Advocacy Update

June 28, 2024: Medicare Payment Reform Advocacy Update


In its June 2024 report (PDF) to Congress, the Medicare Payment Advisory Commission (MedPAC) expressed concerns about the growing gap between what Medicare pays physicians and the actual costs of delivering high-quality care.

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“This larger gap could create incentives for clinicians to reduce the number of Medicare beneficiaries they treat or stop participating in Medicare entirely,” wrote MedPAC. Given these concerns, the Commission is considering alternatives to the paltry updates under current law, which include a 0% update in 2025 and 0.25% or 0.75% updates starting in 2026. Physicians who are qualifying participants in an advanced alternative payment model would receive a 0.75% update and all others would receive a 0.25% update.  

Specifically, MedPAC is considering recommending that Congress replace the inadequate updates under current law with permanent updates based on some measure of inflation. MedPAC discussed updating the practice expense portion of physician payment by the hospital market basket inflation index minus productivity or updating physician payment rates by the Medicare Economic Index (MEI) minus 1 percentage point, possibly with a floor equal to half of MEI.  

The AMA commended MedPAC for recognizing the unsustainable Medicare physician payment trajectory and considering significant improvements over current law, including a permanent increase to physician payment. However, the AMA remains concerned that an update less than the full inflation rate, as is the case with both approaches under MedPAC’s consideration, would allow the gap between what Medicare pays physicians and what it costs to provide high-quality care to continue growing, forcing physicians to make difficult choices about how to keep the lights on and care for America’s seniors and persons with disabilities. This would be even more problematic following years of declining payment rates and high inflation.  

Instead, the AMA strongly urges (PDF) MedPAC to support full inflation updates for physicians and Congress to pass H.R. 2474 “Strengthening Medicare for Patients and Providers Act,” which would update Medicare physician payment annually by 100% of the MEI. Such an update would allow physicians to keep pace with rising practice costs so they can continue to invest in their practices and implement innovative strategies to provide high-value, patient-centered care. 

On May 17, Chairman Wyden and Ranking Member Crapo of the Senate Finance Committee issued a white paper on the Medicare Physician Fee Schedule and its impact on chronic care management. The bipartisan white paper outlines policy concepts related to reforming the way physicians are paid by Medicare and meeting the needs of those with chronic illness. It includes important steps toward potential policy reforms to streamline clinician payment systems and treat chronic diseases. As Chairman Wyden noted, “The way Medicare pays doctors for their work has not kept up with the times, and if it’s not working for doctors, it’s not working for the patients they help.”  

The white paper outlines a number of areas of interest that the Finance Committee sees as an opportunity for reform, including: 

  • Creating sustainable payment updates to ensure clinicians can own and operate their practices 
  • Incentivizing alternative payment models that reward providing better care at a lower cost 
  • Rethinking how Medicare measures quality care 
  • Improving primary care 
  • Supporting chronic care benefits in Medicare fee-for-service 
  • Ensuring continued access to telehealth 

The white paper is the follow up to the Finance Committee’s hearing in April regarding how to approach updating the Medicare physician payment system, and how to ensure the treatment and management of chronic conditions is at the center of the Medicare program. The AMA submitted a Statement for the Record (PDF) for that hearing.  

The AMA has been working closely with the Committee and sees the white paper as a very positive development that represents a bipartisan commitment from the Finance Committee to begin the process of reforming the Medicare physician payment system. The AMA’s response (PDF) to the white paper encouraged the Committee to advance MACRA reform legislation to establish a permanent MEI update, reform the budget neutrality process, reform MIPS, and to maintain the APM bonuses and threshold requirements as well as to develop a more robust APM pipeline. 

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