Mending Medicare: Federal Spending Law Reduces Physician Pay Cut Amid Reform Push
By Emma Freer Texas Medicine March 2023


A massive federal spending law took effect at the tail end of 2022, delivering a smaller-than-scheduled Medicare physician pay cut in 2023 and other positive implications for Texas physicians. 

But this intervention was not a silver bullet. Physicians still face declining Medicare payments in 2023 and 2024, which threaten their practices’ viability and constrain patients’ access to care. 

So, the Texas Medical Association and others in organized medicine continue to advocate for comprehensive reform, a cause to which a key congressional advisory panel recently lent its support.  

Inside the legislation 

When President Joe Biden signed into law the Consolidated Appropriations Act on Dec. 29, he capped off months of advocacy by TMA and others to avert a scheduled Medicare physician pay cut. Although the $1.7 trillion omnibus law only reduced the cut, it included other benefits, such as expanded Medicare and Medicaid coverage. 

The spending bill more than halved, to 2%, a 2023 Medicare physician fee schedule cut that had lowered the conversion factor determining physician payments by 4.5% compared with the 2022 conversion factor. But the spending bill also requires the Centers for Medicare & Medicaid Services (CMS) to reduce Medicare physician payments by 1.25% in 2024, underscoring the need for reform.  

The Medicare physician fee schedule cut, finalized in November, had mostly stemmed from an expiring physician pay increase funded by Congress through 2022 as well as a much-maligned federal budget-neutrality statute that requires any physician pay increase or decrease to be offsetting. 

In response to the cut, Texas physicians sent nearly 2,000 messages to their federal representatives. 

Greg Fuller, MD, a family physician in Keller and chair of TMA’s Council on Socioeconomics, says years of declining Medicare physician payments have taken a toll.  

“You have a lot of physicians who won’t take Medicare at all,” he told Texas Medicine. “You have physicians who won’t take new Medicare patients.” 

TMA, the American Medical Association, and others echoed Texas physicians’ call, pushing Congress to eliminate the pay cut altogether, including in a Dec. 8 letter to leadership.  

“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,” they wrote.  

This advocacy led to some relief with the passage of the Consolidated Appropriations Act and its reduced 2% pay cut. 

“Any cut is harmful to physicians, especially primary care physicians and even more importantly rural practices, where Medicare [and] Medicaid make up a [large portion of the] patient population,” Dr. Fuller said. “Most physicians, especially [those in] primary care, say Medicare is a money-loss venture.” 

The up side 

Still, the spending law brings with it other, more positive developments, including extending pandemic-era telehealth coverage and continuing incentive payments for alternative payment model (APM) participants. 

Zeke Silva, MD, a radiologist in San Antonio and a member of TMA’s Council on Legislation, says both provisions offer physicians – and their patients – consistency.

Specifically, the law extends certain Medicare telehealth flexibilities tied to the COVID-19 public health emergency (PHE) until Dec. 31, 2024, regardless of the status of the PHE, which the Biden administration announced will end May 11. 

The flexibilities include: 

  • Waiving site restrictions to allow patients to access telehealth services at home; 
  • Allowing patients who are unable or unwilling to use video to access audio-only telehealth services; and  
  • Delaying an in-person visit requirement for patients who receive behavioral telehealth services. 

“The question that has been on a lot of our minds is, ‘What is going to happen when the PHE expires? Are those [expanded telehealth options] just going to go away?’” Dr. Silva said. “[This] gives us at least some greater ability to predict when that change will occur.” 

In addition, the law extends bonus payments for eligible APM participants, albeit at 3.5% rather than 5%, and maintains the existing current thresholds. The payments were originally set to expire after the 2022 performance year, with the corresponding payments disbursed in 2024.  

Dr. Silva welcomes these changes, acknowledging that CMS’ stated goal to shift Medicare patients to value-based arrangements has been hampered, in part, by high start-up costs for practices.  

“It gives physicians who choose to pursue that pathway for payment the ability to do so,” he said.  

The law also:  

  • Makes permanent an option for states to provide 12 months of continuous Medicaid coverage to children and postpartum women;
  • Authorizes 200 additional graduate medical education residency positions, half of which will be dedicated to psychiatry;
  • Incentivizes domestic drug manufacturers to address supply shortages; and 
  • Funds more mental health, maternal health, and substance use disorder services. 

The push for reform 

The fight for Medicare physician payment reform gained a new adherent in recent weeks, when the Medicare Payment Advisory Commission (MedPAC), a congressional support agency that provides guidance on Medicare, recommended for the first time in several years that CMS increase Medicare payments to physicians as well as to other health care sectors. 

After meeting twice in mid-January, MedPAC voted unanimously that Congress should: 

  • Update the 2023 Medicare base payment rate for physicians and other health care sectors by 50% of the projected increase in the Medicare Economic Index (MEI), a measure of physician practice cost inflation, which amounts to a 1.25% pay adjustment; and  
  • Increase payment for services provided to low-income Medicare patients by 15% for primary care clinicians and by 5% for specialty clinicians.  

Dr. Silva says it’s critical CMS ties Medicare physician payment to the MEI. 

“Physicians are paying more for supplies, equipment, and staff,” he said. “So, accommodating these increased costs requires, by definition, increased payment.” 

He also notes MedPAC historically has been slow to recommend Medicare physician pay increases.

“The fact that they would come in and collectively make the statement that all physicians caring for Medicare [patients] should receive a 1.25% increase is significant,” he said. “But the amount is not enough.” 

AMA also commended MedPAC for acknowledging the need for a physician pay raise while chiding the panel for recommending a pay adjustment that only goes halfway. 

“Physicians have struggled to keep their practices open in the face of rampant inflation, COVID, and growing costs of running a medical practice, and Medicare payments have not responded adequately,” AMA President James Resneck Jr., MD, said in a Jan. 12 statement. “Congress should adopt a 2024 Medicare payment update that recognizes the full inflationary growth in health care costs.”   

Dr. Fuller says such an update is long overdue and would help level the playing field for physicians when compared with other health care sectors. 

Between 2001 and 2020, Medicare physician payment decreased 22% when adjusted for inflation, whereas payment to the other sectors generally has kept pace with inflation, according to AMA.  

“Physicians get stuck in this zero-sum game every year – so, if anybody gains, somebody loses,” he said. “We have to start getting payment adjustments each year.”

Last Updated On

April 12, 2023

Originally Published On

February 27, 2023

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AMA | Medicare | Practice Viability

Emma Freer

Associate Editor

(512) 370-1383

Emma Freer is a reporter for Texas Medicine. She previously worked in local news, covering city politics, economic development, and public health. A native Clevelander, she graduated from Columbia Journalism School and the University of St. Andrews.

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