All of medicine stands behind these 4 crucial Medicare pay fixes

With another physician pay cut lurking, the AMA spearheaded a letter to congressional leaders that all 50 state medical societies and 76 other health organizations joined in signing. Here's what must change.

By: Tanya Albert Henry, Contributing AMA News Writer

What’s the news:

With physicians yet again facing a Medicare payment cut, the AMA spearheaded a letter (PDF) to congressional leaders that all 50 state medical societies and 76 other health organizations joined in signing.

Focusing on four key pillars, the letter urges lawmakers to pass legislation—much of it already pending before Congress—that would overhaul how physicians are paid and explains why they physician community widely supports these reforms.

Why it matters:

If Congress doesn’t do something, physicians will yet again face a Medicare pay cut in 2025, making it difficult for them to sustain their practices as the cost of doing business continues to rise.

The 2025 Medicare physician payment schedule calls for a 2.8% cut for physicians. If Congress doesn’t intervene, the cut would take effect Jan. 1.

This marks the fifth straight year that physicians have faced additional payment reductions and it comes at a time when the Centers for Medicare & Medicaid Services (CMS) projects the Medicare Economic Index (MEI) to increase 3.6% in 2025.

It all comes on the heels of estimates that the MEI increased by 4.6% in 2024, when Medicare physician payment rates were reduced by 1.69%. When adjusted for inflation, Medicare physician payment has declined 29% (PDF) between 2001 and 2024.

“This series of annual payment reductions and the lack of an inflationary update continue to threaten the viability of physician practices, add considerable burden to the practice of medicine, and stifle innovation,” says the joint letter. Physicians are the only health care professionals that don’t receive an annual Medicare payment increase tied to inflation.

The 2024 Medicare Trustees Report warns that if Congress doesn’t change the delivery system or level of payment update the nation can expect that “access to Medicare participating physicians to become a significant issue in the long-term,” the letter notes.

The AMA and the 126 other organizations that signed the letter outlined these four things Congress can do to make the situation better:

1. Enact an annual, permanent inflationary payment update in Medicare, tied to the MEI.

Physician are the only group to deliver Medicare patients health care who don’t receive annual updates tied to inflation – hospitals and other providers all receive payment based on inflation. The bipartisan “Strengthening Medicare for Patients Providers Act,” would provide physicians with an annual Medicare payment update tied to the MEI.

The letter encourages “swift passage” of the bill, H.R. 2474, because it “would stabilize physician payments, allowing for long-term planning, investment in practices and the delivery of high-quality, patient-centered care.”

2. Pass budget-neutrality reforms.

The Medicare physician pay schedule has statutory-required budget neutrality requirements that must be modified. The bipartisan “Provider Reimbursement Stability Act” bill would reform the Medicare payment schedule budget neutrality policies by—among other things—raising the threshold that triggers a budget neutrality adjustment form $20 million to $53 million and increase it every five years by the cumulative increase in the MEI.

The $20 million threshold was established in 1992 and hasn’t been updated since. Raising the budget-neutrality threshold would allow for greater flexibility in determining price adjustments for services without triggering across-the-board cuts. The bill also would require CMS to reconcile inaccurate utilization projections based on actual claims and prospectively revise the conversion factor accordingly. The letter urges congress to pass the bill, H.R. 6371, “to achieve greater stability and predictability” to the Medicare physician pay schedule.

3. Overhaul the Merit-based Incentive Payment System (MIPS).

4. Modify alternative payment models (APMs).

Read the full article for details on the other two fixes. ??

?? Related coverage: Want to know more about the AMA's Fix Medicare now campaign and the issues?

• Guide: Learn Medicare basics
• Data: Physician payment not keeping up with inflation
• Podcast: Trends in Medicare reimbursement audits
• Video: Medicare advocacy progress report

Speak up for Medicare reform

The need for Medicare physician payment reform has never been greater. The AMA shows how the current system is unsustainable—and how you can urge Congress to support solutions.

The AMA is leading the charge to?reform the Medicare payment system, which is the?AMA’s top advocacy priority.

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