WASHINGTON — Medicare physician payment increases aren’t likely to keep up with physicians’ costs over the long run, which could eventually curtail beneficiaries’ access to care, the Medicare trustees said in a report issued Monday.
“Certain features of current law may result in some challenges for the Medicare program,” the trustees wrote. “Physician payment update amounts are specified for all years in the future, and these amounts do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases. These rate updates could be an issue in years when levels of inflation are high and would be problematic when the cumulative gap between the price updates and physician costs becomes large.”
In particular, the trustees note in a footnote on page 5 of their report, “Under MACRA, a significant one-time payment reduction is scheduled for most physicians in 2025. In addition, the law specifies physician payment rate updates of 0.75% or 0.25% annually thereafter for physicians in advanced APMs [alternative payment models] or MIPS [the Merit-Based Incentive Payment System], respectively. These updates are notably lower than the projected physician cost increases, which are assumed to average 2.2% per year in the long range.”
Beneficiary Access Concerns
That discrepancy could result in access issues for beneficiaries, a senior administration official said Monday during a briefing with reporters. In addition to physician payment rates being inadequate, “the annual price updates for most categories of non-physician health services will be adjusted downward each year [based on the] growth in economy-wide productivity … Should these price updates prove to be inadequate, beneficiaries’ access to … Medicare benefits will deteriorate over time” unless action is taken, the official said.
However, there isn’t a firm definition of what would constitute an adequate physician payment rate, the official told MedPage Today during a question-and-answer session. “I think the concern is to the extent that … [updates of] 0.25% or 0.75% do not keep up with the rate of [average annual growth in] physician costs, that …wedge may not be an issue over 1 year or 2 years or 5 years, but over a long period of time such as a 75-year window, that difference grows to be quite substantial,” the official said.
In 2026, revenues dedicated to the HI trust fund will pay 89% of the program’s costs, they said. That percentage will decline to 77% by 2046 and then will rise slowly to 83% in 2093, they said in their report summary, adding that “The health insurance fund again fails the test of short-range financial adequacy, as its trust fund ratio is already below 100% of annual costs, and is expected to decline continuously until reserve depletion in 2026.”
The health insurance trust fund is one of two Medicare trust funds; it pays for Medicare Part A benefits, which include inpatient hospital services, skilled nursing and home health services following a hospital stay, and hospice services. The other trust fund is the supplementary medical insurance (SMI) trust fund, which pays for Part B-covered physician and outpatient services as well as Part D, Medicare’s prescription drug coverage program.
Good News for Parts B and D
In contrast to the projected deficit for the HI trust fund, Medicare’s Part B and Part D programs are expected to remain solvent into the indefinite future “because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs,” the trustees said in their summary. However, “the aging population and rising healthcare costs [will] cause the SMI projected costs to grow steadily from 2.1% of GDP in 2018 to approximately 3.7% of GDP in 2038, and then to increase more slowly to 4.2% of GDP by 2093.”
Overall, the trustees projected that total Medicare costs — that is, both SMI and HI expenditures — will rise from 3.7% of GDP in 2018 to 5.9% by 2035 and to 6.5% by 2093. Although the rate of health expenditure growth has been below historical averages since 2008, “There is uncertainty regarding the degree to which this slowdown reflects the impacts of the most recent economic downturn and other non-persistent factors, as opposed to structural changes in the healthcare sector that may continue to produce cost savings in the years ahead,” they wrote.
“It is possible that U.S. healthcare practices are becoming more efficient as new payment models develop and providers anticipate less rapid growth of reimbursement rates in both the public and private sectors than has occurred during the past several decades.”
Congressional Action Urged
Action by Congress will likely be necessary to prevent future access problems, the trustees said in their report. “While the physician payment system put in place by MACRA [the Medicare Access and CHIP Reauthorization Act of 2015] avoided the significant short-range physician payment issues resulting from the SGR [sustainable growth rate] system approach, it nevertheless raises important long-range concerns that will almost certainly need to be addressed by future legislation. In particular, additional updates totaling $500 million per year and 5% annual bonuses are scheduled to expire in 2025, resulting in a payment reduction for most physicians.”
“In addition, the law specifies the physician payment updates for all years in the future, and these updates do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases,” they continued. “The trustees previously estimated that physician payment rates under current law will be lower than they would have been under the SGR formula by 2048 and will be about 30 percent lower by the end of the projection period. Absent a change in the delivery system or level of update by subsequent legislation, the trustees expect access to Medicare-participating physicians to become a significant issue in the long term.”
Trump administration officials used the report as an opportunity to continue their criticism of “Medicare for All” proposals being championed by some Democrats and independents in Congress. “At a time when some are calling for a complete government takeover of the American health care system, the Medicare trustees have delivered a dose of reality in reminding us that the program’s main trust fund for hospital services can only pay full benefits for 7 more years,” Seema Verma, administrator of the Centers for Medicare & Medicaid Services, said in a statement.
“Stripping around 180 million Americans of private coverage and adding them to Medicare won’t fix the problem,” she continued. “If we do not take the fiscal crisis in Medicare seriously, we will jeopardize access to health care for millions of seniors.”