Late last year, CMS finalized a rate cut for Medicare reimbursement to physicians. The CMS fact sheet states:
…average payout rates according to the PFS [Physician Fee Schedule] will be reduced by 2.93% in fiscal year 2025, compared to the average amount paid for these services during most of fiscal year 2024.
This sounds like a modest pay cut, but for the American Medical Association the real impact is even greater. CMS reports that the Medicare Economic Index (MEI), a measure of practice cost inflation from staff wages and salaries, office space, supplies, and malpractice,increased by 3.5%. Therefore, with reimbursements falling and practice costs rising, the actual reduction in reimbursements is closer to the 6.7% actual reduction in reimbursements.
Why does CMS do this? MedPAC notes that CMS may aim to reduce reimbursements to physicians in the traditional fee-for-service Medicare system to shift them to advanced alternative payment models (A-APM). While the reimbursement difference between FFS and A-APM physicians is only 1% in 2027, it will grow to 10.5% within several decades.
Historically, the Commission has found that Medicare beneficiaries had similar access to care relative to the privately insured, but the larger gap between MEI growth and PFS updates could negatively impact beneficiary access in the future. future.
Joe Paduda agrees. with this assessment.
