CHICAGO – Echoing warnings from the American Medical Association (AMA), Medicare trustees warned today that the physician payment system has failed to keep up with the cost of practicing medicine and that failure could hinder seniors’ access to health care.

“This report continues the drumbeat of recommendations that all point out that the payment system is failing patients and physicians. When physicians face a set of facts, we respond to improve the situation. It would be political malpractice for Congress to sit on its hands and not respond to this report,” said AMA President Jesse M. Ehrenfeld, M.D., MPH.

In the Medicare Trustees Report (PDF) released today, the trustees warned that the program faces “challenges,” notably that physician payments are not based on underlying economic conditions—such as inflation—and are not expected to keep pace with the cost of practicing medicine. The trustees warned of the gap created between rising costs and physician payments, noting that the “quality of health care received by Medicare beneficiaries would, under current law, fall over time compared to that received by those with private health insurance.”

The trustees wrote: “Absent a change in the delivery system or level of update by subsequent legislation, the Trustees expect access to Medicare-participating physicians to become a significant issue in the long term.”

The report is the latest call for Medicare reform. The Medicare Payment Advisory Commission (MedPAC) recently recommended that Congress increase 2025 Medicare physician payments above current law by linking the payment update to the Medicare Economic Index (MEI), something the AMA has long supported. And members of Congress have introduced the Strengthening Medicare for Patients and Providers Act (HR 2474) that would tie future updates to the full MEI.

“The momentum for change is evident. Yet, physicians—battered by the Change cyberattack, Covid, and climbing costs of operating a practice—have yet to see a response equal to the moment. Instead, physicians saw a 2 percent cut in Medicare payments in 2023 and nearly 2 percent in 2024,” Ehrenfeld said.

As one of the few Medicare providers without an inflationary payment update, physicians have watched their payments (when adjusted for inflation in practice costs) decline (PDF) 29% from 2001 to 2024. These increasingly thin operating margins disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or underserved communities.

“Medicare trustees and MedPAC have teed up the issue for members of Congress who, no doubt, have heard from constituents about problems accessing health care under Medicare. The AMA has plenty of reform ideas to permanently solve the problem and end this annual cycle of payment cuts and patches,” Ehrenfeld said.