The only cure for Medicare payment mess is wholesale reform


AMA News Wire

The only cure for Medicare payment mess is wholesale reform

Mar 8, 2024

The continued failure of Congress to commit to wholesale reforms that might actually fix our broken Medicare payment system is an insult to physicians, hobbles the financial viability of independent practices, and further erodes the health care safety net for tens of millions of Americans—with seniors and those in underserved communities most at risk.

While Congress did not outright ignore the urgent cries from physicians to reverse the planned 3.37% Medicare payment reduction that went into effect on Jan. 1, the 1.68% fix included in the 2024 appropriations package this week—reducing our cuts by half—is woefully inadequate and continues to put physician practices in a financial squeeze when they can least afford it. Medicare physician payment rates have plummeted by about 30% since 2001, adjusted for inflation, jeopardizing the long-term viability of our health care system.

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The impact of sustained, year-over-year Medicare payment cuts will become noticeable first in rural and underserved areas and with small, independent physician practices. Physician practices will continue to scale back the number of Medicare patients they serve; many will stop seeing them permanently. My own parents faced this exact situation with their long-time primary care physician. Sadly, such situations often catch families off guard, leading to frantic searches for a replacement and delays in essential care.

Physicians are the only providers who do not receive automatic inflation updates to their Medicare payments, and we are the only group experiencing a payment cut this year despite high inflation. We cannot minimize the costs and hardships this flawed system has on patients and physicians alike.

This is why the AMA continues to call on Congress to stop the annual cycle of pay cuts and stopgap patches for Medicare payment and enact permanent reforms that bolster our physician workforce and prioritize public health. Despite this latest setback, I continue to be optimistic that real reform will happen.

The AMA created our FixMedicareNow.org website to continue raising awareness of this urgent issue and coordinate our collective physician response. We have created advocacy materials for our partners in organized medicine, including payment trend charts and educational content to more effectively brief policymakers and Congress. 

Spurred in large part by AMA advocacy, Congress took an important first step last year toward Medicare reform with the introduction of H.R. 2474, the Strengthening Medicare for Patients and Providers Act. This bill would provide automatic, annual payment updates to account for practice cost inflation as reflected in the Medicare Economic Index (MEI), which is the government measure of inflation in medical practice costs.

Tying annual payment updates to the Medicare Economic Index has long been supported by the AMA because it is a commonsense solution to the continued erosion of Medicare physician payments and would place physicians on equal ground with other health care providers. The AMA and our Physicians Grassroots Network and Patients Action Network, as well state and specialty medical societies, have joined us in this effort, helping to secure bipartisan co-sponsors for this bill, and educating members of Congress on why it is so desperately needed. 

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Despite this year’s failure to cancel the cut, there are signs that key players in Congress understand the need for comprehensive change. In February, a bipartisan coalition of U.S. senators announced the creation of a Medicare payment reform working group that will explore and propose long-term reforms to the physician fee schedule and updates to the Medicare Access and CHIP Reauthorization Act (MACRA).

Another potential long-term, partial solution that has bipartisan support in Congress is H.R. 6371, which was introduced in the House of Representatives last year by the co-chairs of the GOP Doctors Caucus to reform the budget-neutrality policies that have been producing across-the-board payment cuts. The draft bill would:

  • Require the Centers for Medicare & Medicaid Services to review actual claims data and correct flawed utilization projections that cause inappropriate conversation factor cuts or increases.
  • Raise the spending threshold that triggers a budget-neutrality adjustment from $20 million to $53 million.
  • Limit destabilizing swings in payment by capping budget-neutrality adjustments to 2.5% in any given year.

Until these or similar reforms are adopted, physicians will continue to be punished by an unfair system. Under the current model, physician payments are subject to a six-year payment freeze that ends in 2026. And even when the freeze ends, the statutory update for most physicians will be limited to 0.25% indefinitely, far below even normal rates of inflation. 

To put this into perspective: while physicians endured another round of Medicare pay cuts in 2023 and 2024, the payment schedule confirmed an MEI increase at 4.6%, the highest this century and on top of last year’s 3.8%.

These kinds of cuts, year after year, are not only unsustainable, they’re unconscionable considering the critical role that physicians have in caring for a nation beset by a worsening drug overdose epidemic, rising maternal mortality, declining life expectancy, and where tens of millions of Baby Boomers will soon require advanced levels of care.

We need Congress to work with us to fix the fatal flaws in our current Medicare payment model before these annual cuts create even greater workforce shortages across health care, shrink access to care for patients, and exacerbate the alarming trends that have pushed out nation’s health to the brink.