The Medicare payment system is on an unsustainable path, threatening patients' access to physicians.
The system’s growing financial instability is due to a confluence of fiscal uncertainties physician practices face related to the pandemic, statutory payment cuts, lack of inflationary updates and significant administrative burdens.
Medicare physician payment has effectively been cut 26%, adjusted for inflation, from 2001–2023. The Medicare physician payment system lacks an adequate annual physician payment update, unlike those that apply to other Medicare provider payments (PDF).
A continuing statutory freeze in annual Medicare physician payments is scheduled to last until 2026, when updates resume at a rate of 0.25% per year indefinitely, well below inflation rates.
A JAMA Health Forum study found that it costs an estimated $12,811 and more than 200 hours per physician, per year to comply with the Medicare Merit-Based Incentive Payment (MIPS) system and, to date, there have been very limited options for physicians to move towards value-based Medicare Advanced Alternative Payment Models (APM).
The discrepancy between what it costs to run a physician practice and actual payment combined with the administrative and financial burden of participating in Medicare is encouraging market consolidation and threatens to drive physicians out of rural and underserved areas.
In addition to being asked to do more with fewer resources each year, physicians continue to face significant clinical and financial disruptions during the COVID-19 pandemic. In 2020, according to an AMA study, there was a $13.9 billion decrease (equating to a 14% reduction) in Medicare physician payment schedule spending as patients delayed treatments.
Reforming Medicare physician payment means putting the patient back in the center of health care. That’s why it is a critical component of the AMA Recovery Plan for America’s Physicians, and why the AMA is working to block payment cuts, advocate for physicians and patients and build long-term solutions.
It is urgent that Congress work with the physician community to develop long-term solutions to the systematic problems with the Medicare physician payment system and preserve patient access.
Congress needs to establish a permanent, annual inflationary Medicare physician payment update that keeps up with the cost of practicing medicine and encourages practice innovation.
Budget-neutrality policies need to be revised to:
- Prevent erroneous utilization estimates from causing inappropriate cuts.
- Clarify the types of services that should and should not be subject to budget neutrality adjustments.
- Raise the projected expenditure threshold that triggers the budget neutrality adjustment, which has been in place since 1992.
The performance and reporting programs in Medicare’s MIPS are based on outdated legacy programs and the four components largely function independently and are noncohesive. They are burdensome and often lack clinical relevance. Policymakers should work with the physician community and other stakeholders to develop ways to reduce the administrative and financial burden of MIPS participation and revise reporting programs to ensure its clinical relevance to patient care.
The AMA has:
- Led an advocacy campaign joined by more than 150 other organizations that minimized the 8.5% in Medicare payment cuts originally slated for 2023.
- Successfully advocated for significant Quality Payment Program relief due to COVID-19.
- Developed a set of principles (PDF) supported by more than 120 other medical societies to guide advocacy efforts on Medicare physician payment reform.
- Achieved an extension of the APM incentive payment (now at 3.5%) at the existing 50% revenue threshold through the 2023 performance year.
- Successfully advocated for CMS to continue to allow physicians and group practices to apply for a MIPS Extreme and Uncontrollable Circumstances hardship exception to avoid up to a -9% MIPS penalty in 2025 based on 2023 performance.
The AMA is:
- Pushing for comprehensive Medicare payment reform to increase payment stability, including annual positive updates (H.R. 2474), revised budget neutrality policies, and less onerous quality reporting and payment adjustments.
- Supporting legislation tying annual Medicare physician payment updates to the Medicare Economic Index of practice cost inflation, which was introduced as H.R. 2474 on April 3.
- Recently adopted AMA policy on Medicare payment.
- The need for Medicare payment reform (PDF).
- Congress must stop Medicare payment cuts triggered by budget neutrality (PDF).
- The Medicare physician payment system needs annual inflation updates (PDF).
- Key measures of practice expense in the Medicare Economic Index (PDF).
- Medicare alternative payment models (PDF).
- The principles: Characteristics of a rational Medicare physician payment system (PDF).
- Use the Physicians Grassroots Network to tell Congress to protect America’s Medicare patients.
- Learn about how you can take part in the fight to fix Medicare on behalf of your patients and practices at the AMA's Fix Medicare Now website.
- The AMA's Medicare Basics series provides an in-depth look at important elements of the Medicare physician payment system.
Visit AMA Advocacy in Action to learn more about the advocacy priorities the AMA is actively working on.
The AMA works to generate support for policies critical to the nation’s health care system—and we can’t do it without your help. Learn more about ways to get involved with AMA advocacy.