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Adequacy of Medicare Physician Fee-for-Service Payments

September 14, 2022

Summary: A survey of California physicians finds that Medicare fee-for-service payments, not keeping pace with inflation, don’t cover their costs to provide care. Big caveat: biased sampling — 88% of respondents don’t participate in FFS Medicare. Under single payer, payment rates would be negotiated with physicians, and fair for them.

California Medical Association
August 29, 2022

Deeply alarmed about the growing financial instability of the Medicare physician payment system, the California Medical Association (CMA) recently surveyed physicians about the financial health of their practices and how Medicare payment rates are impacting access to care in their communities.

Since 2001, inflation has increased by 40%, yet physician Medicare payments have only increased by 7%. Today’s Medicare payments on average lag 40% behind the cost of providing care, while hospital and nursing home payments are indexed to inflation (and as a result have increased by 60% since 2001).

According to the CMA survey results, 76% of physicians report that Medicare fee-for-service payments do not cover their costs to provide care, with 61% reporting average revenue losses between 11-50%. And, 13% of physicians even report average revenue losses over 50%.

Forty-one percent of physicians report they are considering closing their practices to new Medicare patients. And, 87% report that low Medicare reimbursement rates coupled with the high costs to practice in California are negatively affecting the ability to recruit and retain physicians in their communities.

Comment by: Don McCanne

It is important to realize that of the 843 physician practices surveyed, 88% reported that they did not participate in the Medicare fee-for-service program, presumably traditional Medicare. No mention was made of private Medicare Advantage participation. Might one suspect that there was an element of bias?

Regardless, the Medicare program does have some very major deficiencies that would require more than a nominal overhaul, especially now that it has been severely damaged through the CMS push for privatization.  In contrast, a well-designed single payer system is a vastly superior system of financing health care for all, and it should have the support of the medical profession. This survey would suggest that “Medicare for All” might be a poor choice for a label, especially if we want the support of organized medicine. But everyone needs to understand the policies behind single payer and how they would work so well for each and every one of us as individuals, including the physicians. Then we would have to join together to make sure that is the system that the government implements.

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