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Senate Finance Committee tackles Medicare physician pay reform

Medicare reimburses outpatient physicians through the physician fee schedule (PFS), which determines payments based on relative value units, geographic adjustments, and a conversion factor. However, this calculation lacks an annual inflation adjustment, leading to concerns from physicians about inadequate reimbursement and potential impacts on practice sustainability. Reports from the Medicare trustees and MedPAC highlight long-term access issues for Medicare patients due to growing cost disparities. The Finance Committee is exploring policy options to better align the conversion factor with rising costs, potentially using the Medicare Economic Index (MEI) for adjustments, and improving incentives for value-based care models. They are also interested in refining the budget neutrality provision to offer more pricing flexibility. Click here for article.

  • The physician fee schedule (PFS) does not include an annual inflation adjustment, causing concerns among physicians about reimbursement rates and practice sustainability.

  • Medicare trustees and MedPAC warn that inadequate payment updates could jeopardize access to physicians for Medicare patients in the long term.

  • The Finance Committee is considering updating the PFS conversion factor based on the Medicare Economic Index (MEI) to better reflect rising costs, with suggestions ranging from 50% to 100% MEI adjustments.

  • Lawmakers are also looking at improving incentives for participation in alternative payment models and refining the budget neutrality provision to allow more flexible pricing adjustments while maintaining fiscal integrity.

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