For four years in a row, American physicians have seen across-the-board Medicare pay cuts that further threaten access to high-quality physician care, especially for older-adult patients in rural, underserved or economically marginalized areas.
In 2023, it was a 2% pay cut that took effect. This year, physicians are seeing another 1.68% pay cut. And for 2025, the Centers for Medicare & Medicaid Services (CMS) has proposed a physician payment schedule that would result in a 2.8% across-the-board cut.
“With CMS estimating a fifth consecutive year of Medicare payment reductions—this time by 2.8%—it’s evident that Congress must solve this problem,” said AMA President Bruce A. Scott, MD, when the proposed rule was issued. “In addition to the cut, CMS predicts that the Medicare Economic Index [MEI]—the measure of practice-cost inflation—will increase by 3.6%. Facing this widening gap between what Medicare pays physicians and the cost of delivering quality care to patients, physicians are urging Congress to pass a reform package that would permanently strengthen Medicare.”
While the AMA is working relentlessly to build understanding on Capitol Hill about the unsustainable path the Medicare payment system is on, preventing further cuts means getting to the root causes of what’s wrong with Medicare physician payment.
“The consecutive years of Medicare cuts demand a comprehensive legislative solution,” Dr. Scott said. “Previous quick fixes have been insufficient. This situation requires a bold, substantial approach. A Band-Aid goes only so far when the patient is in dire need.”
The AMA is leading the charge to reform the Medicare payment system, which is the AMA’s top advocacy priority.
That is why the AMA created the Medicare Basics series, which 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:
- Medicare physician payment adequacy—Budget neutrality.
- Merit-based Incentive Payment System (MIPS).
- The Medicare Economic Index (MEI).
- Advancing value-based care with alternative payment models.
- Transitioning to value-based care: Clinical data registries.
- MIPS data problems.
You can also dive deeper with this collection of AMA news articles that further explores these systemic problems with Medicare physician payment and detail their impact on physicians, their practices and their patients in doctors’ own words.
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Medicare physician pay has plummeted since 2001. What happened?
Doctors are paid 29% less today, when adjusted for inflation. This unsustainable path threatens older adults’ access to high-quality physician care. Since 1992, the role of the MEI in shaping Medicare physician payment has diminished dramatically, first under the sustainable-growth rate (SGR) and then under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. Physicians need an annual inflationary update, which will allow practices to better absorb other payment redistributions triggered by budget neutrality rules and performance adjustments, as well as periods of high inflation and rising staffing costs.
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Fix the Medicare flaw that forces across-the-board cuts
The AMA supports legislation to fix outdated budget-neutrality rules that have cut Medicare physician payments by billions. As one of the few Medicare providers without a payment update tied to inflation, physicians have watched their inflation-adjusted payments fall dramatically since 2001. Physician payments are further eroded by frequent and large payment redistributions caused by budget-neutrality adjustments.
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Value-based care’s future rests on reforms to Medicare APM incentives
Medicare’s pay system is unsustainable. A rigid approach that limits doctor participation in alternative payment models (APMs) is part of the problem. APMs are a key way to achieve value-based care by providing incentive payments to deliver high-quality and cost-efficient care for a clinical condition, a care episode or a patient population.
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It’s time to revamp Medicare’s broken MIPS program
MIPS disproportionately penalizes physicians in rural and small practices, threatening access to care. Although MIPS is well-intentioned, its reporting requirements are burdensome to physician practices and often appear to be clinically irrelevant. Congress must step in and act to prevent unsustainable penalties, invest in and enable the move to value-based care, and increase transparency and oversight in the program.
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Physicians need timely MIPS data to advance value-based care
Sharing MIPS data with doctors is a must-fix when it comes to Medicare physician payment reform.
Value-based care relies on data. To be successful, physicians in MIPS need access to a wide range of information on a timely basis to understand gaps in care and identify opportunities to improve health outcomes, reduce variations in care delivery or eliminate avoidable services—all steps that can lower costs for patients and the Medicare program.
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Fixing Medicare includes easing doctors’ use of data registries
Medicare’s pay system is unsustainable. One problem: Physicians are limited in how they can use clinical data registries to improve care. CMS’ clinical data-registry approval process under the MIPS program is complex and cumbersome, and the lack of accessible cost data inhibits progress toward true value-based care. As a result, physicians’ ability to leverage their participation in these quality improvement efforts for MIPS and engage in continuous learning has been limited.
Read more in Politico Focus about the eight reasons the U.S. needs to fix the Medicare physician payment system.
Learn about how you can take part in the fight to fix Medicare on behalf of your patients and practices at the AMA's Fix Medicare Now website.
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