The hidden costs of temporary solutions to Medicare's physician payment crisis
It's become as predictable as the changing seasons: each year, doctors who treat Medicare patients face the prospect of devastating payment cuts, and each year Congress swoops in at the last minute with a "doc fix" to stop the bleeding.
Congress creates the Sustainable Growth Rate (SGR) formula as part of the Balanced Budget Act
Annual "doc fix" patches begin as SGR formula proves unworkable 5
Physicians face a staggering 24% payment cut without intervention 6
MACRA permanently eliminates SGR but creates new challenges
| Offset Category | Specific Examples | Estimated Savings |
|---|---|---|
| Medicare Payments | Freeze home health payments for one year | $8 billion |
| Drug Cost Changes | Increase Medicaid drug rebates | $10 billion |
| Beneficiary Costs | Impose Part A premium on high-income beneficiaries | $5 billion |
| Public Health | Reduce Prevention and Public Health Fund | $4 billion |
| Provider Payments | Make site-neutral payments for evaluation and management | $10 billion |
2.83% physician pay cut effective January 1, 2025 2
Reflects commitment to budget neutrality within existing Medicare structure
2.5% pay increase for Medicare physicians effective January 2026 1
Additional regulatory changes for 3.62% total projected increase
| Year | Payment as % of Private Rates | Key Legislative Action |
|---|---|---|
| 2011 | 82% | Medicare and Medicaid Extenders Act |
| 2023 | 71% | - |
| 2024 | 64% | Consolidated Appropriations Act |
| 2025 | - | 2.83% cut implemented |
Allow patients to pay doctors directly for "direct primary care" services through special accounts in both traditional Medicare and Medicare Advantage 1 .
Repeal 1997 statutory restrictions on Medicare private contracting, allowing doctors and patients to enter private agreements without submitting to Medicare 1 .
Modernize Medicare to be "patient-centric" rather than "provider-centric," giving patients control over both dollars and decisions 1 .
Each patch has made underlying structural issues more difficult to solve while creating uncertainty for physicians and patients.
Accounting maneuvers undermine public health programs and prevention initiatives, potentially increasing long-term costs.
The tension between fee-for-service and value-based models affects how care is delivered and coordinated.
"Signals matter in health care" 4 . Constant uncertainty makes it difficult to practice high-quality medicine.