Medicare has cut payments to doctors for 2024 by 1.25 percent due to a 3.34 percent reduction in the “conversion factor” used to calculate reimbursement rates under the Physician Fee Schedule (PFS).
The cut follows a 2 percent physician payment reduction in 2023. Medicare’s “conversion factor” is a complicated system that assigns value to a service based on the physician’s work, practice expense, and malpractice coverage.
Physicians decried the cuts, states Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association (MGMA), in a news release.
“Despite appeals from MGMA and hundreds of physician organizations, this afternoon CMS finalized a substantial reduction to the 2024 Medicare conversion factor — further increasing the gap between physician practice expenses and reimbursement rates, and dangerously impeding beneficiary access to care,” said Gilberg.
Congress requires the Centers for Medicare and Medicaid Services to be “budget neutral,” but setting payment rates can be tricky. Containing costs is important in keeping Medicare sustainable for taxpayers and future enrollees and affordable for enrollees. Setting rates too low, however, could discourage physicians from participating in the program.
Goal: Balanced Approach
The dissatisfaction in Medicare’s reimbursement setting by doctors presents an opportunity for reform argues a Paragon Health Institute report by Senior Policy Analyst Joe Albanese, published in December.
The paper notes Medicare’s payment policies have done a good job containing costs, but expenditures can rise over time due to an increase in the volume of physician services and Part B spending.
“Physician payment in Medicare continues to rely on a fee-for-service approach that incentivizes quantity of care over quality and administrative pricing that misestimates the value of health care services,” wrote Albanese.
The goal is to have a balanced approach where physician payments account for the costs of providing care, but patient expenses and government spending are under control, Albanese told Health Care News.
“Some policymakers propose adjusting rates for inflation using the Medicare Economic Index (MEI), but this could lead to excessive cost growth,” said Albanese. “It would be better to apply only a portion of the MEI and to pair this with other reforms. The most basic would be to offset higher spending by reducing Medicare overpayments in areas like outpatient hospital services and Part B drugs.”
Medicare Advantage ‘Advantage’
Medicare Advantage (MA), the alternative to Medicare’s fee-for-service option, which uses private health care companies, provides another area for reform, says Albanese.
“Using data from MA contracts would improve payment calculations since private plans have more incentive than the government to align reimbursement with the value of care and do not need to make these decisions through the political process,” Albanese said.
Albanese’s paper argues policymakers should also strengthen budget neutrality requirements by reviewing utilization estimates based on the previous year and making adjustments. There should also be oversight of new codes.
Another improvement would be eliminating or significantly reforming alternative pay models, such as the “value-based” Merit-Based Incentive Payment System, which can be subject to political whims.
“Years of tinkering with Medicare payment policy for physicians have not produced a suitable long-term approach,” wrote Albanese. “Enacting yet another government-driven approach to payment would only replicate the same problems and fail to balance access to care with fiscal sustainability.”
Revising Mindsets
MA offers lower premiums and simplicity, but the plans are under attack because the model is far different than traditional fee-for-service Medicare, says Albanese.
“The U.S. health care system has no shortage of waste that drives up costs without improving patient health,” said Albanese. “This is bad for seniors who face higher expenses and for the fiscal sustainability of public programs. MA plans can offer more generous coverage precisely because they are able to manage care more efficiently than traditional Medicare. Enrollees in Medicare Advantage also have the ability to switch plans if they don’t like their coverage.”
AnneMarie Schieber (amschieber@heartland.org) is the managing editor of Health Care News.
Internet info:
Joe Albanese, “Escaping from Medicare’s Flawed Physician Payment System,” Paragon Health Institute, December 2023
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