Commissioners on the Medicare Payment Advisory Commission expressed broad support on Thursday for linking annual changes to physician reimbursement to inflation, a measure which — if approved by Congress — would give U.S. doctors more financial predictability and stability.
The backing of the influential congressional advisory board is a cause for optimism for the industry. Doctors have long lobbied Washington to increase Medicare reimbursement, citing lackluster pay as a driver behind practice consolidation and closures.
And insufficient payment could threaten access to care for the 68 million Americans, mostly seniors, on Medicare, according to MedPAC and other program experts. Those concerns have risen as the gap between annual payment updates and doctors’ costs grows.
“We need to keep up. I am more concerned than a couple of folks in here about falling behind, because I think once we do and once it becomes apparent it becomes really, really difficult to fix,” said Commissioner Gregory Poulsen, senior vice president at Utah-based health system Intermountain Healthcare, during MedPAC’s meeting on Thursday.
Medicare reimbursement for physician services has declined 29% from 2001 to 2024 when adjusted for inflation, according to the American Medical Association.
That’s due to how Medicare reimburses outpatient physicians: an annual payment rule called the physician fee schedule, or PFS, which pays for about 9,000 different clinician services across doctor’s offices and hospitals nationwide.
PFS doesn’t include an adjustment for inflation, unlike other Medicare payment systems. And, a statutory requirement requiring changes to PFS remain budget neutral makes it impossible for regulators to increase reimbursement to the levels physicians say they need.
On Thursday, MedPAC commissioners bandied about different solutions with one theme in common: tying physicians’ annual payment update to the Medicare Economic Index or MEI, a measure of cost inflation for physician services.
“I really agree with this notion of an MEI-based update,” said Commissioner Amol Navathe, associate director of the Center for Health Incentives and Behavioral Economics at the Perelman School of Medicine.
“It’s hard to perfectly read the tea leaves, but I think this is striking a good balance between what we understand from the evidence and what we’re worried about from the perspective of access for beneficiaries,” Navathe said.
In previous reports to Congress, MedPAC has suggested an annual conversion factor update linked to 50% of the MEI; or to the MEI minus 1 percentage point, with a minimum floor for the update.
Multiple commissioners said they supported the latter change.
“The MEI minus one … is a great threading of multiple needles. It puts some predictable increases for physicians who are going to be hurt realistically by unpredictable inflation year to year. And I think there’s fiscal prudence in the minus one, so it’s an excellent compromise and approach,” said Commissioner Scott Sarran, the chief medical officer of dementia care startup Harmonic Health.
However, some commissioners raised concerns that linking payments to inflation would significantly raise costs with uncertain effects on access. That’s because — despite physicians slamming Medicare pay as unsustainable — a large majority of U.S. doctors accept Medicare.
Medicare beneficiaries’ access to clinician care is as good as or better than that of privately insured individuals, despite commercial rates being roughly 40% higher than those of Medicare, according to Brian O’Donnell, a principal policy analyst with MedPAC.
“The problem we’re trying to solve in terms of access to me seems very hypothetical. And it’s expensive to solve,” said Commissioner Tamara Konetzka, a professor of public health sciences at the University of Chicago.
Physician associations want Congress to go even further than MedPAC’s suggestions. The AMA and other clinician groups have argued Congress should adopt a 100% MEI update, which would result in even higher annual rate hikes.
But commissioners agreed any reforms should be conservative. Some floated the idea of including a ceiling, as well as a floor, for annual rate updates to avoid runaway costs.
Instead of MEI minus 1 percentage point, Congress could elect to tie annual changes to a percentage of the index, like 75%, said Poulsen.
“If [inflation gets to a] really high number, 1% minus [0.10 percentage points] is a lot less than 1% minus one [percentage point],” Poulsen said. “It seems to me that 75% of MEI or something like that may be an easier and less troubling mechanism over time, because we don’t know what MEI is going to be next year or five years from now.”
Despite a back-and-forth over specifics, most commissioners agreed it’s not an option to wait until the PFS is even more out of step with physician costs. It’s an opinion shared by lawmakers in Congress, with members on both sides of the aisle expressing support for reforming doctor reimbursement in hearings and in public letters.
“This whole aspect around, ‘Because there’s not necessarily an access problem compared with commercial, is there an urgency to problem-solve this’? I don’t think we want to wait until there’s an access problem because when there’s an access problem it’s going to be really difficult to course correct,” said Commissioner Robert Cherry, the chief medical and quality officer at UCLA Health.
“We want to really start thinking about this much more proactively,” Cherry said.
