Decreasing Medicare Spending on Primary Care Physicians: Trends and Implications

A recent report in Health Affairs highlights a decrease in Medicare spending per beneficiary on primary care physicians (PCPs) from $438 in 2017 to $420 in 2023. This decline underscores the challenges faced by primary care within the Medicare system and signals a shift in expenditure allocation.

The study documents a reduction in the percentage of fee schedule spending allocated to PCPs, dropping from 18.6% in 2017 to 15.9% in 2023. Efforts to alleviate the financial strain on PCPs, including reforms implemented in 2021 to boost office visit fees and streamline documentation, have not successfully increased their share of Medicare payments.

Increases in evaluation and management (E&M) fees, critical to PCP revenue, have disproportionately benefited specialists and other non-procedural providers, with PCPs receiving only 28% of total E&M spending. Despite office visits being central to care delivery, PCPs capture a mere 29% of spending, indicating a distribution of revenue across various specialties.

Primary care physicians heavily rely on E&M codes, comprising 92.5% of their Medicare payments. Consequently, stagnation in these fee increases significantly impacts their revenue. The report notes a decline in overall Medicare spending for PCPs, from $17 billion in 2017 to $14.4 billion in 2023, while the fee schedule remains stable at approximately $91 billion.

Historically, care management codes, which compensate for non-visit activities like patient communication, have experienced limited uptake, causing doubts about new advanced primary care management codes slated for 2025. PCPs frequently underclaim for activities such as remote monitoring, exposing structural issues within the fee-for-service model.

One limitation of the study is its reliance on traditional Medicare fee-for-service claims data, excluding participants in Medicare Advantage plans. The transition of beneficiaries from traditional Medicare, decreasing from 38.9 million to 34.4 million between 2017 and 2023, may not accurately reflect the complete impact on PCP payments.

The report suggests a hybrid payment approach combining population-based payments with specific conversion factors for primary care. This strategy could address current fee structure limitations by compensating non-billable activities, thus enhancing overall PCP compensation beyond mere E&M fee adjustments.