Physician payment updates aren't keeping up with inflation: a solution

Medicare physician payment declined 29% from 2001 to 2024, adjusted for inflation in practice costs, according to data compiled by the American Medical Association (AMA). Although the Medicare Payment Advisory Commission (MedPAC), a nonpartisan independent agency that advises Congress on Medicare, has been recommending annual payment increases, physicians received a nearly 2% cut this year. The 2024 cut was originally 3.4%, but Congress intervened in March to ease but not eliminate it.

In a substantive discussion of Medicare on April 11, MedPAC outlined a cure for the ongoing Medicare pay cuts and patches: Tie annual physician payment updates to the full Medicare Economic Index (MEI), a measure of practice cost inflation. See the MedPAC report, "Considering approaches for updating the Medicare physician fee schedule."

In April of 2023, a Medicare reform bill that would accomplish this (the Strengthening Medicare for Patients and Providers Act, HR 2474) was introduced in Congress with support from 120 state medical societies and specialties, including the American Academy of Family Physicians. It is currently with the House Subcommittee on Health.

MedPAC noted in its report that under current law, starting in 2026, payment rates under the Medicare physician fee schedule will increase by 0.75% per year for qualifying clinicians participating in advanced alternative payment models (A-APMs) and by 0.25% for all other clinicians. However, clinicians’ costs are expected to increase by more than 2% per year from 2025 through 2033.

MedPAC's report found that, despite physician payment inadequacy, beneficiaries’ access to clinician care remains "comparable with that of the privately insured." However, the agency noted that "the concern is that a larger gap between MEI growth and updates could negatively affect beneficiary access in the future." It also noted that the "current law’s differential updates will provide a weak incentive to participate in A-APMs."

AAFP resource: Speak Out: Strengthening Medicare for Patients and Providers Act.

Posted on April 23, 2024 by FPM Editors