Finally, the Senate is striking the right notes on Medicare reimbursement

The recent Senate Committee on Finance white paper on Medicare Part B provider payment reform takes a thoughtful and measured approach. 

Working in a bipartisan fashion, the paper establishes their goals for the Medicare Physician Fee Schedule and provides context for the challenges facing the fee schedule. Instead of declaring a preferred solution, they are engaging the community by asking questions of stakeholders. 

Among other items, the physician fee schedule specifies payment to Medicare providers for healthcare services including office-based care. Unfortunately, it has long been plagued with problems, with medical organizations, including the American Medical Association, annually ranking reform of the Medicare Physician Fee Schedule as a top advocacy goal. 

Not only are Medicare providers dissatisfied, but Congress also seems frustrated with the physician fee schedule and the now annual tradition of enacting short-term provider relief.  

The committee, which has jurisdiction over the Medicare program, aims to protect beneficiaries’ access to high-quality care while preserving independent medical practices. They aim to align incentives, where clinicians provide high-value care, reduce wasteful spending and improve care coordination. 

As opposed to another temporary, short-term patch, the committee is interested in reforms that create long-term stability for Medicare. 

The white paper notes that physicians directly influence much of overall healthcare spending. Despite providers’ central role in health care delivery, the Medicare system has selectively underfunded their participation in the program. 

The Congressional Budget Office estimates that spending on the physician fee schedule will only increase by about 17 percent by 2033. Other segments, including hospital inpatient care, hospital outpatient care, group plans (including Medicare Advantage) and Part D (prescription drug coverage) will experience greater growth and will each be larger than physician fee schedule spending. 

One main reason for this underfunding is that, unlike other Medicare programs, the physician fee schedule is not automatically adjusted for inflation. The conversion factor, the payment rate used in the physician fee schedule, is lower today than in decades, dating back to the 1990s. It is 13 percent lower than in 2001, without considering the effects of inflation. 

On the other hand, the white paper states that “overall physician compensation has exceeded inflation,” citing a report from MedPAC. But MedPAC’s comments were nuanced. 

For example, they note that since the volume and intensity of exams have risen, spending per beneficiary has risen. However, because delivering more care is associated with greater costs to providers, “the growth in fee schedule spending … should not be interpreted as profit growth.” 

Nonetheless, the points made by the committee and MedPAC that payment rates must be contextualized with overall spending are well taken.  

As the committee considers policy options, they should begin with three fundamental principles aligned with their goals. 

First, access to high-quality care is paramount and is based on the patient-physician relationship. Next reforms should provide financial stability for Medicare providers. Anything short of a complete inflation adjustment to the conversion factor is insufficient and will simply kick the can down the road. Like other segments of Medicare, a standard, automatic inflation adjustment is required and necessary to preserve independent medical practice. 

Similarly, outdated budget neutrality requirements are well-intentioned, but ultimately, counterproductive because they force illogical cuts without consideration of the downstream impacts on patient care or expense. 

As an example, interventional radiology, a specialty that performs minimally invasive procedures, frequently as an alternative to higher-cost care, received the biggest cut in the 2024 physician fee schedule. While the cut was not an attempt to disincentivize interventional radiology, it was instead an unintended consequence of support for other areas in the physician fee schedule and budget neutrality requirements, the net effect is the same. 

(Full disclosure: I am on the board of the Radiological Society of North America and am employed by a national radiology practice.)

Finally, fiscal responsibility is necessary. The committee will be forced to make choices about where we as a nation should invest our dollars. Additional resources for the physician fee schedule must come from somewhere. 

To help limit unnecessary or wasteful healthcare spending, physician fee schedule reform must include value-based payment reform. The Quality Payment Program has had some successes, but, as noted in the white paper, its Merit-based Incentive Payment System has become a burdensome expense that the committee, “is considering repealing or scaling back.” Many providers would welcome this.

In its place, a new, or at least heavily reformed program should be instituted that is patient-centric, specialty-specific and balanced across the specialties, rewarding practitioners of high-value care, incentivizing investment in the elements necessary to deliver such care and is not burdensome. 

With the white paper, the Senate Finance Committee has taken an encouraging step toward meaningful Medicare reform. Such reform is necessary and long overdue. The physician community looks forward to collaborating with Congress to help sustain the Medicare program for future generations.  

Richard Heller, M.D., MBA, FACR is the senior vice president of Health Policy at Radiology Partners and the Radiological Society of North America’s board liaison for public information and corporate relations.