The Medicare Payment Advisory Commission (MedPAC) held its December Public Meeting this week, focusing on “Assessing payment adequacy and updating payments: Physician and other health professional services” in the Thursday morning session. MedPAC is a nonpartisan legislative agency that advises Congress on Medicare issues. This session examined the current state of physicians’ Medicare reimbursements, with discussions centered on its three key categories of assessment:

• Beneficiaries’ Access to Care
• Quality of Care
• Clinicians’ Revenues and Costs

Beneficiaries’ Access to Care

MedPAC found that Medicare beneficiaries reported access to care that was comparable to privately insured individuals and, in some instances, slightly better. Similarly, wait times for Medicare beneficiaries were roughly the same as they were for privately insured individuals. However, an important exception was identified among low-income Medicare beneficiaries eligible for Medicaid. Physician reimbursement for dual-eligible patients was often lower due to Medicaid’s lagging payment rates compared to Medicare. This can make it much more challenging for dual-eligible patients to access a clinician. 

Additionally, the number of clinicians billing under the Physician Fee Schedule increased by 2.2% between 2018 and 2023. This MedPAC analysis suggests a growing number of providers participating in the Medicare program.

Quality of Care

MedPAC noted challenges in assessing clinician quality, largely due to reliance on the Merit-based Incentive Payment System (MIPS). They criticized MIPS as “fundamentally flawed,” citing its reliance on self-selected metrics, which makes standardized evaluations difficult. The Commission reiterated its recommendation to eliminate MIPS in favor of a more streamlined and effective system.

Clinicians’ Revenues and Costs

Physician compensation under Medicare continues to lag the Medicare Economic Index (MEI). In 2023, average physician compensation grew by 3%, while MEI rose by 4%. However, MedPAC projects that annual MEI increases will moderate in the coming years, dropping to 3.3% in 2024, 2.8% in 2025, and 2.3% in 2026.

Recommendations for Sustainable Reimbursement

To address these challenges and ensure sustainable physician reimbursement, MedPAC proposed two key recommendations:

1. Base Payment Rate Adjustments:

From 2025 to 2026, MedPAC suggests increasing base payment rates by MEI minus 1%. This would begin efforts to replace the current system of annual Congressional updates to the conversion factor, providing a more predictable and less stressful framework for physicians.

2. Safety-Net Add-On Payments:

In alignment with its March 2023 recommendation, MedPAC advocates for establishing safety-net add-on payments under the Physician Fee Schedule (PFS). This includes a 15% add-on for primary care clinicians and a 5% add-on for all other clinicians delivering services to low-income Medicare beneficiaries. Notably, these add-ons would not impact beneficiary cost-sharing. This measure aims to incentivize care for dual-eligible patients, addressing the issues caused by insufficient Medicaid reimbursement rates.

Conclusion

MedPAC’s recommendations highlight the growing concern that MEI is outpacing physicians’ Medicare reimbursements. The recommendations are viewed as a short-term measure, and the MedPAC commissioners still expressed concern about long-term sustainability. Like providers across the country, MedPAC believes a permanent solution is needed to address suboptimal provider reimbursements rather than relying on annual Congressional fixes.

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