The Medicare Physician Payment Schedule is implemented, the initial monetary conversion factor is $31.00 and Medicare volume performance standards (MVPS) are established to determine target rates of growth.
Explore the History of Medicare Payment Reform
For decades, temporary patches and short-sighted solutions to the Medicare payment system have harmed Medicare beneficiaries and physicians, resulting in stagnant payment rates and threatening patient access to necessary care. Scroll through the timeline below to learn about key moments throughout the long road to Medicare payment reform.
The MVPS leads to divergent conversion factors for primary care, surgeons and non-primary care, non-surgery specialists. This subverts the resource-based relative value scale (RBRVS) due to resulting payments no longer being relative.
The Balanced Budget Act (BBA) replaces the MVPS, creates the Sustainable Growth Rate (SGR) and replaces the three separate conversion factors with a single conversion factor (including an additional conversion factor for anesthesia services). The SGR system, as specified in the BBA, includes several technical flaws, one of which is the lack of any provision to correct the Centers for Medicare & Medicaid Services’ (CMS) estimates of the factors in the SGR, such as GDP growth, once actual data becomes available. Whereas CMS originally set a target rate of growth each fall for the coming fiscal year, they significantly underestimate the targets for the initial two fiscal years of 1998 and 1999.
In the Balanced Budget Refinement Act of 1999, Congress fixes some of the flaws but does not correct CMS’ projection errors. By the time Congress fixes this issue in 2003, the 10-year cost of restoring the SGR target for Medicare physician payments is $54 billion.
AMA advocates for Congress to make technical changes to the Medicare Sustainable Growth Rate (SGR) in the Balanced Budget Refinement Act of 1999 to limit oscillations in the annual update.
Physicians experience a 5.4% payment cut.
Physicians are scheduled to receive a 4.4% Medicare cut, but two months into the year, Congress passes the Consolidated Appropriations Resolution which results in an average update of 1.6%.
Physicians are scheduled to receive a 4.5% Medicare cut, but the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) blocks the cut and allows for a two-year update of 1.5%.
Physicians are scheduled to receive a 4.4% Medicare cut, but in the Deficit Reduction Act (DRA), Congress freezes payments.
While MMA and DRA temporarily prevent a steep decline in Medicare physician payment rates, no money is added to the SGR budget to accommodate the resulting increases in spending. This becomes a pattern for future legislative fixes, causing the cumulative SGR deficit and projected physician payment cuts to become exponentially deeper each year.
Physicians are slated to receive a 5.0% Medicare cut, but in the Tax Relief and Health Act (TRHCA), Congress once again freezes payments.
TRHCA also creates the Physician Quality Reporting System (PQRS), a pay for performance quality reporting program and the foundation of the Quality Performance Category of the Merit-based Incentive Payment System (MIPS).
In January, physicians are slated for a 10.1% Medicare cut. In the Medicare, Medicaid, and SCHIP Extension Act, Congress provides physicians with a 0.5% update for the first six months of the year.
In July, Medicare physician payments are slated to be cut by 10.6%, but the Medicare Improvements for Patients and Providers Act (MIPPA) retroactively blocks the cut. For the remainder of the year and throughout 2009, MIPPA provides physicians with a Medicare update of 1.1%.
MIPPA creates the Value-Based Payment Modifier (VBPM) program, which is the foundation for the Cost Performance Category of MIPS.
Congress creates the Meaningful Use (MU) program through the Health Information Technology for Economic and Clinical Health Act. MU is the foundation for the Promoting Interoperability Performance Category of MIPS.
AMA interviews physicians about how Medicare cuts affect their patients and their practices.
Congress passes multiple bills to prevent Medicare physician payment cuts of at least 21.2%. The Department of Defense Appropriations Act averts the cut but does not provide physicians with any Medicare payment updates.
The Temporary Extension Act prevents a March 1st payment cut but does not provide physicians with any updates.
Congress averts an April 1st payment cut but does not provide physicians with any updates. Congress passes the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act which provides five months of relief and a 2.2% payment update.
Congress passes the Physician Payment and Therapy Relief Act which averts a 23.0% payment cut but does not provide physicians with an update for December.
AMA interviews physicians about how Medicare cuts affect their patients and their practices.
AMA ads call on Congress to fix the Medicare physician access problem.
The expected Medicare cuts for physicians grows to 24.9%. Congress averts the cuts in the Medicare and Medicaid Extenders Act but physicians do not receive an update.
AMA ads call on Congress to repeal the SGR.
AMA ads call on Congress to act on permanent repeal of the broken Medicare physician payment formula.
Congress averts a 27.4% payment cut for the first two months of the year through the Temporary Payroll Tax Cut Continuation.
The Middle-Class Tax Relief and Job Creation Act of 2012 prevents the 27.4% cut for the remainder of the year, but physicians do not receive an update.
AMA ads call on Congress to repeal the SGR formula.
Physicians face a 26.5% payment cut. The American Taxpayer Relief Act averts the cut, but physicians do not receive an update.
AMA launches Fix Medicare Now, a grassroots campaign urging Congress to implement long-term solutions to reform the flawed Medicare physician payment system
Through the Pathway for SGR Reform Act, Congress prevents a 23.7% payment cut from January to April. This Act provides physicians with a 0.5% update, but the update does not continue for the remainder of the year.
Through the Protecting Access to Medicare Act (PAMA), Congress averts a 24.1% cut slated to start on April 1st, but physicians do not receive an update. PAMA mandates that CMS hit a “potentially misvalued” services target that would achieve savings equal to 0.5% of Medicare expenditures. If CMS does not reach the target, the difference between the target amount and the expenditures will be taken out of the physician payment schedule. Under PAMA, this 0.5% target is put in place from 2017 through 2020.
