How to Talk About Medicare Payment Reform

How to Talk About Medicare Payment Reform
By Jarrod Fowler, MHA, FMA Director of Healthcare Policy and Innovation | Mar. 15, 2023

As the FMA takes on Medicare payment reform, physicians can use this document as a how-to guide for discussing the issue with policymakers.

In its current form, the Medicare Physician Fee Schedule (MPFS) is not sustainable.

After adjusting for inflation in terms of practice costs, Medicare physician pay declined 22% from 2001 to 2022ⁱ.
- In addition, statutory updates to the MPFS are not projected to keep pace with inflation at any point in the future. Therefore, Medicare physician payments will fall further in real value over time.
- Meanwhile, Medicare payments to hospitals and skilled nursing facilities have grown meaningfully over time.
- CMS actuaries and the Medicare Trustees have acknowledged that perpetually declining Medicare physician pay is a realistic, looming threat to high-quality, accessible care for seniorsⁱⁱ.

While all states are threatened by the unsustainable nature of the MPFS, Florida is particularly vulnerable given that 53.5% of Florida’s projected population growth through 2030 is expected to come from individuals 60 or olderⁱⁱⁱ.

The continued decline in the value of Medicare physician pay could also increase consolidation.
- For instance, in 2012, 60% of physicians worked in practices wholly owned by physicians. However, by 2020, only 49% of physicians worked in private practice^iv.
- In addition, there has been a steady decrease in smaller practices and a marked growth in larger practices with 50 or more physicians^v.
- The FMA strongly believes that physicians should be able to practice in any environment that they believe will help them best serve their patients, including hospital systems and large group practices. However, many physicians now face increasing pressure to consolidate to survive, a situation that has been exacerbated by a lack of Medicare payment updates that keep pace with inflation.

In addition, this year, physicians experienced a Medicare payment cut of approximately 2%.

A further Medicare physician payment cut of approximately 1.25% will go into effect next year under current law.

Physicians need annual MPFS updates that keep pace with inflation. This would protect access to care for vulnerable seniors, promote competition, and protect the economic viability of the practice of medicine.

Physician organizations across the nation, including the FMA, agree on the characteristics of a rational Medicare payment system. This system would ensure financial stability and predictability, promote value-based care, and safeguard access to high-quality care, all while recognizing the importance of fiscal responsibility^vi.