AMA Urges Congress to Update Medicare Physician Payment System

May 27, 2024 | Uncategorized

The American Medical Association (AMA) recently sent a letter to congressional leaders advocating for updates to the Medicare Physician Payment System. Following a Medicare Payment Advisory Commission (MedPAC) report, the AMA has urged Congress to implement a stable annual payment rate that aligns with inflation and practice costs.

The MedPAC report, presented to Congress on March 15, 2022, recommended maintaining the freeze on Medicare physician payment rates and not increasing them for 2023. The AMA has expressed significant concerns about this recommendation, emphasizing that it would negatively impact patient access to care as practice costs rise.

MedPAC’s report stated that despite the decline in Medicare service volume and revenue due to the pandemic, Congress provided substantial relief funds to clinicians. MedPAC expects these volumes and revenues to rebound to pre-pandemic levels by 2023. However, the AMA argues that financial challenges persist for physicians. They cite ongoing fiscal uncertainties related to the COVID-19 pandemic, statutory payment cuts, the consistent lack of inflationary updates, and significant administrative barriers as major issues affecting the stability of the Medicare physician payment system.

Inconsistency In Recommendation

The AMA also highlighted the inconsistency in MedPAC’s recommendation to freeze physician payment rates while CMS projects an 80 percent increase for Medicare Advantage plans in 2023. Data from the Medicare Trustees show that Medicare physician pay has increased by only 11 percent from 2001 to 2021, with one-third of that increase coming from a temporary 3.75 percent update set to expire this year. In contrast, Medicare hospital and skilled nursing facility payment rates have increased by over 60 percent during the same period. When adjusted for inflation, Medicare physician payment rates have declined by 20 percent over the past two decades, while the costs of running a medical practice have risen by 39 percent since 2001.

Additionally, Medicare physician fee schedule spending per enrollee has declined by 1 percent over the last ten years, while other Medicare benefits spending has significantly increased. For instance, Part B fee-for-service spending per enrollee, excluding physician fee schedule spending, rose by 42 percent over the last decade. Part A fee-for-service spending increased by 3.6 percent, Part C spending by 29.4 percent, and Part D spending by 20 percent.

Free Set To Continue Until 2026

The Medicare physician payment freeze is set to continue until 2026, after which payment updates will resume at a rate of 0.25 percent per year, far below the rate of medical or consumer price index inflation. The AMA warns that unless Congress updates Medicare physician payments to reflect inflation, the gap between payment rates and rising practice costs will continue to widen.

The AMA also referenced a May 2021 study that revealed the high costs of compliance with the Medicare Merit-Based Incentive Payment System (MIPS), amounting to around $12,800 and over 200 hours per physician annually. Furthermore, physicians have not been able to receive annual incentive payments for Medicare Advanced Alternative Payment Models (AAPM) due to the lack of transition opportunities.

The AMA stressed that financial hardships, burnout, and stress are driving many physicians to consider leaving their practice within two years. While expressing gratitude to Congress for the financial relief provided during the pandemic and for preventing a 10 percent physician payment cut in 2022, the AMA urged officials to collaborate with the physician community to develop solutions to the systemic issues plaguing the Medicare physician payment system.

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