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Physicians who treat Medicare patients would get about a 1.3% pay increase in 2025 under a draft chairman's recommendation released Thursday by the Medicare Payment Advisory Commission (MedPAC).

That figure represents half of the projected 2.6% increase in the Medicare Economic Index (MEI), a measure of the costs of running a medical practice, Brian O'Donnell, MPP, senior analyst at MedPAC, explained at the commission's December meeting.

"This draft recommendation is motivated by our concerns that clinicians may not be able to absorb projected increases in input costs at current payment levels," said O'Donnell. Under current law, physicians are scheduled for no update in pay in 2025 unless Congress intervenes. This year, physicians were slated for a 4.5% cut until Congress voted to lower the cut to 2% instead.

Despite the 2025 update recommendation, current Medicare physician pay levels appear to be adequate for now, MedPAC staff members said during their presentation. For example, nearly 90% of Medicare beneficiaries said they were "very" or "somewhat" satisfied with their ability to find providers with appointments when they needed them, compared with nearly 80% among those with private insurance, according to a survey of nearly 5,000 Medicare beneficiaries conducted by the commission this past summer.

In addition, a from the National Center for Health Statistics found that 89% of physicians were accepting new Medicare patients, comparable to the 88% who were accepting new privately insured patients, said Rachel Burton, MPP, also a senior analyst at MedPAC.

"Another indicator of beneficiaries' access to care is the number of clinicians billing Medicare fee schedule," she continued. "From 2017 to 2022, the total number of clinicians billing the fee schedule grew by an average of 2.4% per year. Increase in clinicians kept pace with growth in the total number of beneficiaries enrolled in Medicare."

However, the growth varied by type of clinician, Burton said. "In particular, we saw rapid growth in the number of advanced practice nurses and physician assistants. We saw modest growth in the number of specialist physicians -- who account for over three-quarters of the physicians billing Medicare -- and there was a modest but steady decline in the number of primary care physicians. We are concerned about the decline in primary care physicians and are monitoring this closely."

In addition to the draft recommendation for the increase based on MEI, MedPAC Chairman Michael Chernew, PhD, of Harvard Medical School in Boston, also proposed that the commission "reiterate its for additional payments to support Medicare's safety-net clinicians." That recommendation called for Congress to "enact a non-budget-neutral add-on payment, not subject to beneficiary cost-sharing ... for services provided to low-income Medicare beneficiaries. These add-on payments should equal a clinician's allowed charges for these beneficiaries multiplied by 15% for primary care clinicians and 5% for non-primary care clinicians."

Commission member Gina Upchurch, RPh, MPH, of Durham, North Carolina, liked that idea, she said, "because treating these beneficiaries can generate less revenue even though the cost required to treat them is about the same." In some states, for instance, "clinicians are prohibited from collecting cost sharing amounts, either the annual fee deductible or 20% coinsurance for most beneficiaries who are dually enrolled in Medicaid and Medicare, and most states do not pay that cost-sharing on behalf of beneficiaries," she said.

And these patients can be more expensive in other ways. "For example, does somebody need transportation assistance to get there?" said Upchurch. "Are there more no-shows? I don't know that there are, but I would argue that there might be added expenditures from providers trying to help individuals with more limited incomes and assets."

Commissioner Brian Miller, MD, MPH, of Johns Hopkins University in Baltimore, said that despite the general assessment that beneficiaries have good access to care, it was worrying that some figures showed that 11% of Medicare beneficiaries had difficulty accessing specialty care. "That's a significant issue," he said. "It could imply that you have a surgical issue or procedural issue that has yet to be discovered that could impact your functional status ... I'd say that number is actually really concerning if you think about it from a beneficiary perspective."

Commissioner Jonathan Jaffery, MD, MS, of the Association of American Medical Colleges in Washington, took issue with the part of the staff presentation that discussed practice consolidation, noting that although it included a mention of hospitals acquiring physician practices, "there's not really any mention about where other areas of physician employment have gone. And in fact, hospitals are not the largest employer of physicians. We're seeing a lot in the payer side and private equity."

With private equity purchases, "they're not taking multi-specialty practices whole cloth, so it creates a whole bunch of other issues," he added.

Commissioner Gregory Poulsen, MBA, of Intermountain Healthcare in Salt Lake City, Utah, responded to a remark by O'Donnell during the staff presentation that practice consolidation "has enabled physicians to increase their negotiating power with private payers." Other factors are also driving the trend, he said.

"Surveys that I've been part of show that the majority of small practitioners believe themselves to be out of compliance with key [regulatory] requirements, and the only thing that gives them comfort is that everybody else is out of compliance too but ... [they worry about] potentially ending up with major penalties," he said. "Utilization management denials and the prior authorization games are crushing for small, unsophisticated practices. They don't have the resources to deal with huge denials." And "electronic medical records and other tools are hard to implement without large organizational resources capabilities."

Commissioner Lawrence Casalino, MD, PhD, of Weill Cornell Medical School in New York City, called the recommended extra pay bump for safety-net providers "critically important." "More broadly, we need to work on helping to create a way of paying physicians that has face value, makes sense, and that is predictable," he said. "And I think that would do a lot for morale."

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