Medicare's Latest Pay Cut Will Harm Seniors

Doctors are getting a pay cut in 2025. That's the upshot of a rule issued by Medicare earlier this month.

Patients will be the ones who pay the price for Medicare's parsimony. Seniors and younger people alike will find it harder to secure access to doctors and care.

Physician practices' finances have been under stress for years. Next year's looming 2.9% reduction in reimbursement is the fifth pay cut Medicare has proposed since 2021. After accounting for inflation, Medicare payments to doctors fell nearly 30% between 2001 and 2024, according to the American Medical Association.

The costs associated with operating a practice — like rent, utilities, medical equipment, time spent battling insurance companies over things like prior authorization, and wages for staff — haven't fallen. They're up more than 50% since 2001. Even as Medicare proposes to cut physician payments next year, it admits that doctors' expenses are set to increase 3.5% in 2025.

"To put it bluntly," AMA President Dr. Bruce A. Scott recently said, "Medicare plans to pay us less while costs go up. You don't have to be an economist to know that is an unsustainable trend."

Medicare currently covers nearly 48 million American patients. This makes it the second-largest provider of health coverage in the nation, next to Medicaid. And the Medicare population is growing. The country is aging, and more Baby Boomers are retiring.

Asking doctors to see more beneficiaries for less money is unsustainable indeed.

Some practices will close or sell to hospitals or corporate entities rather than try to make the math work with lower Medicare reimbursements.

That's already been happening in recent years. Between 2019 and 2024, hospitals and corporate entities acquired more than 44,000 practices.

Others will respond to lower payments by reducing the number of Medicare beneficiaries they see. As a result, the supply of care available to them will go down.

So seniors may have to wait longer for care. They may lose access to their doctor. Or they may not find one who will take them as a patient.

Lower Medicare reimbursements and higher operating costs will likely cause providers to demand higher payments from commercial insurers. Private insurers paid an average of 129% of what Medicare paid for physicians' services between 2010 and 2020, according to one recent analysis by the Congressional Budget Office.

That number will almost certainly go up, as a matter of financial necessity. Consolidating providers will also enjoy more negotiating leverage.

The result will be higher premiums for the privately insured. Narrower provider networks might come about, too, as insurers search for ways to limit costs.

There is, of course, still time for lawmakers to prevent next year's cuts in Medicare physician reimbursement from taking effect. A bipartisan group of lawmakers in the House introduced legislation in late October that would stop Medicare's looming reimbursement cut and provide doctors with a slight pay increase for 2025 tied to inflation.

Congress needs to take action before the end of this year. Otherwise, patients could find doctors a lot harder to come by.