In a significant move during its recent meeting, the Medicare Payment Advisory Commission (MedPAC) expressed broad support for linking annual updates to physician reimbursement with inflation. This shift could provide much-needed financial predictability and stability for physicians, particularly as healthcare costs continue to rise and payment adjustments lag behind.
The Need for Change: Declining Physician Pay
Physician compensation through Medicare has been a growing concern for years. According to the American Medical Association, Medicare reimbursement for physician services has dropped 29% from 2001 to 2024 when adjusted for inflation. The primary issue lies in the Physician Fee Schedule (PFS), which reimburses physicians for services rendered to Medicare beneficiaries. The PFS does not currently account for inflation, unlike other Medicare payment systems. The result? Doctors are seeing reimbursement rates that don't reflect the true cost of providing care.
This gap between physician pay and the cost of doing business is contributing to practice closures, consolidation, and, in some cases, declining access to care for the 68 million Americans on Medicare. As Gregory Poulsen, MedPAC Commissioner and senior vice president at Intermountain Healthcare, stated, “I am more concerned than a couple of folks in here about falling behind, because I think once we do and once it becomes apparent it becomes really, really difficult to fix.”
A Step Toward Stability: Linking Payments to Inflation
In an effort to address these concerns, MedPAC commissioners discussed various solutions, but one theme emerged: linking annual updates to the Medicare Economic Index (MEI), a measure of inflation for physician services. By tying reimbursement rates to the MEI, physicians would receive annual payment increases that reflect the actual rise in the cost of running a practice.
Commissioner Amol Navathe supported the concept, stating, “It’s hard to perfectly read the tea leaves, but I think this is striking a good balance between what we understand from the evidence and what we’re worried about from the perspective of access for beneficiaries.”
The Debate on Specifics: How Much is Enough?
While commissioners largely agreed on the principle of linking payments to inflation, they remained divided on the exact approach. In previous reports, MedPAC suggested adjusting the annual conversion factor to 50% of the MEI or to the MEI minus 1 percentage point, with a minimum floor for the update. The idea of tying payments to a percentage of the MEI (e.g., 75%) also came up as a more balanced approach, offering predictability while avoiding excessive costs.
While Commissioner Scott Sarran, chief medical officer at Harmonic Health, described the MEI-minus-1 approach as a “great threading of multiple needles,” there were concerns about the potential cost impact. Some commissioners, such as Tamara Konetzka, felt that such an approach might raise costs too high and had uncertain effects on access to care.
What Does This Mean for Physicians?
For physicians, this potential change could provide much-needed financial stability. Linking payment updates to inflation would help practices better manage costs, particularly as expenses for things like medical equipment, office staff, and technology continue to climb. Dr. Robert Cherry, MedPAC Commissioner and chief medical officer at UCLA Health, emphasized the importance of being proactive: “We want to really start thinking about this much more proactively.”
However, the specifics remain in flux. While MedPAC is in favor of linking physician pay to inflation, it has yet to provide a concrete recommendation on the percentage or mechanism.
A Path Forward: Advocating for Change
Physician associations, such as the American Medical Association (AMA), have pushed for more aggressive measures, calling for a 100% MEI update, which would result in higher annual pay increases. However, most MedPAC commissioners seem to favor a more conservative approach, balancing fiscal prudence with the need for adequate compensation.
With Congress also expressing support for reforming physician reimbursement, there is hope that significant changes will soon be implemented. But as Poulsen cautioned, waiting until the problem becomes a full-blown access crisis would be disastrous: “We don’t want to wait until there’s an access problem because when there’s an access problem it’s going to be really difficult to course correct.”
What’s Next?
As the discussions continue, it’s clear that linking physician reimbursement to inflation is a step in the right direction. The key to successful implementation will be finding a balance between providing fair compensation to doctors while ensuring that Medicare remains financially sustainable. With broad support from MedPAC and an ongoing dialogue in Congress, the future of physician reimbursement may soon see much-needed reforms—helping to ensure that physicians can continue providing high-quality care to Medicare beneficiaries for years to come.
At Med Match Solutions, we will continue to monitor these developments closely as they unfold, recognizing the significant impact they will have on healthcare professionals and the future of patient care.
Commenti