Physicians always put the health and well-being of our patients first, drawing on our years of training and experience and acting boldly and decisively as circumstances demand. Now’s the time for Congress to do the same by working urgently to fix a broken Medicare payment system that is placing enormous financial pressure on physicians and threatening the care we provide. The fiscal stability of physician practices and long-term viability of our entire health care system is at stake.
The current situation almost defies belief. The government’s own Medicare Economic Index (MEI), which gauges the inflation in medical practice costs, will hit 4.5% in 2024. That figure is the highest posted in any year since the turn of the century. When combined with the 3.8% hike in the MEI recorded in 2023, that means the medical practice costs increases will have exceeded 8 percent over just two years. Certainly many individual and group physician practices have experienced cost hikes at higher levels based on local labor markets and other factors, while still recovering from pandemic-related financial setbacks.
Nonetheless, provisions in current law compelled the Centers for Medicare & Medicaid Services (CMS) to reduce Medicare physician payment rates across-the-board by 2% this year, and another 3.36% cut to the conversion factor is slated for 2024. This places a special burden on physician practices, as hospitals, skilled nursing facilities and others filing for Medicare reimbursement routinely receive substantially higher payment rates each year based on increased costs. Rather than receiving annual payment increases tied to inflation, physician practices have battled to reduce or delay payment cuts nearly every year.
Fighting to blunt the impact of payment reductions is hardly the key to achieving and maintaining physician practice sustainability, but this is where we find ourselves.
And it is precisely where we have found ourselves for the past two decades. Adjusted for inflation, Medicare physician payment rates plummeted 26% (PDF) from 2001 to 2023–and that is before the latest proposed cuts are figured in. During that time, Medicare physician payment rates rose by an average 0.4% annually, according to an AMA analysis of Medicare Trustees data.
By contrast, practice costs soared by 47% during those same years.
Implementing solutions
While momentum continues to build in the search for solutions to this crisis, the need for immediate and meaningful action cannot be overstated. Medicare payment reform is the first pillar of the AMA Recovery Plan for America’s Physicians. Our needs include immediate relief from annual funding cuts and fundamental changes to Medicare reimbursement centered on simplicity, predictability, relevance and alignment, principles first outlined in a reform guide issued by the AMA and our Federation of Medicine partners last fall.
On the legislative front, a bipartisan measure now pending in the 118th Congress, the Strengthening Medicare for Patients and Providers Act (H.R. 2474), would provide the crucial link between the Medicare physician payment schedule and the MEI, and finally put physicians on an equal fiscal footing with other entities drawing Medicare payment. Providing this link to the MEI was recommended by the Medicare Payment Advisory Commission, although even this proposal falls woefully short of the mark by backing an update tied to just 50% of the MEI. Physicians can contact their representatives in Congress through this AMA portal to urge passage of H.R. 2474.
It’s no accident that physicians serving in the current Congress—both Republicans and Democrats—are spearheading efforts to achieve Medicare payment reform. U.S. Reps. Ami Bera, MD, D-Calif., and Larry Bucshon, MD, R-Ind., have circulated a “Dear Colleague” and sign-on letter to House leadership in support of annual physician payment updates that keep pace with rising costs.
The AMA will fight tirelessly to achieve a financially stable and wholly predictable Medicare physician reimbursement model that protects both physicians and the patients they serve, one that promotes and rewards value-based care while maintaining access to at-risk patients who need it most. Congress must act decisively to help physicians help their patients, and ensure that Medicare continues to fulfill its crucial role in safeguarding both the health and financial well-being of tens of millions of Americans.
