Medicare cuts physician reimbursement rates by 1.25 percent, effective last March––and is set to cut rates again in 2025 by another 2.8%.
It could have been worse: Originally, the plan was to slash doctors’ reimbursement rates for 2024 by 3.37%. Congress relented under a lot of pressure from the American Medical Association and other lobbyists representing large hospital groups.
But even so, the cumulative effect of the cuts has left doctors upset—and it’s easy to see why. Providers face the same inflation pressures as everyone else, including rising costs for labor, equipment, office space, and insurance. On top of that, they have higher personal expenses, just like the rest of us.
So while many other people get cost-of-living raises to account for the last several years of higher inflation, doctors are expected to take a pay cut.
Ongoing Cuts and Their Impact
These reductions follow a trend of smaller cuts in recent years.
However, these small cuts accumulate over time, squeezing doctors’ earnings and making it harder for some to keep accepting Medicare patients.
This means it could soon become harder for Medicare patients to find a doctor willing to take them. Medicare Advantage plan care networks could become that much narrower as providers, already operating on razor-thin margins, opt out of treating Medicare patients.
In this article, we’ll break down the current Medicare payment cuts, how they could affect your healthcare, and what steps you can take to ensure continued access to the care you need.
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What Are Medicare Physician Reimbursement Cuts?
Medicare reimbursements are the payments that doctors and other healthcare providers receive for treating Medicare patients.
The Centers for Medicare & Medicaid Services (CMS) set these rates. Medicare’s Sustainable Growth Rate (SGR) formula, which dictated physician payment rates, was scrapped in 2015 and replaced with the Merit-Based Incentive Payment System (MIPS).
But despite efforts to stabilize Medicare payments, budgetary pressures have continued, resulting in periodic cuts to physician reimbursements.
There are several factors driving these reimbursement rate cuts. These include:
- Legislative caps on annual spending.
- The effects of the COVID-19 pandemic on healthcare economics.
- The ongoing inflationary pressures on the healthcare system, which are squeezing out provider reimbursements.
How Medicare Cuts Impact Doctor Availability
While a 1.25% reduction this year and 2.8% reduction in 2025 may not sound like much by itself, it could have significant consequences for both healthcare providers and Medicare patients.
These medical practices have significant fixed costs. Mortgages, lease payments, insurance premiums, maintenance costs and staff salaries remain constant, even if revenues fall.
So even a modest-sounding reduction in reimbursement rates can take a meaningful chunk out a practice’s profit margin. Especially if Medicare patients represent a significant portion of that particular providers’ patient load.
According to the American Medical Association (AMA), continuous reductions in reimbursement rates have already led to the following consequences:
- Fewer Doctors Accepting Medicare Patients. Many physicians operate on thin margins. When Medicare reimbursement rates fall below a sustainable level, some may decide to stop accepting Medicare patients altogether, limiting your access to care.
- Narrower Networks. Even if your primary doctor continues to accept Medicare, specialists may choose to drop out of Medicare networks. This makes it difficult to find specialists and receive timely care.
- Longer Wait Times. As networks narrow, you may experience longer wait times to see the doctors still accepting Medicare. This is especially problematic for time-sensitive health concerns.
These effects could particularly impact patients in rural areas or underserved communities, where healthcare access is already limited.
Learn More: Choose Your Doctor For More Healthcare Freedom
What It Means for You as a Medicare Beneficiary
As a Medicare beneficiary, the cuts to physician payments could have direct consequences for your access to healthcare services.
If doctors in your area decide to stop accepting Medicare due to reduced reimbursements, your provider network may shrink, leading to fewer choices for medical care.
As these changes take effect in the health care market, here are some things you can do to blunt their impact on you.
1. Check Your Provider Network
Check your Medicare plan’s network to ensure your doctors are still part of it. Medicare Advantage plans, in particular, have more limited networks than Original Medicare. If your plan’s network shrinks, you may have fewer doctors to choose from, and this could lead to longer wait times or needing to travel farther for care.
2. Consider Medicare Supplement Insurance (MediGap)
MediGap plans help to fill coverage gaps left by Original Medicare (Parts A and B), covering out-of-pocket expenses like copayments, coinsurance, and deductibles.
These private insurance plans work alongside Original Medicare. Here’s what to know about MediGap:
- You can choose your doctor. Medicare supplement plans don’t have limited care networks: You can use your plan with any doctor willing to take Medicare patients.
- If you do need care, your out-of-pocket costs can also be much lower compared to Medicare Advantage. Medicare Advantage plans come with potential out-of-pocket costs as high as $8,850, as of 2024.
In contrast, with a MediGap plan, your out-of-pocket costs for Medicare Part A or Part B services could be capped at as low as $240 as of 2024, if you elect Plan G or Plan N.
- MediGap plans require a monthly premium. Many Medicare Advantage plans have no premium.
- MediGap by itself doesn’t cover prescription drugs. You’ll need to buy a separate Part D plan for that.
3. Consider the Medi-Share 65+ Health Sharing Plan
Medi-Share 65+ is a Christian health-sharing program designed specifically for seniors like you who are at least age 65 and enrolled in Medicare Parts A and B.
It’s a health sharing plan, not a traditional insurance plan. It works a little differently than a MediGap policy. For example, it’s not run by a for-profit insurance corporation. Instead, health sharing plans are non-profit, voluntary associations of like-minded people who agree to help share the unexpected medical expenses of their fellow members.