Congress passes the Achieving a Better Life Experience Act of 2014 (ABLE), which supersedes PAMA. Under ABLE, the target is in effect from 2016 through 2018 and increases to 1.0% in 2016.
The Medicare Access and CHIP Reauthorization Act (MACRA) permanently eliminates the SGR, replacing it with 0.5% updates beginning on July 1, 2015, and lasting through 2019. From 2020 through 2025, MACRA sets updates at 0.0%.
MACRA also sunsets the separate PQRS, MU, and Value-Based Payment Modifier Programs. Unfortunately, CMS retained many of the measures and concepts from PQRS, MU, and the Value Modifier in MIPS. Combined, those legacy pay-for-performance programs could have cut physician payment by as much as -11.0%. Congress replaces them with two tracks for tying physician payment to quality and resource use: MIPS, with a maximum downside of -9.0%, and alternative payment models (APMs).
From 2019 through 2024, MACRA establishes a 5.0% incentive payment for qualifying participants in APMs. Congress allocates $500 million on an annual basis between 2019-2024 for bonuses for exceptional MIPS performance. MACRA specifies that beginning in 2026, updates will differ depending on whether a physician qualifies as a participant in an APM. For those who do qualify, the annual update will be 0.75%. For everyone else, the update will be 0.25%.
Despite a scheduled update of 0.5% under MACRA, due to the PAMA/ABLE Act provisions on misvalued services targets, physicians face a -0.36% reduction to the conversion factor.
Despite a scheduled update of 0.5% under MACRA, due to the PAMA/ABLE Act provisions on misvalued services targets, the conversion factor is updated by only 0.24%.
MIPS and APM participation begins. Due to AMA’s advocacy, the first year of MIPS serves as a minimally burdensome transition year.
Despite a scheduled update of 0.5% under MACRA, due to the PAMA/ABLE Act provisions on misvalued services targets, the conversion factor is updated by only 0.31%.
Despite a scheduled update of 0.5% under MACRA, the Medicare physician payment schedule conversion factor is updated by only 0.11% due to budget neutrality requirements under law.
MIPS payment adjustments, based on 2017 performance, affect 2019 Medicare physician payment. 93% of physicians achieve a positive payment adjustment, with the maximum incentive at 1.88%.
Researchers find that compliance with MIPS costs $12,800 per physician, per year and that physicians spend an average of 53 hours per year—equivalent to a full week of patient visits—on MIPS-related tasks. MIPS is a repackaging of previous legacy programs, including PQRS, MU and VBM.
Under MACRA, the annual physician payment update is set at 0.0%. The conversion factor increases marginally by 0.14% due to budget neutrality adjustments.
MIPS payment adjustments, based on 2018 performance, affect 2020 Medicare physician payment. 98% of physicians avoid a penalty, and the maximum MIPS incentive is 1.68%.
Under MACRA, the annual physician payment update is set at 0.0%. CMS implements the CPT Editorial Panel and AMA/Specialty Society RVS Update Committee (RUC) recommended coding and valuation changes to the office and outpatient Evaluation and Management (E/M) services, which along with a CMS-developed E/M add-on code, would have cut the Medicare conversion factor by 10.2% due to statutory budget neutrality requirements. However, Congress passes the Consolidated Appropriations Act of 2021, delaying for three years the implementation of the E/M add-on code—G2211—and providing a 3.75% increase for CY 2021. As a result of these two actions, the conversion factor decreases by 3.3%.
MIPS payment adjustments, based on 2019 performance, affect 2021 Medicare physician payment. More than 99% of physicians avoid a penalty as a result of flexibilities and hardship exceptions due to the COVID-19 pandemic. The maximum MIPS incentive amount is 1.79%.
AMA advocates against proposed Medicare payment cuts of 9.75% scheduled to go into effect on January 1, 2022, through the Reverse Medicare Cuts campaign.
The Protecting Medicare and American Farmers from Sequester Cuts Act results in a 3.0% offset to the 3.75% budget neutrality adjustment that had been deferred from 2021. The 0.75% reduction is combined with a small budget neutrality adjustment, leading to a 0.8% reduction in the 2022 conversion factor.
MIPS payment adjustments, based on 2020 performance, affect 2022 Medicare physician payment. 98% of physicians avoid a penalty as a result of flexibilities and hardship exceptions due to the COVID-19 pandemic. The maximum MIPS incentive amount is 1.87%.
AMA leads an advocacy campaign (Cancel Medicare Cuts) joined by more than 150 other organizations that minimized the 8.50% in Medicare payment cuts slated for 2023.
A 4.5% payment cut for 2023 results from the deferred 3.0% budget neutrality adjustment for increases to office visit payment and the additional 1.5% adjustment for the other E/M family increases. The Consolidated Appropriations Act of 2023 reduces the anticipated 4.5% cut by increasing the 2023 conversion factor by 2.5%, therefore reducing the cut to 2.0%.
The Consolidated Appropriations Act of 2023 extends the APM incentive payment at 3.5% for an additional year, to be paid in 2025 based on 2023 APM participation.
MIPS payment adjustments, based on 2021 performance, affect 2023 Medicare physician payment. Nearly 97% of physicians avoid a penalty as a result of flexibilities and hardship exceptions due to the COVID-19 pandemic. The maximum MIPS incentive amount is 2.34%.
AMA relaunches Fix Medicare Now campaign.
Tell Congress to Cancel the Cut
The Centers for Medicare and Medicaid Services recently approved a 3.4% cut to Medicare physician payments for 2024. If Congress doesn’t act before the year is over, these proposed cuts will go into effect, worsening patients’ access to care and disproportionately harming small, independent and rural physician practices.
Congress needs to act now. Contact your lawmakers and urge them to cancel the cut and fix Medicare now, before it’s too late. Click the button below to take action!