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Medicare's Physician Payment System: It’s Time for Long-Term Solutions

We’ve been on the road fighting for Medicare physician payment reform for well over a decade, and the system remains on an unsustainable path. Temporary patches and ongoing cuts to the Medicare physician payment system have left physician practices and patient access to care at serious risk. Payment cuts, freezes and redistributions have further exacerbated the challenge, yet Congress and the administration are still not focused on fixing the root of the problem—the payment system itself. But it’s time for that to change. It's essential that leaders in Washington work with the physician community on immediate, preventative measures, as well as long-term solutions that will reform the payment model once and for all.

A History of Threats

For years, the Medicare Sustainable Growth Rate (SGR) formula’s threats of payment cuts resulted in instability for both practices and patients. While the Medicare Access and CHIP Reauthorization Act (MACRA) offered some progress in response, it lacked key components such as an annual inflationary update and adequate support for small and rural practices. Today, physicians are the only Medicare providers who do not receive an annual inflationary update. In fact, since 2001, Medicare physician payments have lagged 30% behind the rate of inflation growth. More than two decades of stagnant payment rates is unacceptable. Practice costs and consumer prices have increased while Medicare physician pay has declined. 

More recently, in 2021 many physicians faced Medicare cuts due to payment redistributions caused by policy changes implemented by the Centers for Medicare & Medicaid Services (CMS). These cuts would have severely threatened patient access to care and further strained physician practices working to stay open during a global pandemic. While the AMA was able to successfully work with Congress on legislation that delayed and phased in those cuts, history repeated itself in 2022 and 2023 as physicians faced another round of cuts from still more payment redistributions. As the phase-in continues, physicians are experiencing a 3.37% cut in Medicare payments in 2024.

Physician with a patient
Couple dancing

Bottom line: throughout the years, the AMA has had countless interactions with lawmakers about issues related to Medicare and made it clear that these issues need to be fixed. The Medicare physician payment system is flawed and outdated.  Medicare payment reform is long overdue.

What's At Stake

Cuts, temporary measures and partial fixes to the Medicare physician payment system are not sustainable. They hinder physicians’ ability to adequately pay staff, purchase new equipment and invest in their practices.

Without long-term reform, physicians could be forced to close their doors for good, leaving Medicare patients without access to high-quality care.

The Way Forward

The Medicare physician payment system needs reform to better meet the needs of patients and physicians. The right solutions will encourage innovation, while enabling small and large practices across rural and urban areas to thrive. The AMA and the Federation of Medicine developed a set of principles to guide advocacy efforts on Medicare physician payment reform. Overall, a rational Medicare payment system would: 

  • Ensure financial stability and predictability.
  • Promote value-based care.
  • Safeguard access to high-quality care. 
Tell Congress to Reverse the Cut

CMS approved a 3.37% cut to Medicare physician payments that went into effect on January 1, 2024. If the latest cut is left in place, patient access to care will remain at risk.

Further inaction is not an option. Contact your members of Congress and demand they reverse these devastating cuts as part of the upcoming 2024 appropriations package. Click the button below to take action!