The Declining Value of Medicare Physician Payment Must Be Addressed
By Jarrod Fowler, MHA, FMA Director of Healthcare Policy and Innovation | June 14, 2023
AMA Medicare updates compared to inflation (2001-2023)
  • 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 26% from 2001 to 2023i.
    • 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 unsustainable and that such a system will ultimately pose a 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 close to 50% of Florida’s projected population growth from 2021 through 2030 is expected to come from individuals 65 or olderiii.

  • The ongoing 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 practiceiv.
    • In addition, there has been a steady decrease in smaller practices and a marked increase in larger practices with 50 or more physiciansv.
    • 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 2024, physicians can expect a Medicare payment cut of approximately 1.25%, unless Congress takes further action. Once again, this will come on top of a de facto cut due to inflation’s effects.

  •  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 medical practice. Such updates are a key component of any payment reform proposal.

 AMA Medicare Provider updates for 2023 graphic


i https://www.ama-assn.org/system/files/medicare-updates-inflation-chart-cumulative.pdf
ii Multiple: https://www.ama-assn.org/press-center/press-releases/ama-medicare-trustees-agree-medicare-payment-system-unsustainable  https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/2015HR2a.pdf
iii http://edr.state.fl.us/content/presentations/economic/FlEconomicOverview_1-3-22.pdf
iv https://www.ama-assn.org/system/files/2021-05/2020-prp-physician-practice-arrangements.pdf
v id