A report to Congress released by the Medicare Payment Advisory Commission (MedPAC) warned that the growing gap between Medicare physician payment rates and physicians’ practice costs could threaten access to care for Medicare patients. 

Payment rates are set to be flat in 2025 and, starting in 2026, will increase by 0.25 - 0.75% per year. Meanwhile, clinicians’ costs, as measured by the Medicare Economic Index (MEI), are expected to increase by an average of 2.3% per year from 2025 through 2033 – with costs exceeding the growth in payment rates by a larger margin than we have seen over the past two decades. 

“This larger gap could create incentives for clinicians to reduce the number of Medicare beneficiaries they treat or stop participating in Medicare entirely,” the report stated.  

The California Medical Association (CMA) and the American Medical Association (AMA) have been sounding the alarm to Congress for the last several years that Medicare payment does not cover a physician’s cost to provide care, nor does it keep pace with inflation. 

Since 2001, physician fees have declined by 29%, adjusted for inflation, while other Medicare providers received 60% increases during the same time. Notably, physicians are the only Medicare providers whose payments do not automatically receive an annual inflationary update.  

The MedPAC report also notes the growing differential between payment rates when a service is billed in a physician’s office versus a hospital outpatient department, and expressed concern that this could encourage more services to be billed in the higher paid outpatient setting and could spur additional vertical consolidation in the health care industry. 

The MedPAC report echoes a similar warning from the Medicare Trustees that failure to provide Medicare physician payments that keep pace with rising cost of practicing medicine could cause significant access to care issues for patients. 

However, despite acknowledging the impact inadequate physician payments will have on beneficiaries’ access to care, both of MedPAC’s proposed approaches for updating the physician fee schedule would cover less than half the full inflation rate. 

AMA expressed concern that an update that is less than the full inflation rate would harm physicians’ ability to remain financially viable while treating Medicare patients and instead urged MedPAC to support H.R. 2474, the “Strengthening Medicare for Patients and Providers Act,” which would provide an annual inflation update for Medicare physician payments at 100% of the Medicare Economic Index. The bill was introduced by Reps. Raul Ruiz, M.D. (D-CA), Ami Bera, M.D. (D-CA), Larry Bucshon, M.D. (R-IN) and Mariannette Miller-Meeks, M.D. (R-IA). 

A physician survey conducted by CMA found that two-thirds of respondents said Medicare payments do not cover their costs to provide care, with nearly half planning to retire early, and 70% limiting the number of Medicare patients they can treat. And in many California communities, seniors can no longer find a physician who is accepting new Medicare patients.