2023 Legislative Conference: Medicare physician payment
Medicare physician payment
The American Academy of Dermatology Association (AADA) urges Congress to stop the pending Medicare payment cuts that could negatively impact patient care access and to mitigate the financial distress facing dermatology practices. Congressional action can maintain stability for dermatology practices by addressing factors affecting the Medicare physician payment system, including lack of an inflationary update, ongoing statutory payment cuts, and administrative hurdles.
Message to Capitol Hill
As a dermatologist, I share concerns that the Medicare Physician Fee Schedule fails to reimburse physician practices adequately and threatens access to care for patients in our community. Medicare reimbursement for physicians is not linked to inflation, yet facilities like hospitals and skilled nursing facilities receive annual inflationary updates.
In 2024, a proposed 3.4% cut to Medicare physician payment threatens to decrease dermatological reimbursement. This is in addition to cuts to Medicare physician payments over the past few years. Despite record inflation, supply, and workforce shortages, CMS is proposing more pain for physicians.
Deeper dive
Issue background
Since 2001, the cost of operating a medical practice has increased by 47%, while economy-wide inflation has risen 73%. During this time, Medicare hospital facility updates increased by roughly 70%, significantly outpacing physician reimbursement.
Adjusted for inflation in practice costs, Medicare physician reimbursement has declined 26% from 2001 to 2023.
This structure threatens the viability of medical practices, especially smaller, independent, physician-owned practices. The current payment structure has contributed to consolidation and increased hospital ownership of physician practices, which are more costly, reduce competition, and are less patient-centered.
Practices rely on reimbursement to cover a multitude of practice expenses including:
Staff salaries and benefits,
The cost of federal and state regulatory compliance,
The costs associated with insurance mandates, such as step therapy and prior authorization.
Year-over-year cuts to Medicare physician reimbursement jeopardize our ability to keep our doors open and care for patients in our communities. Fewer physicians in our communities means longer wait times for patients to receive care. When those patients do receive care, their only option may be clinical staff with less training.
Ask
The AADA urges Congress to address the systemic issues within the Medicare physician payment system and safeguard physicians’ ability to provide patient access to care.
House of Representatives: Cosponsor the Strengthening Medicare for Patients and Providers Act (H.R. 2474), which would provide for an annual inflation update equal to the Medicare Economic Index (MEI) for Medicare physician payments.
Senate: Support similar legislation if introduced or brought to a vote.
Revise budget neutrality policies.
Work with stakeholders to develop ways to reduce the administrative and financial burden of the Quality Payment Program (QPP) and revise reporting programs to ensure its clinical relevance to patient care.
Messaging tips
Use this opportunity to personally demonstrate the value of care in the dermatologist’s office setting.
Example: Compare the cost of treating your patient with melanoma or another complex skin disease in your office as opposed to an outpatient hospital setting and explain how treating your patient in your office is also better for patient outcomes.
Personalize how lack of adequate reimbursement impacts your ability to maintain high-quality staff and, specifically, jobs in your community.
Example: Remind them your practice contributes to the economy in their community and their constituents. Explain that other industries have the flexibility to change the pricing of their products to reflect rising costs and increase staff salaries, while physicians do not have that ability because of the Medicare Physician fee schedule. What other profession or business would be able to sustain operating under such a structure?
Medicare policy resources
Here you'll find additional resources and reading material on Medicare payment policy.
American Medical Association: Budget Neutrality Primer
This is an in-depth policy explainer on budget neutrality in Medicare physician payment. Revising budget neutrality is one of our main asks and reading more will help in your meetings.American Medical Association: Merit-based Incentive Payment System (MIPs) Primer
This is an in-depth policy explainer on the Meirt-based Incentive Payment System (MIPS). Congressional staff are very unlikely to deep-dive on MIPS so it is okay if you’re understanding of the program is rudimentary. We are providing this a resource should you be interested.American Medical Association: Medicare Physician Payment Inflation Chart
This chart shows Medicare physician payment updates compared to inflation. It is a great resource that illustrates our ask. A similar chart is included in your welcome packet and in your leave-behind folders for Capitol Hill.American Medical Association: Medicare physician payment v. Consumer Prices v. Practice Costs
This chart shows Medicare physician payment updates compared to inflation in consumer prices and practice costs.American Medical Association: Payment Updates Chart
This chart shows Medicare payment updates across various providers including hospitals, skilled nursing facilities, and physicians.Congressional Research Service: Medicare Overview
This briefing was prepared by the Congressional Research Service. It provides a two-page overview of the structure of Medicare including spending, eligibility, enrollment, financing and more. Published May 21, 2020.Congressional Research Service: Medicare Primer
This briefing was prepared by the Congressional Research Service. It provides an in depth overview of Medicare. Published May 21, 2020.
