Article
What the commission recommended
The Medicare Payment Advisory Commission released its March 2026 report to Congress this week. For general acute care hospitals, it recommends updating 2026 inpatient and outpatient base rates by the amount current law already sets for 2027. That falls short of what hospital groups wanted; the AHA had urged the commission in January to support a higher update given the gap between Medicare payment and rising costs.
The more consequential proposal is structural. MedPAC would replace today’s Medicare disproportionate share and uncompensated care payments with an add-on based on its Medicare Safety-Net Index, applied to inpatient and outpatient services and covering both fee-for-service and Medicare Advantage patients. It would add $1 billion to the pool and phase in reductions for hospitals that would receive less. A National Rural Health Association summary notes that rural hospitals would generally receive more under the index than under current formulas.
Other signals worth noting
- Clinicians: a 2027 physician fee schedule update 0.5 percentage points above current law.
- Post-acute: a 4% cut to skilled nursing facility base rates and a 7% cut for home health. MedPAC projects freestanding SNF Medicare margins near 25% in 2026.
- Medicare Advantage: enrollment reached 55% of eligible beneficiaries in 2025, about 34.9 million people, with estimated payments of $537 billion.
- Site of service: the commission continues to favor moving toward site-neutral payment.
What to do with it
MedPAC recommendations are advisory, but they frame the starting point for Congress and CMS. The fiscal 2027 inpatient proposed rule, typically released in April, will set the actual market basket and productivity adjustment. CFOs should not assume upside beyond current law.
Safety-net hospitals should model the index against their own payer mix now. Because it counts Medicare Advantage patients and blends inpatient and outpatient volume, the winners and losers will not mirror today’s DSH distribution. Systems with post-acute subsidiaries should model the proposed SNF and home health cuts, and those with large hospital outpatient revenue should keep watching site-neutral proposals.
Archive entry for Mar 13, 2026, added Nov. 11, 2026.