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Medicare Payment Reform

Medicare Payment Reform

Diverting the Medicare physician payment system away from its current unsustainable path and steering it instead toward physician practice sustainability will protect patient access to quality, evidence-based care while easing administrative burdens.

The American Medical Association, together with the WSMA and other state and national medical societies, have outlined a practical, commonsense approach reforming Medicare physician reimbursement based on the principles of simplicity, relevance, alignment and predictability.

Why We Must Reform the Medicare Physician Payment System

The need for change is clear. Taking inflation in practice costs into account, Medicare physician payment plunged 20% from 2001 to 2021. Medicare spending on physician services per enrollee retreated by 1% between 2010 and 2020, even as spending per enrollee for other parts of Medicare jumped by between 3.6% and 42.1%.

Compounding the problem of low and eroding reimbursement is the fact that insurers increasingly use Medicare as their baseline for payment standards. "The rates for much of commercial insurance, which in the past had cross-subsidized Medicare and Medicaid, are trending toward Medicare," says WSMA President (2021-2022) Mika Sinanan, MD, PhD. "They say you have to live and work at a Medicare level."

With inflation soaring to 40-year highs, statutory payment cuts looming, and many physician practices still dealing with pandemic-related financial issues, recent proposals from the Centers for Medicare and Medicaid Services undermine the long-term sustainability of physician practices while threatening patient access to physicians participating in Medicare.

Long-term Reform Needed

The WSMA is urging Washington’s congressional delegation to sign on to H.R. 2474, the Strengthening Medicare for Patients and Providers Act. The legislation applies a permanent inflation-based update to the Medicare Physician Fee Schedule conversion factor, which will provide much-needed stability to the Medicare payment system as our members contend with an increasingly challenging environment providing Medicare beneficiaries with access to timely and quality care.

Congress has taken action to mitigate some of the recent MPFS cuts on a temporary basis, however, reimbursement continues to decline. According to an American Medical Association analysis of Medicare trustees data, when adjusted for inflation, Medicare payments to clinicians have declined by 26% from 2001-2023. The failure of the MPFS to keep pace with the true cost of providing care, combined with year-over-year cuts resulting from the application of budget neutrality, sequestration, and a paucity of available alternative payment models and value-based-care models, clearly demonstrates the Medicare payment system is broken. The addition of an inflationary update will provide budgetary stability as clinicians, many of whom are small business owners, contend with a wide range of shifting economic factors, such as increasing administrative burdens, staff salaries, office rent, and purchasing of essential technology.

A full list of congressional representatives who have signed on to H.R.2474 can be found here. If you need help connecting with your congressional representatives, contact the WSMA policy department at policy@wsma.org. More information on the Medicare payment cuts can be found at fixmedicarenow.org/resources.

Rewarding the Value of Physician Care

Leading the charge to reform Medicare physician payment is a core element of the AMA's Recovery Plan for America's Physicians, along with fixing prior authorization, supporting telehealth, reducing physician burnout and stopping scope of practice creep.

Physicians deserve payment models that recognize and invest in their contributions in providing high- value care to patients, while generating cost savings across all parts of Medicare and the broader health care system. In practical terms, this means directly rewarding the value of care that physicians offer to patients, as opposed to administrative tasks such as data entry that are often irrelevant to the service being provided.

Advancing value-based care also means encouraging innovation with practices and systems with an emphasis on continuous improvement, boosting the overall quality of care provided to the full spectrum of patient populations, including higher-risk and higher-cost groups. Ideally, a variety of payment models and incentives tailored to the distinct needs of different specialties and practice settings should be in place, along with a financially viable fee-for-service model.

And because the need to embed racial justice and advance equity across all aspects of medicine has never been greater, payment model innovations should be risk-adjusted and reflect the ongoing contributions of physicians to dismantle health disparities. Physicians who address social drivers of care need support as they provide care to historically marginalized, higher risk, and harder-to-reach patient populations. This support should extend to practices of all sizes and in all locations.

One of the biggest problems under the current payment system is the fact that other Medicare providers benefit from built-in updates, such as a medical economic index or an inflationary growth factor, that help offset increases in the cost of providing services - but no such offset exists for physicians.

Just as we didn't get where we are overnight, we are unlikely to secure the massive, badly needed overhaul of the Medicare physician payment system tomorrow. The good news is that we can get there through single-minded determination and the collective efforts of our association, our counterparts in the Federation of Medicine, and the AMA.

Working together, we can place the Medicare payment system back on a sustainable path and ensure that our patients receive the quality care they deserve.

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