2023 Brings Another Medicare Pay Cut?!

During the final days of December 2022, the United States Congress passed its year-end omnibus legislation, which included, yet again, a Medicare physician pay cut. After two decades of flat to down payment rates, the 2.5% for 2023 means that Medicare physician payments have dropped by 22% from 2001 to 2021.

Physicians had initially been facing a much larger cut, however an advocacy campaign by the American Medical Association (AMA), the American Academy of Orthopaedic Surgeons (AAOS), and numerous other physician organizations helped reduce that amount to “just” 2.5%.

Physician organizations have uniformly expressed their disappointment with Congress and its failure to prevent cuts to Medicare physician payments and have urged Congress to begin working on Medicare physician payment reform.

AMA Statement on the Medicare Pay Cut

AMA President Jack Resneck, Jr., M.D. stated, “The AMA is extremely disappointed and dismayed that Congress failed to prevent Medicare cuts next year [2023], threatening the financial viability of physician practices and endangering access to care for Medicare beneficiaries. This 2.5% cut following two decades of flat payment rates will have consequences on health care access for older Americans.”

Dr. Resneck continued, “High inflation compounds the threat to practice viability because physicians are the only Medicare providers without annual inflation-based updates. We are deeply worried that many practices will be forced to stop taking new Medicare patients – at a time when access to care is already inadequate. Congress must immediately begin the work of long-overdue Medicare physician payment reform that will lead to the program stability that beneficiaries and physicians need.”

AAOS Message to Congress

American Academy of Orthopaedic Surgeons President Felix H. Savoie, III, M.D., FAAOS issued the following statement on the omnibus package, “AAOS is extremely disappointed that Congress failed to fully address the impending cuts to Medicare physician payment. In choosing to allow payment reductions year after year, and to the leaders of health care teams nonetheless, Congress is worsening a system that is already broken and threatening seniors’ access to care.”

Dr. Savoie continued, “The AAOS is calling on congressional leadership one final time to do the right thing and stop these cuts in their entirety—our members, their patients and the entire physician community depend on it.”

CMA Statement on Medicare Pay Cut

The California Medical Association (CMA) President Donaldo Hernandez, M.D. made the following statement. “Physicians are frustrated and demoralized because, at a moment when the entire health care system is stressed to its limits, both parties in Congress have decided to ‘thank’ physicians working on the frontlines with cuts that will have devastating impacts.”

Dr. Hernandez continued, “This 2.5% cut, following two decades of flat payment rates with no inflationary updates, will cause irreparable harm to Medicare and our underserved communities. When adjusted for inflation, Medicare physician payments have dropped by 22% from 2001 to 2021. Physicians simply cannot afford to operate under the current payment system.”

CMA went on to urge Congress “to return in January and immediately get to work on a long-term overhaul of the Medicare payment system that includes an annual automatic inflation update, addresses budget neutrality, and provides more alternative payment model (APM) opportunities.”

2023 Medicare Physician Fee Schedule Final Rule

What was the initial proposed pay cut?

On November 1, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that included updates and policy changes for Medicare payments under the Physician Fee Schedule effective January 1, 2023. The rule reduced the physician pay conversion factor to $33.06. This reduction was a decrease of $1.55 or 4.5% from the 2022 conversion factor of $34.61. The final rule is an end of the temporary 3% supplemental increase from 2022.

A 22% Physician Pay Cut Between 2001-2021!

The AMA was vocal in its opposition to the 4.5% cut. On December 8, 2022, AMA President Jack Resneck Jr., M.D. issued a statement on the Medicare Payment Advisory Commission meeting. Dr. Resneck stated, “The AMA thanks the Medicare Payment Advisory Commission (MedPAC) for acknowledging during their meeting today the growing gap between the costs of practicing medicine and what Medicare pays.”

Dr. Resneck continued, “AMA research shows that, adjusted for inflation in practice costs, Medicare physician pay declined 22 percent from 2001 to 2021, or by 1.2 percent per year on average. This widening gap has created instability for physician practices and threatens Medicare patient access to care. The AMA strongly urges Congress to stop the 4.5% payment cut scheduled for Jan. 1, 2023, and to work with physicians on wholesale payment system reforms that include inflationary updates reflecting the costs to practice medicine.”

