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New Legislation Proposes Tying Physician Reimbursement to Inflation

22 May, 2023 F.J. Thomas

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Sarasota, FL ( – Medicare rates and updates drive the workers compensation industry on multiple levels, from payer rules, to reimbursement structures for procedures and drugs. While Medicare issues corrections and changes every year, the truth of the matter is that reimbursement for physicians does not fluctuate with inflation levels as other types of services do.

In fact, while healthcare costs seem to be increasing, in July 2022 the American Medical Association (AMA) announced that the original proposed CMS conversion factor used to calculate rates was the lowest in 20 years. In an updated report from last month, the AMA announced that physician payments have declined 26 percent since 2001.

In March, the Medicare Payment Advisory Commission (MedPAC) board issued a report calling for Congress to increase Medicare physician reimbursement by 1.45 percent in 2024. MedPac advised that this should be a permanent increase in next year’s reimbursement rates and would replace the 1.25 percent temporary increase. In addition to the increase, the MedPac recommendations included a 15 percent add on for those clinicians treating low income or Medicaid populations, with a 5 percent increase for other clinicians, who currently get a 15 percent reduction.

According to the MedPac analysis, the clinician cost of treating patients, measured by the Medicare Economic Index, increased 2.6 percent in 2021 and current estimates show an increase of 4.7 percent in 2022.

Initiated by four physicians who are also US House representatives, bill H.R.2474 aims to permanently use inflation rates as a factor in calculating physician reimbursement rates that update every year. The AMA, along with an exhaustive list of medical associations, issued a formal letter in support of the legislation last month. Supporters believe that to consider inflation in reimbursement for physicians is only fair as all other services do receive an inflationary update. Additionally, the supporters believe that providing increases tied to inflation would create more financial stability for physicians, and allow providers to invest in their practices in order to provider better care.

In light of the recent exodus of healthcare providers the last couple of years, current employee shortages, and projected clinical staff shortages, recent reports indicate that access to care may not be improving any time soon. In a critical industry riddled with staffing shortages, unprecedented levels of regulations and burnout, providing a fair reimbursement methodology that takes inflation increases into consideration could potentially make the difference that is needed to improve the system.

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    About The Author

    • F.J. Thomas

      F.J. Thomas has worked in healthcare business for more than fifteen years in Tennessee. Her experience as a contract appeals analyst has given her an intimate grasp of the inner workings of both the provider and insurance world. Knowing first hand that the industry is constantly changing, she strives to find resources and information you can use.

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