Doctors' 3% Medicare Pay Cut – Could It Lead to Fewer Providers Accepting Medicare Patients?

A nearly 3% Medicare payment cut for physicians is set to take effect in 2025, raising concerns about the potential impact on patient care, particularly in rural and underserved areas. The Centers for Medicare & Medicaid Services (CMS) finalized the pay cut in early November, meaning physicians who provide Medicare-covered services will see reduced reimbursement rates. 

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Medicare Payment Cuts

Under current rules, Medicare payments for physicians do not adjust with inflation as they do for hospitals, nursing homes and other health care facilities. This results in a fixed payment structure for physician services that is slowly eroded by rising operational costs. 

As a result, many doctors feel financially squeezed, especially as their operating costs are expected to increase by an estimated 3.5% in 2025, according to CMS. The American Medical Association (AMA) has emphasized that these cuts significantly strain practices, particularly smaller ones or those in rural areas.

For the past five years, Congress has delayed or partially offset Medicare pay cuts through temporary measures, often in the final days of the legislative calendar. In 2024, lawmakers are once again discussing options to avert the cut. One bipartisan proposal, the Bipartisan Medicare Patient Access and Practice Stabilization Act, aims to stop the planned reduction and provide physicians a partial 1.8% inflationary boost.

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The Implications for Medicare Patients

Physician advocates worry that reducing Medicare reimbursements could limit patients' access to care. 

"For physician practices operating on small margins already, this means it is harder to acquire new equipment, harder to retain staff, harder to take on new Medicare patients and harder to keep the doors open, particularly in rural and underserved areas," says Dr. Bruce A. Scott, President of the American Medical Association.

Dr. Scott also stated that Medicare's plan to pay physicians less while doctors' costs continue to increase is an unsustainable trend. 

A primary concern is that providers in rural or underserved areas may feel compelled to close practices, retire earlier or reduce the number of Medicare patients they accept. Operating with lower Medicare reimbursement rates often means tighter margins for these practices. 

As Dr. Scott noted, the financial stress can be severe enough to drive some physicians out of independent practice, pushing them to seek employment in larger health care systems or retire early.

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What's Next?

Congress is expected to consider the Bipartisan Medicare Patient Access and Practice Stabilization Act and similar proposals before the end of the year. The AMA and the American College of Surgeons (ACS) hope this will lead to a longer-term solution that provides predictable and fair Medicare reimbursement rates. A bipartisan group of over 200 members of Congress supported a letter to the House of Representatives calling for a legislative solution to prevent future Medicare pay cuts.

What happens with the upcoming cut and whether Congress can pass a bill to avert it remains to be seen. However, each year of temporary fixes increases the pressure to develop a more sustainable solution for Medicare reimbursements. Many are watching to see if this year will bring new actions to prevent annual cuts and ensure that Medicare patients continue to get the care they need from their providers. 

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