AMA Urges Congress to Update Medicare Physician Payment System

Following a recent Medicare Payment Advisory Commission (MedPAC) report, the American Medical Association (AMA) has asked Congress to update the Medicare physician payment system to include a stable annual payment rate that keeps up with inflation and practice costs.

In a letter to congressional leaders, the organization expressed concerns about the MedPAC recommendation to continue the freeze on Medicare physician payment rates and the lack of an adequate annual update for the payment system.

The MedPAC report, sent to Congress on March 15, 2022, recommended that federal officials maintain Medicare reimbursement rates for physicians and not provide any increases for 2023. According to AMA, this would hurt patient access to care as it becomes more expensive for physicians to practice medicine.

“Although clinicians have experienced declines in their Medicare service volume and revenue due to the pandemic, Congress has provided tens of billions of dollars in relief funds to clinicians during the PHE, and we expect volume and revenue to rebound to pre-pandemic levels (or higher) by 2023,” MedPAC stated in the report.

However, AMA affirmed that financial challenges for physicians persist.

“Physicians have been enduring an increasing financial instability of the Medicare physician payment system due to a confluence of fiscal uncertainties related to the COVID-19 pandemic, statutory payment cuts, consistent lack of inflationary updates, and significant administrative barriers,” the letter stated.

Additionally, AMA noted that MedPAC cannot justify freezing Medicare physician payment rates as CMS projects an 80 percent increase for Medicare Advantage plans in 2023.

Data from the Medicare Trustees showed that Medicare physician pay has increased by only 11 percent between 2001 and 2021. Around one-third of that increase includes the temporary 3.75 percent update set to expire this year.

In contrast, Medicare hospital and skilled nursing facility payments rates increased by more than 60 percent over the same period.

After being adjusted for inflation, Medicare physician payment rates have declined 20 percent over the last two decades, the letter noted. Meanwhile, the cost of running a medical practice—including physician office rent, employee wages, and liability insurance premiums—has increased 39 percent since 2001.

Medicare physician fee schedule spending per enrollee has also declined by 1 percent over the last ten years or 0.1 percent each year, while other Medicare benefits spending has increased. For example, Part B fee-for-service (FFS) spending per enrollee, excluding physician fee schedule spending, increased by 42 percent over the last decade. Part A FFS spending increased by 3.6 percent, Part C spending rose 29.4 percent, and Part D spending increased 20 percent.

The Medicare physician payment freeze is scheduled to last until 2026. Once the freeze ends, payment updates are set to resume at a rate of 0.25 percent per year, which is significantly below the rate of medical or consumer price index inflation, AMA stated in the letter.

Unless Congress provides Medicare physicians with an update that reflects inflation, the gap between physician payment rates and rising inflation in medical practice costs will widen, AMA said.

The organization also referenced a May 2021 study that revealed that it costs physician practices around $12,800 and more than 200 hours per physician per year to comply with the Medicare Merit-Based Incentive Payment System (MIPS). Additionally, physicians have not been able to receive annual incentive payments for Medicare Advanced Alternative Payment Models (AAPM), as they have not had the chance to transition into a model.

AMA stressed that financial hardships, burnout, and stress, are pushing physicians to consider leaving their practice within two years.

While AMA expressed its gratitude to Congress for providing financial relief during the pandemic and preventing the 10 percent physician payment cuts in 2022, the organization urged officials to work with the physician community to develop solutions to the systematic problems with the Medicare physician payment system.