Medicare Physician Payments Drop Over 33% Since 2016, Threatening Access and Sustainability

Since 2016, physicians treating Medicare patients have experienced a significant decline of over 33% in real income, driven by stagnant reimbursement rates, increasing Medicare Advantage enrollment, and rising operating costs. This financial pressure has led some health systems to stop accepting certain Medicare Advantage plans, while many more are considering such moves, creating challenges for physicians serving these patients. The employment viability of physicians treating Medicare patients is increasingly precarious, as the reimbursement gap forces many to consider reducing their Medicare patient panel or exiting the program entirely.

The difference in reimbursement between Medicare Advantage plans and traditional Medicare is contributing to a potential bifurcation in physician acceptance of patients. A "two-tier" Medicare system could emerge wherein seniors enrolled in Medicare Advantage have fewer provider options compared to those in traditional Medicare. This disparity stems partly from physicians' growing awareness of the financial drawbacks of serving Medicare Advantage populations.

Declining Medicare reimbursement trends also influence commercial insurance payment structures, as many commercial payers benchmark their reimbursements against Medicare rates. A reduction in Medicare payments can indirectly suppress commercial reimbursement rates, thereby further squeezing physician revenue and margins across the healthcare system. This dynamic limits physicians' ability to offset Medicare losses with commercial insurance revenues, leading to broader systemic financial strain.

Reduced physician participation in Medicare may also impact patient access to care. Seniors could face increased emergency department visits due to lack of available primary care providers and delayed or forgone care, resulting in poorer health outcomes and higher overall healthcare expenditures. Deferred treatment of chronic conditions could escalate complications, adversely affecting patient quality of life and mortality rates.

Looking ahead, continuation of current trends threatens the financial sustainability of physicians and healthcare providers reliant on Medicare reimbursements. Specialty-specific impacts will vary, but hospitals are already experiencing negative margins on Medicare services. Without adjustments, declining Medicare rates risk eroding operating margins further, potentially compromising the viability of care delivery to the aging population over the next decade.