Fix the Medicare flaw that forces across-the-board cuts

Kevin B. O'Reilly , Senior News Editor

AMA News Wire

Fix the Medicare flaw that forces across-the-board cuts

Nov 3, 2023

What’s the news: A coalition of physician members of Congress has introduced a discussion draft of legislation to reform the budget-neutrality policies applied to the Medicare physician payment schedule.

This legislative proposal, largely based on work that emerged from the AMA Medicare Reform Workgroup, offers practical policy improvements that provide some needed stability to the physician payment system by assuring that the Centers for Medicare & Medicaid Services' (CMS) payment policy is based on reality—not projections. 

Speak up for Medicare reform

The need for Medicare physician payment reform has never been greater. The AMA shows how the current system is unsustainable—and how you can urge Congress to support solutions.

Among other things, the proposal would raise the budget-neutrality threshold from $20 million to $53 million and increase every five years by the cumulative increase in Medicare Economic Index (MEI) since the last update to the threshold. The $20 million was established in 1992 and has not been updated since. Raising the budget-neutrality threshold would allow for greater flexibility in determining pricing adjustments for services without triggering across-the-board cuts.

The AMA and over 120 national medical organizations and state medical societies lauded the leadership (PDF) embodied in the proposal, which was set forth by the co-chairs of the GOP Doctors Caucus: Reps. Greg Murphy, R-N.C., Brad Wenstrup, R-Ohio, and Michael Burgess, R-Texas.

The AMA and others wrote that they "deeply appreciate your leadership in drafting a proposal to reform the budget-neutrality policies that have been eroding Medicare physician payment levels in recent years," adding that their proposal "would add needed stability and predictability to Medicare physician payments."

The goal is to generate bipartisan support for the proposal from the key House and Senate committees with jurisdiction over the Medicare program. 

Leading the charge to fix Medicare pay is the first pillar of the AMA Recovery Plan for America’s Physicians.

The AMA has challenged Congress to work on systemic reforms and make Medicare work better for you and your patients. Our work will continue, fighting tirelessly against future cuts—and against all barriers to patient care.

Why it's important: As one of few types of Medicare providers without a payment update tied to inflation, physicians have seen their inflation-adjusted payments drop 26% (PDF) from 2001 to 2023. And the final 2024 Medicare physician pay schedule issued Nov. 1 includes a 3.4% cut, which comes top of 2023’s 2% pay cut. The pay schedule “is an unfortunate continuation of a two-decade march in making Medicare unsustainable for patients and physicians,” AMA President Jesse M. Ehrenfeld, MD, MPH, said in a statement issued last night.

The letter from AMA and other physician organizations notes that doctors' pay is "further eroded by frequent and large payment redistributions caused by statutory mandates" that require CMS "to make refinements to fee schedule service valuations and coding policies subject to budget neutrality."

One big problem is CMS often misses the mark in its assumptions, overestimating how much various health care services will be used when doing code revaluations in its budget-neutrality estimates.

Notably, when transitional care management services were added to the Medicare physician pay schedule in 2013, CMS estimated that 5.6 million new claims would be submitted for these services. They were off by more than 5.3 million claims in the first year and even after three years the number of transitional care management claims was still shy of 1 million.

As a result of that overestimation, Medicare physician payments were cut by more than $5.2 billion from 2013 to 2021.

And, the physician organizations' letter notes, "once these redistributions are made through the conversion factor they are not added back, even when actual utilization is far lower than projected."

The bottom line in such cases, the AMA and others wrote, "is not budget neutrality, but rather permanent and unjustifiable Medicare cuts to physician payments across the board."

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To address such instances, the proposal would provide a lookback period to reconcile overestimates and underestimates of pricing adjustments for individual services no later than Sept. 1 of the subsequent year. This would allow for the Medicare conversion factor to be calculated with more accuracy based on actual utilization data and claims.

Find out how you can take part in the fight to reform Medicare on behalf of your patients and practices at the AMA's Fix Medicare Now website.

Learn more: The AMA has declared Medicare physician payment reform to be an urgent advocacy and legislative priority

To help physician advocates and lawmakers get a stronger grasp on the complicated terrain of Medicare physician payment reform, the AMA's Medicare Basics series provides an in-depth, straightforward look at key elements of the payment system and why they are in need of reform—including budget-neutrality rules.