Here’s what to know about Medi-Share 65+:
- These plans are much cheaper than MediGap plans, and limit your out-of-pocket costs for Medicare Part A and B covered services to just $500 per year per household.
There’s no limited network to worry about. You can use your plan with any doctor. - Like MediGap plans, Medi-Share 65+ doesn’t share costs for prescription drugs. So you’d need to buy a Medicare Part D plan for that.
- Medi-Share 65+ starts at just $99 per month for those aged 65 through 74, with guaranteed level pricing until age 75.
- There’s a six-month waiting period before Medi-Share 65+ will share costs related to pre-existing conditions. However, this waiting period is waived if you enroll during your initial enrollment eligibility period for MediGap, or if you enroll during the Medicare Fall Enrollment Period
Most of our clients find that choosing Medi-Share 65+ offers significant savings compared to MediGap plans, or and even for many Medicare Advantage plans for people who need significant health care.
If Medi-Share 65+ makes sense for you, you can self-enroll in minutes.
Or if you prefer a personalized consultation, plan comparison, and recommendation, schedule a no-cost consultation with a MediGap Advisors Personal Benefits Manager.
4. Consider Switching Medicare Advantage Plans
If doctor attrition causes your current Medicare Advantage plan to become unacceptably narrow, or you lose access to a favorite provider, you can take advantage of the Fall Open Enrollment Period to switch plans.
Medicare’s Fall Open Enrollment Period runs from October 15th through December 7th. This annual window allows you to switch to another Medicare Advantage plan or return to Original Medicare if your current plan no longer meets your needs.
What to Consider Before Switching Plans
- Take the time to compare multiple Medicare Advantage plans side by side.
- Look at factors such as monthly premiums, deductibles, copayments, and out-of-pocket maximums.
- Pay close attention to the prescription drug coverage, and any additional benefits like dental, vision, or hearing services that may be included.
- Verify that your current doctors and preferred hospitals are in-network for the new plan.
Note: If you do choose to go back to Original Medicare, and you have some preexisting conditions, know that it could be difficult or expensive to buy a MediGap plan to go along with your Original Medicare enrollment.
However, you could possibly enroll in Medi-Share 65+. That plan does normally impose a six-month waiting period before costs related to pre-existing conditions are shareable. But Medi-Share waives that rule if you sign up during the Fall Open Enrollment Period.
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5. Join a Direct Primary Care (DPC) Clinic
These are private subscription-only primary care clinics, usually independent and run by just 1-3 doctors.
With DPC, you pay a monthly membership fee and receive unlimited visits with your primary care doctor—as many as you need. Not every DPC clinic accepts Medicare-age patients, but many do.
They can’t bill Medicare for covered services. But you can receive primary care without additional copays, coinsurance, or out-of-pocket deductible costs. Be sure to ask specifically about how they handle Medicare beneficiaries when you sign up.
DPCs can be a great way to maintain access to quality care when the conventional doctors who take Medicare patients are drying up around you.
Take Advantage of Medicare Fall Open Enrollment
The Medicare Open Enrollment Period (OEP) is a critical time to reassess your Medicare coverage. Whether you’re looking to change plans due to shrinking provider networks or seeking better coverage options, this period is your opportunity to make adjustments.
Here’s what you can do during the OEP:
- Switch from Original Medicare to a Medicare Advantage plan.
- Switch from one Medicare Advantage plan to another.
- Drop Medicare Advantage and return to Original Medicare.
- Sign up for a stand-alone Part D (prescription drug) plan (you may have a late enrollment penalty if you did not maintain creditable coverage and you are outside of your initial Medicare eligibility period.
How to Protect Yourself as a Medicare Beneficiary
As a Medicare beneficiary, here’s how you can protect your access to quality healthcare despite the significant cuts in Medicare reimbursement rates:
- Stay Informed. Monitor updates from healthcare organizations and advocacy groups to understand changes that may affect your care. You should have recently gotten a letter from your plan called the “Annual Notice of Change” that details any changes to your coverage.
- Advocate for Change. Contact your elected representatives to express concerns about Medicare payment cuts, as they rely on constituent feedback for policy decisions. Tell them how physicians opting out of treating Medicare patients affects you, personally.
- Review Your Options Annually. Utilize the Open Enrollment Period each year to reassess your coverage, ensuring you have the best plan for your needs.
- Communicate with Providers. Discuss any concerns with your healthcare providers to explore alternatives and maintain access to necessary treatments.
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Final Thoughts
The ongoing changes to Medicare physician payments are part of a larger conversation about healthcare in America.
While these cuts may not seem large on paper, their ripple effects could significantly impact your healthcare access, making it harder to see the doctors you know and trust.
Your Personal Benefits Manager (PBM) can help you find the best health insurance option, even with a narrow list of in-network physicians or potential gaps in care. Ongoing changes to Medicare physician payments may limit access to your preferred doctors, but a PBM can help you review options and consider supplemental plans. Contact your PBM today for a free consultation and personalized advice on selecting the best plan for your needs.
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Whitney Kline is one of your Personal Benefits Managers at Medigap Advisors. She loves working for Medigap Advisors especially helping clients choose the right Medicare plan.