Included in Dr. Resneck’s statement was a December 8, 2022, letter from the AMA and signed by all 50 state medical associations. The letter was sent to House leaders Nancy Pelosi and Kevin McCarthy and Senate leaders Chuck Schumer and Mitch McConnell.

The letter said: “The impending 4.5% Medicare Physician Fee Schedule (MPFS) payment cut comes as medical practices throughout the country are experiencing pressures stemming from rising rates of inflation.”

“All health care stakeholders struggle to endure steep, annual payment reductions; however, the negative impact of such policy decisions is exacerbated by the fact that physicians are the only providers whose Medicare payments do not automatically receive an annual inflationary update. This statutory flaw that characterizes the MPFS consistently leads to financial uncertainty and budgetary challenges for all physicians. The stark reality is that, adjusted for inflation in practice costs, Medicare physician pay has declined 22 percent from 2001 to 2021. Allowing cuts to Medicare payments is simply unacceptable during this time of record inflation and coming on the heels of a highly disruptive pandemic.”

“Burnout, stress, workload, and the cumulative impact of COVID-19 are leading one in five physicians to consider leaving their current practice within two years. Payment cuts will only accelerate this unsustainable trend and undoubtedly lead to Medicare patients struggling to access health care services. As a result, we cannot overstate the importance of Congress stopping the looming 4.5% reduction, in full. Put simply, the cost of Congressional inaction is an across-the-board cut that will further amplify the financial hardship physician practices are already facing while inhibiting Medicare from delivering on its promises to seniors and future generations.”

National Specialty Societies Join the AMA Urge Congress to Stop Payment Cut

On December 5, 2022, over 100 national organizations and others added their voice to the AMA call. Signatories included the Ambulatory Surgery Center Association, the American Academy of Orthopaedic Surgeons, and American Physical Therapy Association.

The letter said: “The undersigned organizations, representing over one million physician and non-physician health care clinicians and the patients they serve, strongly urge Congressional action to prevent the entire 4.5% reduction to Medicare payment rates from being implemented on January 1, 2023. This desperately needed relief will help provide financial stability for practices until permanent payment reforms are established.”

“On top of this nearly 4.5% Medicare Physician Fee Schedule (MPFS) payment cut, medical practices throughout the country are experiencing significant inflationary pressures. Since the MPFS is the only payment system within Medicare lacking an annual inflationary update, clinicians, many of whom are small business owners, contend with a wide range of shifting economic factors—such as staff salaries, building rent, and purchase of essential technology—when determining their ability to provide care to Medicare beneficiaries.”

“We cannot overstate the importance of Congress stopping the entirety of the upcoming 4.5% reduction. Anything less will result in an across-the-board cut that will further exacerbate the significant financial hardship clinicians are already facing and undermine Medicare’s ability to deliver on its promises to seniors and future generations.”

An Early Groundhog Day?

In AMA Update “Reducing physician burden with Medicare payment with Todd Askew” Unger and Askew discussed “proposed Medicare payment cuts and getting Medicare on a sustainable path for physicians and patients.” In his opening remarks Unger commented, in part, “I feel like a little bit of Groundhog Day from last year. Here we are again. It’s the end of the year and we’re back fighting to avert deep Medicare payment cuts.”

Askew agreed with the “Groundhog Day” reference, remarking, “And there is a clear understanding among policymakers now more so than ever that the status quo, this Groundhog Day as you mentioned every year having to fight cuts as opposed to focus on reform is just not sustainable.”

While the focus has been on the 4.5% cut, the total is actually 8.5%. The other 4% reduction comes from the 4% pay-as-you-go (PAYGO) sequester. Askew explained, “Essentially it’s a broad reduction in government spending over a number of categories, not just Medicare to make up for previous overspending if you will. That’s 4% of the cut.”

Medicare Payment Reform?

While physician advocacy efforts were able to hold Congress to a two percent pay cut for now, there are already efforts underway to try to stop this from happening again. According to Askew, over the past year state medical associations and national medical specialties have been working with the AMA “to build a consensus around a set of principles endorsed by over 120 of those organizations on what a new Medicare payment system should look like.”

Will Congress take note of these principles and take appropriate action? That remains to be seen…