LUGPA Policy Brief - MedPAC Recommends Linking Medicare Physician Reimbursement to Inflation

December 2024 

In a meeting in November, the Medicare Payment Advisory Commission (MedPAC) voiced its renewed support for linking Medicare’s physician payment updates to inflation. This reform, long supported by LUGPA, would address some of the longstanding issues in Medicare’s physician fee schedule (MPFS), offer increased financial stability for doctors, and counteract rising levels of healthcare consolidation and closure pressures on practices.

Inadequate Medicare reimbursements are one of the key issues private physicians face in their daily operations. The MPFS, which covers around 9,000 clinician services across various settings, lacks an inflation adjustment mechanism, making it increasingly difficult for independent physicians to manage rising costs. This has also led to access issues for many of Medicare’s 68 million beneficiaries. According to the American Medical Association, Medicare reimbursement for physician services declined 29% from 2001 to 2024 when adjusted for inflation.

In the November meeting, MedPAC commissioners explored various strategies to align physician payment updates with the Medicare Economic Index (MEI), which tracks inflation in physician service costs. Among the proposals was a Partial MEI Adjustment, which would update payments by either 50% of the MEI or MEI minus 1 percentage point, including a minimum update floor to ensure stability. Multiple commissioners expressed support for the MEI minus 1 approach, noting it offers a balanced solution that promotes stability in physician payments while exercising fiscal prudence.

Despite MedPAC’s support, there are concerns that partial MEI adjustments may still be insufficient to meet practice needs. To address this gap, LUGPA supports legislation like H.R. 2474, the “Strengthening Medicare for Patients and Providers Act,” which proposes a full MEI-based annual inflation update.

LUGPA supports efforts to secure sustainable Medicare payment adjustments that accurately reflect inflation and practice costs, promoting financial predictability for physicians. While MedPAC’s recommendations are a step forward, LUGPA echoes the call for comprehensive inflation adjustments to ensure practice viability, improve patient access, and prevent consolidation trends that diminish patient choice.

For additional information on MEDPAC’s efforts, please visit our Policy Update on MEDPAC’s ongoing efforts here: https://www.lugpa.org/index.php?option=com_content&view=article&id=488:medpac-indexing-medicare-base-payment-rate&catid=20:site-content

To view a discussion with MEDPAC Commissioner Brian Miller from our 2024 Annual Meeting, click here: Brian Miller, MD: Policy, Politics & the Future of Independent Practice | LUGPA Health Policy Forum