Clinicians deserve a slight bump in Medicare pay because of rising practice costs, an influential federal advisory panel said this week. Physician groups largely lauded the recommendation — but some say it doesn’t go far enough.
In its annual report to Congress, the Medicare Payment Advisory Commission (MedPAC) calls for a 1.45% increase for 2024 in the base rate used in the physician fee schedule.
MedPAC said this should be a permanent increase. It would replace a 1.25% temporary increase in the 2024 physician fee schedule, part of a massive spending package passed in December.
Although members of Congress are not obliged to act on MedPAC’s recommendations, the panel’s work often influences lawmakers’ decisions about the giant federal health program. Congress would need to change current federal law to update the 2024 Medicare physician schedule.
The report also calls for add-on payments for services provided to people in traditional fee-for-service Medicare who qualify for low-income subsidies or who also are enrolled in Medicaid. MedPAC recommended a 15% add-on for primary care clinicians and 5% for other clinicians.
MedPAC members voted unanimously in January in favor of both of these recommendations for changes in the physician fee schedule, along with other suggestions.
Unlike annually updated Medicare payment rules for hospitals and other healthcare professionals, the physician fee schedule does not routinely factor in inflation.
The federal rules set to adjust Medicare hospital payments, for example, currently project a 2.9% increase in 2024 payments for hospitals to reflect rising costs involved in providing care, to which MedPAC proposes adding a 1% increase.
“If we were to recommend that hospitals receive a notable update and physicians would not, that gap would widen and contribute to growing disparities between the payment rates for those settings and potentially increase the incentives for hospitals to acquire physician practices,” James E. Mathews, PhD, executive director of MedPAC, said on a Wednesday call with reporters.
Costs of providing clinicians’ services, as measured by the Medicare Economic Index (MEI), rose by 2.6% in 2021 and are estimated to have risen 4.7% last year, substantially higher than historical norms, MedPAC said.
Growth of these expenses is expected to rise by 3.9% this year and 2.9% in 2024, although these projections could change.
Tochi Iroku-Malize, MD, MPH, MBA, president of the American Academy of Family Physicians said her group was pleased with the recommendation of the permanent, annual Medicare physician payment update to account for rising practice costs. AAFP also welcomed the proposal for add-on payments for clinicians with many patients living in poverty.
“Enacting these recommendations will safeguard access to care, provide urgently needed support for physician practices, and mitigate access disparities for low-income beneficiaries,” Iroku-Malize said.
The American Medical Association welcomed the MedPAC call for a change in 2024 physician payment rates, but maintains the proposed bump was not enough.
MedPAC settled on an increase of half of the 2.9% increase, or 1.45%, in MEI, seeking an increase focused on clinicians’ practice costs and not their own compensation.
“Having surveyed the healthcare landscape, MedPAC recognized that physician pay has not kept up with the cost of practicing medicine. Yet, we feel strongly that an update tied to just 50% of MEI will cause physician payment to chronically fall even further behind increases in the cost of providing care,” said Jack Resneck Jr, MD, president of the AMA, in a statement Wednesday. “Congress should adopt a 2024 Medicare payment update that recognizes the full inflationary growth in healthcare costs.”
The Medical Group Management Association (MGMA) also called for a larger increase, describing the proposed one as “grossly insufficient.”
“Medical practices have been suffering from significant staffing shortages and cost increases across the board,” Anders Gilberg, MGA, senior vice president of government affairs at MGMA, said in a statement. “An update of any amount less than the full MEI will not adequately remedy the negative impact of the broader economy on practices’ financial stability.”
More Work Ahead
The Medicare Economic Index calculation is intended to capture changes across the variety of expenses needed to cover clinicians’ services. Economists often use the term “market basket” to cover cases including multiple expenses. The MEI addresses clinicians’ compensation and practice expenses, which can include staff wages, rent, equipment costs, and liability insurance.
At a January meeting, MedPAC member Lawrence Casalino, MD, PhD, of Weill Cornell Medical School, New York City, said he wasn’t “terribly happy” with a recommendation of an update reflecting the half of the MEI increase that focused on practice expenses.
“The other half is for physicians’ time. And we’re not really recommending any increase for that,” Casalino said.
Casalino is among the MedPAC members who have called for a broader overhaul of how Medicare pays clinicians.
There’s widespread discontent with the implementation of the last major law intended to set these payments, the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. With this law, members of Congress sought to keep base physician payment flat from 2020 to 2025, while creating systems to link higher pay to improvement on quality metrics.
MACRA was intended to end repeated chaotic attempts by Congress to head off slated cuts in physician payment, which stemmed from the sustainable growth rate (SGR) budget mechanism that lawmakers earlier created.
“There are just too many problems with the current way of paying physicians, and one symptom of that or sign of that is that practically every year there has to be some kind of patch. This has been going on for decades,” Casalino said at a January MedPAC meeting. “And that needs to be fixed.”
MedPAC Chairman Michael Chernew, PhD, said the commission is considering how to engage in a “much more comprehensive assessment” of this issue.
Primary Care Pay Still Lags
As in previous years, compensation for primary care physicians lagged that of specialists, MedPAC said in the report. These findings were generally in line with the Medscape Physician Compensation Report 2021.
Median compensation for primary care was $264,000, lagging the $315,000 median compensation reported for 2021 across specialties. In this case, primary care refers to family medicine, internal medicine, and general pediatrics.
Median compensation was $295,000 in the group classified as nonsurgical, nonprocedural. Specialties in this group include emergency medicine, endocrinology, hospital medicine, nephrology, physical medicine, psychiatry, neurology and some fields of internal medicine/pediatrics.
Median compensation was $441,000 for surgical specialties and $450,000 for “nonsurgical, procedural specialties,” a group that includes cardiology, dermatology, gastroenterology, pulmonary medicine, and hematology/oncology.
The highest reported median compensation was for radiology ($482,000).
Kerry Dooley Young is a freelance journalist based in Miami. Follow her on Twitter @kdooleyyoung.
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