. The drop in Medicare margins from negative 6 percent to an estimated negative 7.2 percent marks a historic low in how Medicare covers the cost of care for America’s seniors, officials said. This continues a trend of declining Medicare payment adequacy over the past seven years.

MedPAC staff project that overall Medicare margins will be a negative 5.9 percent in FY 2010.

Rich Umbdenstock, president and CEO of the American Hospital Association, said this fuels concerns about adding more patients to Medicare through a “buy-in” under reform.

“The data released at (the) MedPAC meeting underscore our concerns about the Medicare buy-in proposal that’s currently part of the Senate health reform bill,” said Umbdenstock.  “For the majority of America’s hospitals, Medicare payments cover less than the cost of care for hospital services to seniors, making it more difficult to make ends meet.”

The Medicare buy-in could hamper hospitals’ ability to maintain the essential public services that patients and communities depend upon and to upgrade technology and facilities that make care better, he said.

MedPac is considering a draft recommendation to Congress that would provide a full “market basket” update for fiscal year 2011 outpatient and inpatient hospital payments.

The market basket update is used to adjust hospital payments for inflation. The draft recommendation would provide hospitals with a full Medicare payment update that would take effect along with adoption of a quality incentive program.