Congress allows Medicare cuts for physicians starting Jan. 1
On Dec. 20, President Biden signed a stopgap continuing resolution, the American Relief Act (HR 10545), a year-end legislative package designed to keep the government funded until March 14, 2025.
This legislation included extensions for various expiring health care programs until either mid- or late March, such as pandemic-era telehealth waivers, the National Health Service Corps, the Teaching Health Center Graduate Medical Education Program, community health centers, the special diabetes program, the geographic practice cost index (GPCI) work adjustment, and the hospital-at-home initiative.
However, the legislation did not include relief from Medicare physician payment cuts. An earlier draft of the year-end package had proposed mitigating 2.5% of the planned cuts to Medicare physician payments in 2025. Despite initial bipartisan support, this proposal was ultimately dropped due to political pressure and broader concerns about government spending. As a result, the scaled-down spending package passed without addressing these payment reductions.
As of Jan. 1, 2025, physicians are facing a 2.83% reduction in payments under the 2025 Medicare Physician Payment Final Rule. This cut marks the fifth consecutive year that physicians have endured reductions in Medicare payments, exacerbating long-standing financial pressures on medical practices.
Compounding this issue, the Centers for Medicare & Medicaid Services (CMS) projects that the Medicare Economic Index (MEI), which measures the cost of delivering care, will increase by 3.5% in 2025. Given this growing disparity between Medicare payment rates and the rising costs of providing care, the AMA has renewed the urgent call for Congress to reverse the new cuts as soon as possible and implement a payment update that reflects inflationary pressures.
With the gap between reimbursement rates and the cost of care continuing to widen, the AMA and other physician advocacy groups argue that these annual payment reductions jeopardize access to quality care for Medicare beneficiaries and threaten the financial stability of medical practices across the nation.
For more information and resources to take action, visit the AMA’s Fix Medicare Now website.
AMA commends MedPAC for recognizing inadequate Medicare physician pay
In a comment letter (PDF) following the Medicare Payment Advisory Commission’s (MedPAC’s) December meeting, the AMA commended the commission for acknowledging the unsustainable trajectory of the current Medicare physician payment system and stressing for the third straight year that physician payment rate updates should be based on an inflation-based index for Medicare. The AMA agreed that the 0.25% and 0.75% updates, depending on qualifying alternative payment model participant status, under current law for 2026 are inadequate and far below the cost to provide care to America’s seniors and people with disabilities. The letter urged MedPAC to recommend a physician payment update that keeps pace with the rate of inflation. Additionally, the AMA explained the role of the AMA/Specialty Society Relative Value Scale Update Committee (RUC) in making recommendations to CMS encouraging increased payments for primary care physicians and clarified that the Medicare Economic Index includes a productivity adjustment. MedPAC is expected to vote on its Medicare physician payment adequacy recommendation to Congress at its January meeting. Its recommendation will then be included in the commission’s March report to Congress.
