Third-generation family physician Sterling N. Ransone Jr., MD, is part of a two-physician practice in Deltaville, Virginia, a town of just 2,000 people in a county of fewer than 10,000 people. He and his wife, a pediatrician, see patients from five surrounding counties in Eastern Virginia.
The scourge of falling Medicare payments has not bypassed their rural part of the country.
And 2025 is no exception to the trend, thanks to Congress’ failure to stop the 2.83% Medicare physician payment cut that took effect Jan. 1. That pay cut comes even as the Centers for Medicare & Medicaid Services (CMS) has projected another 3.5% rise in the Medicare Economic Index, which measures the cost of running a medical practice. And since 2001, Medicare physician payment has fallen by 33% after adjusting for rising practice costs.
The problems with Medicare physician payment contributed to the Ransones’ decision to practice within a health system, continuing a national trend away from private practices.
As a past president of the American Academy of Family Physicians, Dr. Ransone said he has seen that the problems his small practice is experiencing in rural Virginia are no different than what other practices across the nation face. While some practices like his have sold their private practices, some other physicians have had to close their doors. And even larger urban practices aren’t immune from the problems.
“With Medicare, it’s a federal issue and the problems are magnified across all 50 states and our territories. So, what really struck me is just how everybody has to deal with this,” Dr. Ransone said of what he has learned from interacting with physicians from across the country. “Five years in a row now, we have had to go to Congress to say, ‘Please don’t cut our pay.’ Think of what we could do working with Congress to help our patients if we weren’t spending all of our time just trying to maintain the viability of our practice and access for our patients to see physicians.”
These are among the reasons that fixing the broken Medicare payment system is the top advocacy priority for the AMA.
The numbers don’t add up
About 50% to 55% of Dr. Ransone’s patients are on Medicare. About 15% are covered by Medicaid, with another 10% on Tricare and the rest covered by private payers.
“Every one of the insurances that I take are indexed off Medicare,” Dr. Ransone noted. “So, when Medicare says they’re going to have a 2.8% reduction in my pay, my Medicaid pay is going to go down. Tricare is indexed off of it. For a long time, Tricare paid about 80% of what Medicare paid and now the commercial insurers are following suit.”
That’s a change from when he started practicing medicine in the mid-1990s when commercial payers paid about 120% of Medicare rates and physicians could offset lower payments from certain programs.
“These days, you’re not seeing that,” he said. “It’s leading to a lot of problems with practice viability. A lot of practices are just saying: Look, it’s costing more for me to see a patient than I’m getting paid to see them. It’s really difficult.”
Less money for patient care
Finding ways to continue paying practice staff and keep the office lights on as payments for services fall means physicians cannot invest in new technologies that would aid in patient care. They also must often forgo hiring staff to better support their patients.
For example, patients with type 2 diabetes need a yearly eye check due to the risk of eye problems. In Dr. Ransone’s area, that means the patient has to take another day off of work to visit an ophthalmologist that is more than an hour’s drive away.
However, new technology that involves magnification, a camera and augmented intelligence (AI) can enable physicians such as Dr. Ransone to be able to do a scan in the primary-care setting.
“We take a photo of the retina, AI will scrub the photograph, and they can diagnose diabetic retinopathy with the accuracy of a fellowship trained retinologist. But if my pay keeps getting cut, I can’t afford to buy the machine to do it,” he said. “I want to do it, but if I can’t afford to do it, I can’t afford to do it.”
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It means the patient will have to take at least a half day off work and drive an hour to get their eyes checked, assuming there are even enough physicians to provide that service.
The pay cuts also mean that Dr. Ransone has been unable to hire a care coordinator.
“If I have someone in my office that can help make sure that the patient knows when their appointment is, that can maybe find them a ride or help get the information for a specialty visit to me so I can coordinate care, that is invaluable,” he said. “I can’t afford to have somebody.”
The AMA is strongly encouraging physicians from around the country to come out in force for the AMA National Advocacy Conference in Washington, D.C., in February. The goal is to show Congress the real-life impact of the broken Medicare payment system on patients and on physician practices and the communities across America that doctors serve. Learn more and register now.
Fix Medicare now
Bipartisan bills that the AMA supports were introduced in the last session of Congress to make bigger, longer-term fixes to the nation’s largest single health care payer in a system that is already facing widespread physician shortages that threaten patient access to care:
- The Strengthening Medicare for Patients Provers Act would give physicians an annual Medicare payment updated tied to the Medicare Economic Index.
- The Provider Reimbursement Stability Act would reform the Medicare payment schedule budget-neutrality policies by, among other things, requiring that CMS reconcile inaccurate utilization projections based on actual claims and prospectively review the conversion factor accordingly.
The AMA will be working to have similar legislation introduced in the current session of Congress. The AMA also has a statutory proposal to replace the Medicare Incentive-based Payment System’s (MIPS) tournament model of payment adjustments with a more sustainable approach tied to annual payment updates. The “Data-Driven Performance Payment System, which the AMA developed with substantial input from national medical specialty societies and physicians nationwide, also would give CMS incentives to share data with physicians and improve the measures.
“All of us want the best care available for our loved ones. If physicians can’t keep up with inflation, how are we going to be able to give the best care?” Dr. Ransone said. “It gets to the point where with certain payers it costs me more to see the patient than I get reimbursed for. I still have to pay my staff; I like to give them raises. The electricity that we pay in our office has not gotten cheaper. The rent and all of the other practice expenses are subject to inflationary pressures. What isn’t keeping up is the income from all sources that we are receiving. And that is all based on how Medicare pays us.”
Learn more with the AMA’s Medicare Basics series, which provides an in-depth look at important aspects of the Medicare physician payment system. With six straightforward explainers on budget-neutrality rules, MIPS, the Medicare Economic Index and more, policymakers and physician advocates can learn about key elements of the payment system and why they are in need of reform.
