Proposed Medicare Pay Cut Highlights Urgent Need for Healthcare Reform
A 3.36% Pay Cut is About to Put the Squeeze on Medicare
On July 14th, the Centers for Medicare and Medicaid Services (CMS) proposed the 2024 Physician Fee Schedule, which includes a 3.36% reduction in physician pay. This, in combination with rising medical costs and inflation, is the latest in a decades long trend of reduced physician compensation, leading the American Medical Association (AMA) to call for reform.
Stricter Regulations for Merit Based Rewards
CMS uses a Merit-Based Incentive Payment System (MIPS) to determine physician compensation, making adjustments based on factors like the quality of care, rate of improvement, and cost of services.
To avoid a penalty, physicians must score above a certain threshold. Under the proposed fee schedule, the minimum score to avoid a penalty has seen a seven point increase from 75 to 82, meaning many more practices will be facing financial penalties than in previous years.
This, combined with the rise in overall medical costs and the difficulties of the pandemic, have resulted in an approximate 26% decrease in physician income, according to the AMA. They claim that the proposed pay cuts will disproportionately affect small, independent, rural practices that serve historically marginalized populations. This includes lower-income and minority communities, who have long been underserved.
These practices often struggle to meet MIPS benchmarks due to limited funds and equipment, and AMA argues the proposed change will only further the gap.
AMA Has History of Opposing MIPS
The AMA, one of the largest physician advocacy groups in the country, has long opposed this merit based compensation program. They have long claimed that MIPS is divorced from clinical outcomes, and compliance costs physicians a large amount of time and money each year. They also claim that MIPS disproportionately affects independent practices, rural practices, and physicians who care for the most socially and medically vulnerable members of the population.
MIPS uses a tournament based model. This means that all payment bonuses received by high-scoring practices are paid for by penalties issued to low-scoring physicians. AMA argues that such a system promotes inequity, giving more resources to large healthcare organizations that are already successful, while punishing those which are struggling.
As an alternative, the AMA has advocated for several alternative payment models, aiming for a more value based care model. They’ve shown support for a recent bill aimed at reforming the Medicare pay schedule, though it remains to be seen if this bill will be passed.
A Longstanding Debate
Despite advocating for payment reform, the AMA has long opposed the transition to single payer healthcare, also known as Medicare-For-All, with Clifford Marks of the New York Times writing that “for much of its history, persuading the AMA to consider a single-payer-style system was a little like asking today’s National Rifle Association to support a ban on assault weapons”. Votes to support a single payer system have failed as recently as 2019, though the margin between supporters and the opposition continues to shrink.
It is unclear how the proposed fee schedule will affect the AMA’s political lobbying going forward. While their opposition to MIPS is rooted in concerns over inequality, a swap to a single payer system would mean that all physician payments would be subject to MIPS bonuses and penalties. At the time of writing, it’s unclear if this will push them toward supporting more healthcare reform, or scare away the rising support for single payer healthcare among the AMA’s membership.
Potential Consequences for Medicare Beneficiaries
While the AMA is primarily concerned with physicians, there are major implications of this pay cut for many seniors.
Currently, the vast majority of physicians accept Medicare, but these increased penalties may force certain practices to alter their pay structure. This can lead to high costs for consumers as practices change their payment models. In extreme cases, some practices may be forced to shut down or relocate.
The MIPS penalties may also result in reduced quality of care in certain regions, particularly those in remote, rural areas. Often, these regions have very limited access to quality care, so these penalties may worsen already existing health crises in these regions.
For now, seniors should expect to see higher overall healthcare costs in line with previous trends. However, it remains unclear what larger consequences will result from these proposed changes. Physicians have until September 11, 2023 to submit formal comments and complaints, after which the schedule will be revised and put to a vote. The fee schedule is expected to be finalized at some point in November, and will come into effect at the beginning of 2023.
