MedPAC calls for inflationary Medicare physician payment update

March 16, 2023

Recognizing that physician pay has not kept up with the cost of practicing medicine, the Medicare Payment Advisory Commission (MedPAC) has called for a physician payment update tied to the Medicare Economic Index (MEI). The California Medical Association (CMA), American Medical Association (AMA) and others in organized medicine have long championed this move and appreciate MedPAC’s acknowledgement that the current Medicare physician payment system is inadequate – a critical first step toward the larger, necessary work of reforming Medicare to make it more rational and serve patients better.

In the face of inflation, the COVID-19 pandemic, and growing costs of running a medical practice, physicians have struggled to keep open their doors, jeopardizing access to care, particularly in rural and underserved areas. Not only have Medicare payments failed to respond adequately, but physicians saw a 2% payment reduction for 2023, creating an additional challenge at a perilous moment. 

MedPAC – the independent federal panel that advises the U.S. Congress on Medicare issues – suggested in its March 2023 “Report to Congress” that lawmakers update the 2023 Medicare base payment rate for physician and other health professional services by 50% of the expected increase in the MEI.

While it is notable that MedPAC for the first time ever has recommended an inflationary update for physicians, CMA, AMA and others are strongly urging Congress to adopt a 2024 Medicare payment update that recognizes the full inflationary growth in health care costs.

"As one of the only Medicare providers without an inflationary payment update, physicians have waited a long time for this change. When adjusted for inflation, Medicare physician payment has effectively declined 26% from 2001 to 2023,” said AMA President Jack Resneck Jr., M.D. “These increasingly thin or negative operating margins disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or other historically minoritized or marginalized patient communities. Our workforce is at risk just when the health of the nation depends on preserving access to care.”

In a letter signed by CMA, AMA and 134 other health organizations – representing 900,000 physicians and tens of millions of Medicare patients – the groups told Congress that a full inflation-based update is “the principal legislative solution to the ongoing problems plaguing the Medicare Physician Fee Schedule.”

The letter notes that Congress has passed stopgap measures in the past few years to mitigate threats to Medicare physician payments. Yet, practice costs have outpaced those efforts. The gap between frozen physician payment rates and rising medical practice costs due to inflation will continue to widen. A permanent solution is needed to avoid this annual panic and legislative chaos.

The letter points out the real-life impact of the eroding value of Medicare payments. According to MedPAC, among those looking for a new primary care physician, half of Medicare patients had difficulty in finding one. And among Medicare patients looking for a new specialist, one-third struggled to find one. Finding specialists in rural and historically underserved areas is particularly difficult, and the payment system is creating even bigger barriers for patients in those communities.

The full letter can be found here


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