Inside the final 2025 Medicare physician payment schedule

The AMA strongly urged Congress to stop the 2.83% cut included in the Centers for Medicare & Medicaid Services’ (CMS) 2025 Medicare physician payment schedule, but Capitol Hill again failed to do so—marking the fifth straight year of cuts.  

That failure extends “a devastating decline in Medicare physician reimbursement that already stretches beyond two decades,” as AMA President Bruce A. Scott, MD, wrote in a Leadership Viewpoints column earlier this year.

But on several items that are under the agency’s control, CMS has been listening to recommendations from the nation’s physicians on topics such as the Medicare Economic Index rebasing and permanently including audio-only visits in the definition of “telecommunications services.”

In the 3,088-pages of the payment schedule final rule, CMS acknowledged that the costs incurred by physicians to deliver care will go up by 3.5% next year, as determined by the Medicare Economic Index.

“Physician practices cannot continue to absorb increasing costs while their payment rates dwindle,” says an AMA summary of the CMS final rule (PDF).

“Both the Medicare Payment Advisory Commission and the Medicare Trustees have issued warnings about access to care problems for America’s seniors and persons with disabilities if the gap between what Medicare pays physicians and what it costs to provide high-quality care continues to grow,” the summary adds.

One proposed measure to fix the Medicare payment system is the Strengthening Medicare for Patients Providers Act. The AMA-supported bipartisan bill would provide physicians with an annual Medicare payment inflationary update tied to the Medicare Economic Index.

The AMA is leading the charge to reform the Medicare payment system.

In the payment schedule, CMS announced that it will continue its delay in implementing new Medicare Economic Index weights until it receives information from the AMA’s Physician Practice Information survey (PPI).

The AMA has advocated for CMS to defer changes until the survey results are analyzed.

“The AMA agrees that CMS should allow for the review of data from the PPI Survey before implementing re-weighting that would result in significant redistribution within physician payment,” AMA Executive Vice President and CEO James L. Madara, MD, wrote in a Sept. 5 letter (PDF) commenting on CMS payment schedule proposals. “The PPI Survey (PDF), which closed Aug. 31, 2024, collected information on physician and other health care professional compensation, practice costs, and direct patient care hours worked.”

The letter noted that the AMA, working with the Mathematica research firm, will analyze the data and share information with CMS in early 2025.

The AMA and other physician organizations criticized the data sources and methodology CMS had used.

In the final rule, CMS explains that it is working the Rand Corp. to develop alternative methods for measuring practice expense for implementation of Medicare physician payment updates and that it “would include analysis of updated PPI data, as part of our ongoing work.”

CMS also asked for suggestions on how it may improve the stability and predictability of any future updates, including recurring pricing updates for clinical staff, and medical supplies and equipment, the AMA summary says.

As with the Medicare pay cut, it was up to Congress to act by Dec. 31 to extend waivers enacted during the COVID-19 public health emergency that have allowed Medicare patients to access telehealth services at any location in the country—and not just in rural areas, which is currently the law. In the government-funding continuing resolution passed last week, these telehealth flexibilities were extended but only until March 2025 when the resolution expires. Then it will again be up to Congress to act.

There are actions CMS can take on its own, however, to facilitate telehealth care. For nearly five years, the AMA has been advocating for CMS to permanently allow billing for telehealth services delivered via telephone or other audio-only devices. In the final rule, CMS announced that it will make that change.

Specifically, this policy applies to instances when the patient is not capable of or does not consent to the use of audio-visual technology for the diagnosis, evaluation or treatment of a mental health or substance-use disorder, and for the monthly assessment of end stage renal disease.

“While practitioners should always use their clinical judgment as to whether the use of interactive audio-only technology is sufficient to furnish a Medicare telehealth service, we recognize that there is variable broadband access in patients’ homes, and that even when technologically feasible, patients simply may not always wish to engage with their practitioner in their home using interactive audio and video,” the final rule says.

CMS also extended for one year:

• Suspension of frequency limits on subsequent hospital and nursing facility telehealth visits.
• The ability of teaching physicians to provide virtual direct supervision and virtual supervision of residents when the resident provides telehealth services.
• Physicians providing telehealth from their homes do not have to report their home address to Medicare.

For the last of those provisions, CMS noted that it took into account physician privacy and concerns about the safety of physicians and other health professionals.

CMS also reported that “a significant number” of physicians cited additional administrative burdens such as having to change billing practices, adding their home address to the Medicare enrollment file and coordinating with the appropriate Medicare Administrative Contractor in their jurisdiction.

CMS also finalized changes to its Medicare Diabetes Prevention Program that align with AMA suggestions that allow for more flexibility—including an online “distance learning component.” The agency, however, continues its stance against online-only programs despite the AMA calls to include virtual-only suppliers as a way to expand the program’s reach to additional beneficiaries. 

Follow the fight for Medicare reform

Stay up to date on how the AMA is fighting to reform the Medicare payment system for physicians—delivered to your inbox.

Subscribe Now

CMS followed the AMA’s suggestion that thresholds for incurring a financial penalty under the Merit-based Incentive Payment System (MIPS) should not be increased due to disruptions by the COVID-19 public health emergency and the Change Healthcare cyberattack.

The same threshold will be maintained through calendar year 2025, which affects MIPS payments in 2027.

The AMA payment schedule summary also notes that research continues to show that MIPS is unduly burdensome and “divorced from meaningful clinical outcomes.”

“The AMA is strongly urging Congress to make statutory changes to improve MIPS and address fundamental problems with the program by eliminating steep penalties that disproportionately hurt small and rural practices, prioritizing access to timely and actionable data, reducing burden, aligning MIPS with facility quality programs, and incentivizing the development and reporting of new clinically relevant quality and cost measures,” the summary says.

The AMA raised fairness concerns regarding the MIPS cost-performance category, noting how it lowered some physicians’ final scores while some MIPS-eligible physicians are not scored on cost measures. In response, CMS modified its methodology for the category with the aim of increasing scores for those whose average costs are near the median.

There are no data-submission requirements for the cost measures, which CMS scores using claims data, however, the “AMA has pointed out numerous errors in the calculation of the MIPS cost measures, which negatively impact physicians’ MIPS scores and Medicare payment rates,” the summary says.

In response, CMS adopted a cost measure exclusion policy that would apply when an error is made in calculating the cost measure which would result in a negative impact on the measure score.

CMS finalized its proposal that the AMA supported regarding expansion of coverage for colorectal cancer (CRC) screening.

This action will promote access and remove barriers for much needed cancer prevention and early detection—particularly within rural communities and populations with higher rates of colorectal cancer, the summary said. In particular, Black persons have an incidence rate of 41.9 per 100,000 people and the rate for Native Americans is 39.3 per 100,000 compared to 37 per 100,000 for white people, according to the National Cancer Institute.

“We anticipate that updating and expanding coverage for CRC screening will result in some additional utilization, but that additional utilization will be balanced, in part or in whole, by avoided utilization of alternative types of tests as well as benefits and savings resulting from increased prevention and early detection (allowing for less invasive and more effective treatment),” the CMS final rule says.