Medicare Funding Woes Persist: A Look at the 2024 Spending Bill

A Stormy Forecast for Physicians: Medicare Pay Cuts, Aggressive Insurers & Rising Expenses Ahead

The year started on a challenging note with a federal spending bill that included further cuts to physician Medicare reimbursement, the latest broadside in a downward trajectory that has occurred over the last two decades. While the recently passed spending bill provides partial relief for some of the Medicare pay cuts, soaring insurance premiums and a relentless rise in operating expenses point to a tough future for healthcare practitioners.

In this two-part blog, we look at why physicians are feeling squeezed by government budget cuts on one side, and aggressive moves by insurers on the other. Recognizing that the impact will be felt most keenly by traditional fee-for-service physicians already struggling to survive, we also consider how a change to concierge medicine will enable them to remain independent and protected from the storm clouds ahead.

The New Medicare Fee Schedule Elicits Disappointed Industry Response

The 2024 Medicare Physician Fee Schedule that went into effect January 1st included a 3.37% pay cut, continuing a 20-year decline in reimbursements that has failed to keep up with a 47% rise in practice costs. It was noted that these cuts would be felt hardest by smaller, independent practices, like those in rural and underserved areas. According to the American Medical Association, when adjusted for inflation, physician payments declined 26% from 2001 to 2023 (see chart below).

On March 9th, a newly passed spending bill mitigated some of this year’s cuts by giving a 1.68% boost to the Medicare conversion factor for the rest of 2024. Industry response was tepid, describing the legislation as a “short-term patch” rather than meaningful reform. Said AMA President Jesse Ehrenfeld, MD: “While we appreciate the challenges Congress confronted when drafting the current 2024 appropriations package, we are extremely disappointed that about half of the 2024 Medicare physician payment cuts will be allowed to continue. There were many opportunities and widespread support to block the 3.37% Medicare cuts for physician services but in the end, Congress opted to reverse only 1.68 of the 3.37% payment reduction…the need to stop the annual cycle of pay cuts and patches and enact permanent Medicare payment reforms could not be more clear.”

Medical Group Management Association (MGMA) Senior Vice President Anders Gilberg went further, saying: “We are deeply disappointed with Congress’ half-hearted attempt to remedy the devastating blow physician practices were dealt by the 2024 Medicare Physician Fee Schedule. Anything less than a full reversal of the 3.4% cut is appallingly inadequate.”

What’s Next

While both inpatient and outpatient hospital payment rates have kept pace with inflation, increasing by 60% over the past two decades, physicians don’t receive an annual inflation adjustment. A number of bills have been introduced to fix the Medicare physician fee schedule by tying payment updates to inflation, such as the Strengthening Medicare for Patients and Providers Act, or modifying the budget neutrality threshold with the Provider Reimbursement Stability Act. But the odds for these long-term fixes are not great due to the cost, according to U.S. Congressman Larry Bucshon, MD, a long-time advocate for issues of importance to physicians and patients.

“It may take another one or two Congresses so stay in the fight,” he urged. “Until policy changes are enacted to address the growing chasm between Medicare reimbursement rates for physicians and the real costs of running a practice, the challenges facing America’s physicians will worsen.”

The Concierge Medicine Solution

As a concierge medicine pioneer since 2002, we have long understood the dysfunction inherent in our healthcare system, and how it has fueled the ongoing deterioration of physicians’ financial security, professional satisfaction and emotional well-being. Conversion to the Specialdocs concierge medicine model, sustained primarily through annual patient membership fees, has proven to be a powerful solution. This alternative practice model is the only one that fulfills the Quadruple Aim of value-based care: improving the health of patient populations, enhancing the patient care experience, reducing costs and improving provider satisfaction. If you are interested in learning whether you and your practice can reap the benefits of a change to concierge medicine, we encourage you to connect with us.

Ready to see if you’re an ideal candidate for the Specialdocs concierge model?

If you’re looking to gain your independence to practice your best medicine for your patients and achieve a rare work-life balance, then consider taking our brief STEP form so that we may determine if you’re a good candidate for concierge medicine. Specialdocs is here to answer all your questions and guide you every step of the way towards building your concierge practice.

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