MedPAC ponders future of physician pay

© Medicare Payment Advisory Commission

Advisers to Medicare policy continue poring over dollars and data to establish how physicians will be reimbursed in coming years.

The Medicare Payment Advisory Commission (MedPAC) met April 11 with discussion touching on a number of topics including approaches for updating the Medicare Physician Fee Schedule.

Staff presented a 32-page summary with background on payment rates, starting with determination of relative value units (RVUs) based on work, practice expenses (PE), and professional liability insurance. The report had Medicare payment history and projections into the 2030s. In short: There’s a lot to consider, and it’s complicated.

“This is a feast of information, maybe a firehose of things to talk about,” said MedPAC Chairman Michael E. Chernew, PhD.

Generally, Medicare recipients have had access to care and provider acceptance comparable with patients using private insurance over many years. But MedPAC commissioners have concerns about that in the future, according to the staff analysis.

Chernew asked for broad philosophical concepts about what the other commissioners thought. The MedPAC commissioners spent more than an hour taking turns commenting and asking questions about what is working, or not, with physician reimbursement as of April 2024, and what’s to come. The information will be included for deliberations in June and for future policy decisions.

“This is the beginning of a conversation, not the end of a conversation, so we’re not going to resolve everything now,” Chernew said. “I think this was a remarkably rich conversation and really quite useful.”

Concerns about payments

Principal Policy Analyst Geoff Gerhardt, MPP, and Senior Analysts Rachel Burton, MPP, and Brian O’Donnell, MPP, outlined concerns of MedPAC commissioners and staff.

• Concern 1: Growth of the Medicare Economic Index (MEI) is projected to exceed fee schedule updates by more than it did in the past. MEI growth outpaced MPFS updates by just more than 1% a year for the two decades before the COVID-19 pandemic.

But from 2025 to 2033, the average annual difference between MEI growth and the MPFS is larger: 1.7% for clinicians in advanced alternative payment models (A-APMs) and 2.1% for those not in A-APMs.

“While full MEI updates have not been necessary in the past to ensure beneficiaries maintain access to care that is comparable to the privately insured, the concern is that a larger gap between MEI growth and updates could negatively affect beneficiary access in the future,” the presentation said.

• Concern 2: Site-of-service payment differentials are a factor that encourages vertical consolidation, although the effect might be modest. Medicare generally pays more for the same service when it is performed in hospital out-patient departments compared with freestanding clinician offices. Payments for clinician work are similar across sites, but there can be large payment differences for practice expenses (PE), the presentation said.
• Concern 3: Current law has differential updates that provide weak incentives to participate in A-APMs in the late 2020s, but rates will spread and create a potentially untenably large incentive by the 2040s.

Policy approaches

The staff analysts also outlined policy approaches MedPAC could consider.

• Approach 1: Update practice expenses by the hospital market basket minus productivity. The PE conversion factor would be automatically updated each year, but the work and professional liability insurance conversion factor would not. Clinicians performing high-PE services in freestanding office settings would see the largest increases, with smallest increases for clinicians performing low-PE services and services in facility settings.

This approach would increase payment for some specialties more than others from 2024 to 2033. Internal medicine would see a cumulative 10.8% increase. Raises of 16.8% would go to clinicians in allergy/immunology and radiation oncology, while emergency medicine and licensed clinical social workers would see increases of 4.9%.

The approach would help PE payments keep pace with inflation and reduce incentives for vertical consolidation. But relatively small increases for primary care and behavioral health would hurt or make worse access and supply problems.

• Approach 2: Update payment rates by the MEI minus 1%, with a floor on annual updates equal to half of MEI. That would match the MPFS updates of the 20 years before the COVID-19 pandemic, and it would likely be more predictable and stable than past update approaches.

The approach would preserve the “relative value” concept of the fee schedule and evenly distribute update effects. But it would not address site-of-service payment differences.

• Approach 3: Extend the A-APM participation bonus for a few years. This approach includes options including repealing the Medicare Merit-based Incentive Payment System. There also is a question about how large to make the bonus.

That approach could increase clinicians’ incentives to accept Medicare patients, but many specialists would lose access to the A-APM bonus because patients in the A-APMs tend to be attributed to primary care providers.