Medicare Physician Pay-Cuts Threaten Patient Care

“First, do no harm”—then Medicare cuts physician pay year after year, harming the very practices that treat Medicare’s 65,748,297 patients.

What would happen to those 66 million patients if, by steadily cutting doctor pay, the Medicare system cratered?

The cost of delivering healthcare rose 4.6% in 2022? When adjusted for inflation, Medicare physician payment has effectively declined (PDF) 26% from 2001 to 2023.

Doctors serving the elderly are not happy campers by any stretch.

At the recently concluded Interim Meeting of the American Medical Association (AMA) attending physicians, including a sizeable contingent of orthopedic and spine surgeons said that the current system and proposed cuts are creating financial havoc.

“Physicians heed the idea of ‘First do not harm.’ Yet, the payment system year after year inflicts harm on the ability of physician practices to stay afloat,” said AMA President Jesse M. Ehrenfeld, M.D., M.P.H. “We also are aware of the First Law of Holes. When you find yourself in one, stop digging. We are in a veritable crater. Cutting payments again is only taking us deeper.”

Time for an Overhaul

By an overwhelming majority vote, delegates at the Interim Meeting called for an overhaul of Medicare’s payment system.

Specifically, and we at OTW agree, physician payments should be tied to the Medicare Economic Index (MEI), which is the government measure of inflation in medical practice costs.

In April, a bipartisan group of House members introduced a bill that would provide annual inflation updates to the Medicare payment schedule based on the MEI. MEI will be 4.6 percent in 2024, the highest this century, and only compounds upon last year’s 3.8 percent.

Unbelievably, in October, Centers for Medicare and Medicaid Services (CMS) called for 2024 downward adjustment of 3.4 percent.

“For 2024, there will be an 8 percent decline between the 3.4 percent adjustment to the payment schedule and 4.6 percent increase in MEI. How many business models anticipate that for the coming year? The answer is few if they hope to survive. Yet, unless Congress acts in the next two months, that’s what awaits physicians. Coming out of COVID-19, physicians did not expect and surely do not deserve this,” Ehrenfeld said.

Seniors and people with disabilities are concerned by the prospect of disappearing access, a threat that has moved from the theoretical to reality.

These declining revenues disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or other historically minoritized or marginalized patient communities.

More Reading on This Issue From AMA

The AMA’s set of principles (PDF) to guide efforts on Medicare physician payment reform. This is part of the AMA’s Recovery Plan for America’s Physicians and represents a rational Medicare physician payment system that provides financial stability through positive annual payment updates, improves the financial viability of physician practices, and eases administrative burdens.