The aging baby boomers will dramatically change the profile of Medicare beneficiaries, and the Medicare system needs to adjust as a result, the Medicare Payment Advisory Commission said in a new report.

Age, ethnic mix, education and income disparities, and a growing proportion of beneficiaries being treated for multiple chronic conditions will alter program spending and the types of services Medicare beneficiaries will need in the future, according to the latest MedPAC report, Promoting Greater Efficiency in Medicare. The report recommends to Congress possible ways to change Medicare to address these future needs.

Among the report’s suggestions: The government should establish a hospital compensation index. MedPac added that the index could be used to direct payments to nursing homes under the prospective payment system. To avoid jarring payment swings, implementation should be gradually phased in, according to the report.

MedPAC’s report is available at