Federal Payment Advisory Body Calls for Physician Payment Increases in Medicare

On March 3, 2023, the Medicare Payment Advisory Commission (MedPAC) called for a physician payment update tied to the Medicare Economic Index.

Tying physician payment updates to the Medicare Economic Index would allow physician payments to be annually adjusted based on increased costs caused by inflation. As a result of the current physician payment update process, which does not adjust with inflation, physicians have struggled to keep practices open. This has jeopardized access to care, particularly in rural and underserved areas.

Not only have Medicare payments failed to respond adequately to rising costs, but physicians saw a 2% payment reduction for 2023, creating an additional challenge at a perilous moment. In fact, studies have found that when adjusted for inflation, Medicare physician payment has effectively declined 26% from 2001 to 2023.

In response to the MedPAC announcement, ISASS joined a coalition of 134 other health organizations, including the American Medical Association, to write to congressional leaders, arguing that a full inflation-based update is “the principal legislative solution to the ongoing problems plaguing the Medicare Physician Fee Schedule.”

As noted in the letter, although Congress has passed stopgap measures over the past few years to mitigate threats to Medicare physician payments, practice costs have outpaced those efforts. The gap between frozen physician payment rates and rising medical practice costs due to inflation will continue to widen.

The letter points out the real-life impact of the eroding value of Medicare payments. According to MedPAC, half of Medicare patients looking for a new primary care physician had difficulty finding one. Among Medicare patients looking for a new specialist, one-third struggled to find one. Finding specialists in rural and historically underserved areas is particularly difficult, and the payment system is creating even bigger barriers for patients in those communities.

The full letter can be found here.