At the end of last year, CMS finalized a rate cut for Medicare reimbursement to physicians. The CMS Fact Sheet states:

…average payment rates under the PFS [Physician Fee Schedule] will be reduced by 2.93% in CY 2025, compared to the average amount these services were paid for most of CY 2024

This sounds like a modest pay cut, but the American Medical Association the real impact is even larger. CMS reports that the Medicare Economic Index (MEI)–a measure of practice cost inflation from staff salaries and wages, office space, supplies and malpractice–increased by 3.5%. Thus, with reimbursement falling and practice cost rising the real reimbursement reduction is closer to 6.7% real reimbursement reduction.

Why is CMS doing this? MedPAC notes that CMS may be aiming to drive down reimbursement for physicians in traditional Medicare fee-for-service in order to shift them to advanced alternative payment models (A-APM). While the reimbursement differential between FFS and A-APM physicians is only 1% in 2027, it will grow to 10.5% over multiple decades.

MedPAC writes:

Historically, the Commission has found that Medicare beneficiaries had similar access to care relative to the privately insured, but the larger gap between MEI growth and PFS updates could negatively affect beneficiary access in the future.

Joe Paduda agrees with this assessment.