Medicare Physician Payment Cuts 

With a growing deficit and an economic recession on the horizon, Congress is searching for solutions to save government funding. Its recent decisions on where to trim down will, according to many in healthcare, come at the expense of patients and healthcare workers. Buried in the year-end omnibus legislation proposed to keep the government afloat until September 2023 was a policy that placed cuts on Medicare payment to physicians (1). These payments, remitted to physicians for treating patients with Medicare insurance plans, follow a strict schedule set by the Centers for Medicare and Medicaid Services (CMS), a department of the federal government. Although the omnibus extended Medicare coverage in United States territories and kept funding for telehealth services, other aspects of the bill have less positive implications for Medicare, which could negatively affect patient care (2).  

While the bill was initially designed to slash Medicare physician payments by 8.5%, a campaign by hundreds of physician organizations, including the American Medical Association (AMA), and a bipartisan effort of 45 Senators helped reduce the proposed cut to 2% in 2023, and at least 1.25% in 2024 (3). However, this reduction isn’t as much of a win as physicians had hoped. The decrease follows twenty years of flat payment rates, which translates to a decrease of 22% between 2001 and 2021 after adjusting for inflation (1). Additionally, the omnibus also reduced the Medicare physician incentive from 5% to 3.3% (3). However, Medicare’s Advanced Alternative Payment model, a system enacted by the American Rescue Plan Act in 2016, remains in place for the next two years, with a reduced incentive of 3.5% for qualified physicians (3). 

Physicians argue that the Medicare payment cuts will significantly impact patient care (4). Opponents of the decision argue that the reductions will result in subpar care due to the decrease in the Medicare incentive. Furthermore, many independent physician firms already report struggling with inflation and rising practice costs — therefore, the Medicare payment reduction presents yet another financial problem for many (5). In response, many practitioners may no longer treat Medicare patients, which may prompt them to stop accepting Medicare or close their practices (5). The decline in physicians who accept Medicare may become a significant problem for the 58 million Americans with this insurance plan (6).  

To combat these pay cuts, physician organizations around the country are pushing for Congress to change the Medicare payment system (7). Major organizations such as the California Medical Association have demanded Congress to implement an automatic inflation update, a key component that could eliminate the effective pay cuts due to the previous lack of consideration of inflation (7). Additionally, the decrease in the incentive payment is set to expire after one year, and physician organizations are planning on fighting to ensure it is not ratified in future legislation (7). More than 120 medical organizations have worked together with the American Medical Association to build a shared interpretation of their ideal payment system to implement in the future. While implementing these changes in a famously “broken” system will be an uphill battle, policymakers agree that the current system is unsustainable and that changes are necessary to provide quality health care to Medicare patients (1, 4, 8).  

References 

1: O’Reilly, K. 2022. “Medicare physician pay cuts underscore need to fix broken system.” American Medical Association. URL: https://www.ama-assn.org/practice-management/medicare-medicaid/medicare-physician-pay-cuts-underscore-need-fix-broken-system.  

2: Iroku-Malize, T. 2023. “Spending bill delivers AAFP advocacy wins, limits pay cut.” American Academy of Family Physicians. URL: https://www.aafp.org/news/blogs/wordfrompresident/entry/2023-funding-package-wins.html.  

3: Dyrda, L. 2022. “Congress keeps 2% Medicare physician pay cuts in 2023 spending bill.” Becker’s Hospital Review. URL: https://www.beckershospitalreview.com/hospital-physician-relationships/congress-keeps-2-medicare-physician-pay-cuts-in-2023-spending-bill.html.  

4: McAuliff, M. 2022. “Medicare pay cuts will hurt seniors’ care, doctors argue.” Kaiser Family Foundation. URL: https://khn.org/news/article/medicare-pay-cuts-will-hurt-seniors-care-doctors-argue/. 

5: American Medical Association. 2022. “Medicare updates compared to inflation (2001-2021).” American Medical Association. URL: https://www.ama-assn.org/system/files/ama-medicare-gaps-chart-grassroots-insert.pdf.   

6: Freed, M., Biniek, J., Damico, A. and Neuman, T. 2022. “Medicare Advantage in 2022: enrollment update and key trends.” Kaiser Family Foundation. URL: https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/.  

7: California Medical Association. 2022. “Physicians react to Congress’ vote to cut Medicare payments by 2% in 2023.” California Medical Association. URL: https://www.cmadocs.org/newsroom/news/view/ArticleId/49991/Physicians-react-to-Congress-plan-to-cut-Medicare-payments-by-2-5-in-2023. 

8: Lubell, J. 2022. “Put a stop to ‘Groundhog Day’ games on Medicare physician pay.” American Medical Association. URL: https://www.ama-assn.org/practice-management/medicare-medicaid/put-stop-groundhog-day-games-medicare-physician-pay.