Medicare Must Pay Docs More, Say MedPAC Commissioners

— Two proposals discussed at the commission’s December meeting would increase physician pay

by Joyce FriedenWashington Editor, MedPage Today December 9, 2022

WASHINGTON — Medicare needs to pay physicians more, especially those who treat low-income patients, members of the Medicare Payment Advisory Commission (MedPAC) said at their December meeting.

“There’s no question that there’s high levels of physician burnout, and there’s some evidence to suggest that that’s increased quite a lot,” said Lawrence Casalino, MD, PhD, of Weill Cornell Medical College in New York City, adding that increasing payments would be a good way to show that the Medicare program cares about its clinicians.

“I don’t think it’s good for beneficiaries or the program to have a lot of burned-out physicians, and that’s what we have now. You’re working harder than ever and have more things that you don’t get paid for, and then you feel like you’re not being respected. That, I think, is the cause of burnout,” Casalino added. “I think we really do need to rethink MIPS [Medicare’s Merit-Based Incentive Payment System] and the whole way that physicians are paid.”

MedPAC members were discussing two proposals developed by MedPAC staff with commissioners’ input for inclusion in the commission’s annual report to Congress. The first proposal would raise Medicare’s physician payments by half of whatever the percentage increase is in the annual Medicare Economic Index (MEI), which tracks changes over time in physician practice costs and earning levels.

For example, “CMS currently forecasts a 2.5% increase in the MEI for 2024,” said Ariel Winter, MPP, principal policy analyst for MedPAC. “If this forecast stays the same, the update would be 1.25%. Because clinicians’ practice expenses account for about half of the MEI, this draft recommendation would ensure that payment rates keep pace with the growth of clinicians’ practice costs.”

The proposal was developed because the cost of “clinician inputs” — such as staff salaries, office rent, and supplies — is growing more rapidly than before, explained Winter. “Before 2021, the MEI typically grew by 1% to 2% per year,” he said, but it “increased by 2.6% in 2021, and it is projected to increase by 4.4% in 2022, 3.5% in 2023, and 2.5% in 2024.”

But the increases in physician reimbursement under Medicare are lagging far behind, he continued. “Between 2010 and 2024, the MEI is projected to increase cumulatively by 27%, far exceeding the 3% cumulative increase in annual updates … We are concerned about the ability of clinicians to cover their input costs given the widening gap between the MEI and updates to fee schedule rates.”

Most MedPAC commission members liked that proposal. “I do think the recommendation will at least send a message that people care and they’re paying attention, and that [physicians are] valued,” said commission member Greg Poulsen, MBA, senior vice president of Intermountain Healthcare in Salt Lake City.

But commissioner Lynn Barr, MPH, founder and executive chairwoman of Caravan Health in Kansas City, Missouri, said that amount of increase “probably isn’t going to move the needle, so I question whether that’s even worth doing, or whether it should be more targeted.” Instead, Barr suggested that “we give more of a lift to primary care — primary care is the whole basis of the entire [Medicare alternative payment model program] … I can’t tell you how many times a physician has said to me, ‘I do more but you pay me less,’ and that’s what we’re doing because we’re not compensating them for inflation. So I would be more inclined to give any and all increases to primary care.”

The second proposal was to increase pay by 15% to primary care physicians who treat low-income patients, and by 5% to non-primary care physicians who treat those patients. “We expect that the draft recommendation will maintain or improve access for beneficiaries with lower income, and we expect that the safety net payments should increase clinicians’ willingness to treat low-income beneficiaries,” said Rachel Burton, MPP, senior policy analyst for MedPAC.

The payment increase would likely not apply to physicians in the Medicare Advantage program, she said, because “the thinking here is that Medicare Advantage plans are free to make up for any lost cost-sharing when they contract with clinicians, and we don’t have good information about the size or distribution of any revenue shortfall that might exist.”

The commissioners were enthusiastic about that proposal, with Barr calling it “excellent, awesome, and well overdue.”

Commission vice chair Amol Navathe, MD, PhD, of the University of Pennsylvania in Philadelphia, said that “the work on the safety net side is critical, because it does create this clear incentive that benefits clinicians when they care for low-income Medicare beneficiaries. And [studies show] there is this concentration of clinicians who comprise this kind of safety net” for low-income beneficiaries.

Casalino said he liked the proposal, but he pointed out that physicians whose practices are owned by hospitals will get the pay increases from both of MedPAC’s proposals plus an inflation adjustment that hospitals get each year under the Outpatient Prospective Payment System, whereas that won’t be true for independent physician practices.

“So there’ll be a quite a bit higher increase for physicians employed by hospitals — and physicians are the only sector for which there is no automatic inflation adjuster,” unlike hospitals, nursing homes, and other healthcare facilities, which get such an adjustment each year, he said. “If I could wave a magic wand and make a positive change this year, it would be to eliminate” those types of differences.

Poulsen also liked the proposal but was concerned about leaving out Medicare Advantage plans. “We may actually discourage [Medicare Advantage] plans from focusing on [low-income] populations in their marketing,” he said. “And yet I think it’s this population that — maybe more than any other — can benefit from the coordination that Medicare Advantage, done in its best way, can actually deliver on.”