Opinion | Let’s Tie Medicare Reimbursement Increases to Inflation

The year 2023 has welcomed physicians across the country with a drop in their Medicare compensation. These are the same doctors who have kept us healthy and alive — often at the cost of record levels of stress and burnout — both through COVID and before. The solution is clear, physician pay should not be another bargaining chip to achieve budget neutrality, and Congress must permanently codify physician compensation increases like every other area of Medicare spending.

The passage of the $1.7 trillion omnibus spending bill for this year will cut physicians Medicare payments by 2%. Thankfully, intense physician advocacy was able to prevent the originally slated 8.4% in cuts. However, these cuts by Congress are still a reckless measure that will further underpay our most needed physicians in our most understaffed fields. As a result, this threatens to lower Medicare access and endanger our already precarious healthcare system.

Instead, Congress should listen to the joint recommendations of the American Medical Association (AMA) and 120 other professional medical organizations released in 2022, pushing for “a baseline positive annual update reflecting inflation in practice costs, and eliminate, replace or revise budget neutrality requirements to allow for appropriate changes in spending growth.”

CMS, constrained by rules regarding deficit spending, often looks to the compensation of physicians as a source of cost savings. As a result, Medicare physician compensation has not meaningfully grown in the past decade.

This is not to say that the U.S. does not spend enough on healthcare. Despite spending more on healthcare per capita than other wealthy countries, the U.S. fails to maintain an effective healthcare system as evidenced by shortages of hospital beds and a notable decline in life expectancy during the pandemic not seen in other developed nations. While the causes behind this are numerous and complex, reducing payments to physicians is absolutely not the right answer to address this.

While physician reimbursement is not rising, the cost of everything else is. The global pandemic and supply chain disruptions pushed annual inflation rates in the U.S. to a peak of 9.1%. These rising costs are even more applicable to healthcare, as the cost of U.S. healthcare has nearly tripled since 2001, according to the Kaiser Family Foundation.

Yet, physicians did not reap any benefits of the growing bloat of healthcare costs. In fact average physician pay has not kept up with inflation, and Medicare compensation has only increased by about 10% since 2001. Therefore, doctors actually have had their pay cut — according to some estimates by around 21%. In the setting of compensation increasing for all other services, such as hospital and nursing costs, this is not just anomalous but unfair.

These cuts will have the greatest impact on the physicians who often serve as the backbone of our medical system: primary care physicians. With these cuts, primary care physicians, many of whom are small business owners, will likely find that they cannot afford to accept Medicare patients if they want to remain in business.

This would be devastating for the U.S. healthcare system. Primary care physicians save billions in healthcare spending every year through preventative care. Lack of primary care is tied to recurrent emergency room visits and pricey hospital admissions.

If primary care practices and groups who are already operating on thin margins are subjected to a 2% cut from seeing patients on Medicare, they may have no choice but to limit the Medicare patients who they see — or stop seeing them all together. This is a recipe for disaster when we already have a shortage of primary care physicians.

Ultimately, it is patients who are elderly and disabled who will be harmed by fewer physicians accepting Medicare. Younger and healthier people who mainly have private insurance may be insulated from these effects for the time being — that is until they age too.

With the expected compensation for primary care and other frontline specialties seeing a potential drop in the long term, debt-laden medical students are further disincentivized from those medical specialties where the country desperately needs physicians. Why become a doctor who mainly sees Medicare patients when you could be properly compensated for your labor by seeing patients with private insurance or those who pay in cash?

By 2034, AAMC predicts a shortage of up to 124,000 doctors — almost half of which are primary care providers. This coupled with not only a growing population but an older and sicker population will stress our healthcare system in every aspect.

With physicians and nurses either quitting or resigning due to burnout from COVID-19, we cannot and should not endure yet another shock to the system in the form of payment cuts.

While reform is desperately needed, we cannot shore up one area in our healthcare system by defunding another. Biden’s stated commitment to the Medicare program during the State of the Union address this week was encouraging. But ensuring physician compensation increases with inflation is another essential step towards a fairer and more equitable healthcare system that rewards physicians in areas of higher need.

William Zhu is a third-year medical student in Baltimore. Greg Jasani, MD, is an emergency medicine physician who works in Baltimore.