April 4, 2025: Medicare Payment Reform Advocacy Update

In a letter (PDF) to the Medicare Payment Advisory Commission (MedPAC), the AMA commended MedPAC for acknowledging the unsustainable trajectory of the current Medicare physician payment system and for exploring ways to increase the default physician payment update to account for the increase in the costs to run a medical practice. 

The AMA strongly urged the Commission to recommend that Congress update physician payment on an annual basis by the full increase in inflation as measured by the Medicare Economic Index (MEI) to ensure predictability and stability for physician payment and to maintain or improve access to care. At a minimum, if the Commission does move forward with a recommendation of tying physician payment updates to a portion of MEI, the AMA urged MedPAC to add a floor of at least 50% of MEI.  

Unfortunately, physicians are absorbing a pay cut of 2.83% in 2025, which marks the fifth consecutive year of reductions to Medicare physician payments. At the same time, the Centers for Medicare & Medicaid Services (CMS) projects that the MEI will increase by 3.5% this year, widening the chasm between what physicians are paid and their practice expenses. In fact, when adjusted for inflation in practice costs, Medicare physician pay declined 33% from 2001 to 2025, or by 1.7% per year on average. Under current law, beginning Jan. 1, 2026, physicians will see a measly 0.25% update unless they participate in an advanced alternative payment model, in which case their update will be a slightly higher 0.75%. These updates will fall far short of the input costs of physician services, which threaten to continue the instability in the Medicare Physician Fee Schedule (MPFS). 

The AMA also commented on MedPAC’s draft recommendation to improve the accuracy of relative payment rates, shared an update about the Physician Practice Information (PPI) survey, and provided information about the AMA/Specialty Society RVS Update Committee (RUC). Finally, the AMA offered support for MedPAC’s discussion about a more robust regulatory structure for Institutional Special Needs Plans. 

The AMA joined 12 national medical specialty societies and other health care organizations in a letter (PDF) calling on MedPAC to highlight the urgent need to extend the incentive for value-based care and supporting the Commission’s draft recommendations to increase Medicare physician payment and ensure long-term sustainability of the Medicare program. Specifically, the coalition urged MedPAC to reiterate its concerns as outlined in Chapter 1 (PDF) of MedPAC’s June 2024 Report to Congress about the expiration of the incentives for physicians and other clinicians in advanced alternative payment models.  

Congress has yet to extend the advanced alternative payment model (APM) incentive for the 2025 performance period, and physicians, other health care professionals, and ACOs are facing significant uncertainty about whether they will be able to continue to support expanded care teams and maintain investments in population health infrastructure. As the debate about whether and how to extend APM incentives is ongoing—and MedPAC is considering recommending that the slightly higher conversion factor updates for APM participants be replaced with a single conversion factor update—it is critical that the Commission explicitly stress the importance of APM incentives in any discussion of Medicare physician payment reform. The APM incentives are essential to sustain and increase participation in APMs, and thus to increase access to high-quality patient care. 

• April 4, 2025: Advocacy Update spotlight on more flexibility to avoid MIPS penalties
• April 4, 2025: National Advocacy Update
• April 4, 2025: State Advocacy Update
• April 4, 2025: Judicial Advocacy Update