Why the Medicare Physician Fee Schedule is Deplorable

Do you ever feel like the inflation adjustments for Medicare reimbursement don’t keep up with inflation?

You are not alone.  And you are certainly not crazy.

This has been going on for years, decades even, and it’s not only so obvious but so terrible that it’s difficult to understand how it’s possible.

The phrase “usual, customary, and reasonable” (UCR) is an infuriating oxymoron.

What’s so reasonable about taking less money for the same work year after year?

The Elephant in the Room

Medicare is optional for physicians.

You don’t have to participate in the program at all if you don’t want to.

Isn’t that nice?  It’s also unrealistic because more people are turning 65 than 25 every year. If you had told someone in Washington’s day that would be the case in 240 years he probably would have laughed at you.

Only 1% of physicians opted out of Medicare in 2023, and the reason is the proverbial pachyderm in the antechamber.

Can you really afford to turn away your single largest demographic?

Not to mention that whole Hippocratic oath thing. 

I’d venture to guess everyone reading this far has felt the obligation and responsibility to treat every patient fairly and to the best of their ability. 

The Games Medicare Plays

The Medicare Physician Fee Schedule establishes the payment rates for services provided by physicians and other healthcare professionals.

The conversion factor adjustment is an annual process that accounts for inflation, changes in medical practice, and budget neutrality adjustments required by law.

Every year on January 1st Medicare adjusts the Physician Fee Schedule.  In 2023 the conversion factor provided by legislation was 1.25%

The Consolidated Appropriations Act of 2024, signed into law on March 9, 2024, includes the update to the Medicare Physician Fee Schedule (PFS) conversion factor to 2.93%

That means all services with a date of service between January 1 and March 8 of this year are subject to the lower conversion rate, after which the 2024 signing provides for a nine-month reprieve from the lowering of the PFS conversion factor. 

Why in the hell does this happen?  It comes back to the games our federal government play, pretty much. 

There are supposed caps in place to protect the system from suffering from runaway inflation, but in the end it’s the recipients of government reimbursements that suffer.

The conversion factor does vary widely depending on specialty but for the most part 99% of physicians, particularly those in private practice suffer the most.

Cause for Hope?

There are a few possible upsides to the 2023 legislation that remain largely unchanged by the recent 2024 signing.

Centers for Medicare and Medicaid Services (CMS) have extended telehealth options that emerged during the pandemic, including access provisions for Medicare recipients from their home. CMS has also added a billing provision that allows add-on payments for complex evaluations and management at higher rates, as well as adding additional CPT codes to allow separate billing for certain care coordination and direct patient care.

We have to believe that over time the stonewalling of the budget has to come up against  the higher-minded thinking of those who understand at the end of the day the patient’s well-being and right to quality care with confidence has to win the day. 

It may not always feel that way. 

In the interim, making the best of a bureaucratic mess may boil down to increasing core efficiencies in claims billing and coordination as well as cash flow considerations to rise above the forces attempting to govern what is truly customary and reasonable.

Final Thoughts

It is going to feel, every time you sit down to think about it with your outstanding claims staring you in the face, that government programs are in the business of forcing austerity measures upon the clinicians of our country.

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