What’s the news: With physicians yet again facing a Medicare payment cut, the AMA spearheaded a letter (PDF) to congressional leaders that all 50 state medical societies and 76 other health organizations joined in signing.
Focusing on four key pillars, the letter urges lawmakers to pass legislation—much of it already pending before Congress—that would overhaul how physicians are paid and explains why they physician community widely supports these reforms.
The AMA is leading the charge to reform the Medicare payment system, which is the AMA’s top advocacy priority.
Why it matters: If Congress doesn’t do something, physicians will yet again face a Medicare pay cut in 2025, making it difficult for them to sustain their practices as the cost of doing business continues to rise.
The 2025 Medicare physician payment schedule calls for a 2.8% cut for physicians. If Congress doesn’t intervene, the cut would take effect Jan. 1.
This marks the fifth straight year that physicians have faced additional payment reductions and it comes at a time when the Centers for Medicare & Medicaid Services (CMS) projects the Medicare Economic Index (MEI) to increase 3.6% in 2025.
It all comes on the heels of estimates that the MEI increased by 4.6% in 2024, when Medicare physician payment rates were reduced by 1.69%. When adjusted for inflation, Medicare physician payment has declined 29% (PDF) between 2001 and 2024.
“This series of annual payment reductions and the lack of an inflationary update continue to threaten the viability of physician practices, add considerable burden to the practice of medicine, and stifle innovation,” says the joint letter. Physicians are the only health care professionals that don’t receive an annual Medicare payment increase tied to inflation.
The 2024 Medicare Trustees Report warns that if Congress doesn’t change the delivery system or level of payment update the nation can expect that “access to Medicare participating physicians to become a significant issue in the long-term,” the letter notes.
The AMA and the 126 other organizations that signed the letter outlined these four things Congress can do to make the situation better.
Enact an annual, permanent inflationary payment update in Medicare that is tied to the MEI. Physician are the only group to deliver Medicare patients health care who don’t receive annual updates tied to inflation – hospitals and other providers all receive payment based on inflation. The bipartisan “Strengthening Medicare for Patients Providers Act,” would provide physicians with an annual Medicare payment update tied to the MEI.
The letter encourages “swift passage” of the bill, H.R. 2474, because it “would stabilize physician payments, allowing for long-term planning, investment in practices and the delivery of high-quality, patient-centered care.”
Pass budget-neutrality reforms. The Medicare physician pay schedule has statutory-required budget neutrality requirements that must be modified. The bipartisan “Provider Reimbursement Stability Act” bill would reform the Medicare payment schedule budget neutrality policies by—among other things—raising the threshold that triggers a budget neutrality adjustment form $20 million to $53 million and increase it every five years by the cumulative increase in the MEI.
The $20 million threshold was established in 1992 and hasn’t been updated since. Raising the budget-neutrality threshold would allow for greater flexibility in determining price adjustments for services without triggering across-the-board cuts. The bill also would require CMS to reconcile inaccurate utilization projections based on actual claims and prospectively revise the conversion factor accordingly. The letter urges congress to pass the bill, H.R. 6371, “to achieve greater stability and predictability” to the Medicare physician pay schedule.
Overhaul the Merit-based Incentive Payment System (MIPS). The way the MIPS program is structured places undue administrative burdens on physicians—ones that don’t have evidence of improving patient outcomes or quality of care. On top of that, practices that are small, rural and in underserved communities see the greatest penalties under the system.
The letter voices support for legislative proposals to replace key elements of MIPS with a data-driven performance payment system that, among other things, freezes performance thresholds for three years to allow recovery from the COVID-19 pandemic and Change Healthcare cyberattack and aligns program requirements with other CMS hospital value-based programs, simplifies reporting by allowing cross category credit and enhances measurement accuracy.
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Modify alternative payment models (APMs). Key policy proposals that support physicians’ transition into APMs must be continued. The proposed bipartisan “Value in Health Care (VALUE) Act” bill would extend the original 5% APM incentive payments and freeze the 50% revenue threshold for an additional two years. Current APM bonusses expire at the end of the year and the 50% threshold is scheduled to “jump to a nearly-impossible-to-reach 75% on January, 1,” the letter explains. The AMA and others encourage Congress to pass the VALUE Act, S. 3503/H.R. 5013.
“The current Medicare Physician Payment System is increasingly unsustainable and the necessary policy reforms can no longer be delayed without severe repercussions for patient access and quality of care,” the letter says. “The foundational component of strengthening the current payment system is refining the Medicare Physician Fee Schedule to accurately reflect the fiscal and clinical realities of medical practice today.”
Learn more: The AMA is working relentlessly to build understanding on Capitol Hill about the unsustainable path the Medicare payment system is on. The AMA’S Medicare Basics series, provides an in-depth look at important aspects of the Medicare physician payment system. With these six straightforward explainers, policymakers and physician advocates can learn about key elements of the payment system and why they are in need of reform.
A piece that appeared in Politico outlines eight reasons why the United States needs to fix the Medicare physician payment system. Learn more about the push physicians made with their legislators in August while Congress was in recess to press for Medicare reform.
Visit AMA Advocacy in Action to find out what’s at stake in reforming Medicare payment and other advocacy priorities the AMA is actively working on.