Deeper dive
Inflationary Impact
Ask
House of Representatives: Cosponsor the Strengthening Medicare for Patients and Providers Act (H.R. 2474), which would provide for an annual inflation update equal to the Medicare Economic Index (MEI) for Medicare physician payments.
Senate: Support similar legislation if introduced or brought to a vote.
Sources: Federal Register, Medicare Trustees' Reports, Bureau of Labor Statistics, Congressional Budget Office
Medicare has paid for physicians’ services under the Medicare Physician Fee Schedule (MPFS) since 1992. Over time, the Medicare statute established prospective payment systems or fee schedules for other provider types, but physicians are subject to inequitable payment policies compared to others delivering care and services. Under current law, inflationary updates for the MPFS are held at 0% from 2020 through 2025, and beginning in 2026, the payment update will be a mere .25% (a quarter of one percent) for physicians participating in Medicare fee-for-service.
These rate increases are below the rate of inflation as measured by the Medicare Economic Index (MEI) – the inflation index used by CMS to measure the increase in the cost of operating a physician practice. The MEI for 2023 is 3.8% and is estimated to be 4.5% in 2024.
According to data from the Medicare Trustees, Medicare physician reimbursement has increased just 9% from 2001 to 2023, or 0.4% per year on average. Adjusted for inflation in practice costs, Medicare physician reimbursement declined 26% from 2001 to 2023, or by 1.3% per year on average. In comparison, Medicare hospital payment updates have increased roughly 70% between 2001 and 2023 with average annual increases of 2.5% for inpatient services and 2.4% for outpatient services.
The cost of running a medical practice increased 47% during this same period, or 1.7% per year, while economy-wide inflation has risen 73%. These medical practice costs include increases in physician office rent, employee wages, and professional insurance premiums.
Additional resources
American Medical Association: Medicare Physician Payment Inflation Chart
This chart shows Medicare physician payment updates compared to inflation. It is a great resource that illustrates our ask. A similar chart is included in your welcome packet and in your leave-behind folders for Capitol Hill.American Medical Association: Medicare physician payment v. Consumer Prices v. Practice Costs
This chart shows Medicare physician payment updates compared to inflation in consumer prices and practice costs.American Medical Association: Payment Updates Chart
This chart shows Medicare payment updates across various providers including hospitals, skilled nursing facilities, and physicians.
Budget Neutrality
Ask
Revise budget neutrality policies.
The Medicare statute requires that changes made to fee schedule payments be implemented in a budget neutral manner.
These cuts to Medicare physician payments arise from a complex set of budgetary rules and systemic flaws in the requirements. These include the budget-neutrality requirement for Medicare mandating that any increase for certain physician services must be balanced by cuts elsewhere.
For 2024, CMS’s proposed conversion factor is $32.75, down from $33.89 for 2023, and representing a cut of nearly 3.4% in Medicare payments next year. The Medicare conversion factor is the key component in determining Medicare physician payments. These cuts are unacceptable, and Congress must act to avert significant reductions in Medicare reimbursement in 2024. Congress must replace or eliminate budget neutrality requirements to the physician fee schedule.
Additional resource
American Medical Association: Budget Neutrality Primer
This is an in-depth policy explainer on budget neutrality in Medicare physician payment.
Quality Payment Program
Ask
Work with stakeholders to develop ways to reduce the administrative and financial burden of the Quality Payment Program and revise reporting programs to ensure its clinical relevance to patient care.
The AADA supported the Medicare Access and CHIP Reauthorization Act (MACRA) in 2015 as it eliminated the problematic Sustainable Growth Rate formula, previously used to determine Medicare reimbursement. Implementing the law has been excruciatingly challenging, particularly for specialties like dermatology, with a significant number of small practices that do not fit into the one-size-fits-all approach taken by CMS.
As a result, the implementation of MACRA has been burdensome, costly, and done little to improve patient outcomes. The hurdles associated with MACRA compliance have only been compounded by cuts to Medicare physician reimbursement and the lack of an inflationary update tied to the cost of rising practice expenses in the Medicare physician fee schedule. Congress must reform the Quality Payment Program to increase physician input and improve patient care without administrative burdens.
Additional resource
American Medical Association: Merit-based Incentive Payment System (MIPs) Primer
This is an in-depth policy review on the Merit-based Incentive Payment System (MIPS).
