Medicare Reimbursement for Doctors is in Critical Condition

In an era of rising costs for everything from groceries to gasoline to healthcare, independent physicians are now going to receive less — not more — for taking care of our most-vulnerable citizens, our seniors, furthering a crisis that has been deepening for years.

Last month the federal government recently released a proposed update to a policy that most Americans have never heard about but could very well have a profound impact on their next doctor’s appointment. That policy — the Medicare Physician Fee Schedule — determines how much healthcare providers get reimbursed for treating patients covered by Medicare. 

And that reimbursement is going down, yet again.

While reimbursement rates for hospitals consistently climb with inflation, including a 2.6% increase going into effect later this year, the reimbursement rates for doctor’s offices do not. As a result, according to the AMA (American Medical Association), the Medicare reimbursement for doctor’s offices, when adjusted for inflation, is down almost 30% since 2001. Despite this widening disparity, the government has just proposed cutting the reimbursement rate for doctor’s offices by 2.93%.

It’s easy to think this update to the physician fee schedule will only impact patients on Medicare, but that’s not the case. These reimbursement cuts aren’t happening in a vacuum; they are part of a perfect storm of demands and challenges to independent providers across the country. As practices struggle to stay afloat financially, this update could deeply impact physicians and their ability to serve all patients with quality care.

America’s physicians are experiencing widespread burnout due to administrative workloads, staffing shortages, regulatory requirements, and increasing patient demands. Compounding this burnout is a growing elderly population in need of care, with an estimated 11,000 people joining Medicare each day.

Meanwhile, physicians are paying more for labor, rent, and medical supplies. Many are also recovering from the effects of February’s cyberattack on health payment processing giant Change Healthcare, which created an enormous backlog of unpaid claims and serious cashflow problems.

The potential financial impact of the proposed changes would be another blow, and if approved, already cash-strapped practices could wind up laying off employees, reducing hours or making other changes that in the end will impact all patients. The effect could be greatest among larger practices, especially those in specialty disciplines who see a disproportionate number of older patients.

If you talk to physicians, as I do all the time, it is not hard to notice how many say they worry that their practice is not financially sound and are considering major changes to their practice operations to offset financial burdens. 

Here’s the worst-case scenario. Practices will have less time to spend with each patient, because they will need to fill their schedule with more and more patients to make the numbers work. Some practices may stop taking new Medicare patients or drop Medicare altogether, leaving our most vulnerable seniors struggling to access quality and timely care. Other doctors will switch to concierge care, available only to those able to pay a hefty annual fee.

We don’t fault the government for trying to move Medicare to a more quality-based system. However, continuing to arbitrarily cut fee-for-service reimbursement is doing more harm than good. 

And others agree. The American Physical Therapy Association called last year’s payment cuts “devastating.” The organization “strenuously opposes any attempt to reduce payment for physical therapy under Medicare.”

The American Hospital Association said that 2024’s proposed cuts “would pose significant risks to patients’ access to care and health systems’ financial stability, particularly for providers serving historically marginalized communities.”

And MedPAC, the Medicare Payment Advisory Commission — has expressed its concern that as medical procedures continue to be reimbursed at a higher rate than evaluation and management, more practices will focus on higher-value services in lieu of less-profitable but actually cost-saving work, such as preventative care.

The solution is straightforward … pay doctor’s offices what it costs to treat the patient.  

The American Medical Association and 120 state medical societies support the Strengthening Medicare for Patients and Providers Act (H.R. 2474) currently pending in Congress. This bi-partisan bill would tie Medicare physician reimbursement to medical inflation, thus permanently linking the reimbursement for treating a senior with the actual cost of that treatment. 

Doctor’s offices are the front door of the American healthcare system. We owe it to them to support H.R. 2474 and put an end to annual Congressional stop-gap spending bills. Now is the time to invest in the policies, programs, and technologies that build more resiliency in this most critical infrastructure and support those who support us in our time of need. Our collective health depends on it.

Photo credit: mkurtbas, Getty Images

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