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Medicare payment rates continue to fall short of care delivery costs

MGMA Stat - October 13, 2021

Medicare Payment Policies


Claire Ernst JD

Nearly three-quarters (73%) of medical practices report that 2021 Medicare payments will not cover the cost of delivering care to beneficiaries, according to the latest MGMA Stat poll.

That figure represents an alarming trend: A similar MGMA Stat poll in 2019 found more than two out of three (67%) medical practices reported Medicare payments did not cover the cost of delivering care.

The poll was conducted Oct. 12, 2021, and had 347 applicable responses.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) intended to stabilize physician payment rates in Medicare’s fee-for-service (FFS) system and incentivize physicians to move into value-based payment models. However, the well-intentioned program resulted in burdensome and costly reporting requirements and has not provided adequate alternative payment model (APM) participation options as originally envisioned. Additionally, under MACRA’s revised methodology for updating the physician fee schedule (PFS), Medicare FFS payments are not keeping up with inflation or the cost of running a medical practice. A statutory freeze in the annual Medicare PFS update is scheduled to last until 2026, when updates will resume at an annual rate of 0.25% indefinitely.  

Unfortunately, as we head toward CY 2022, physician practices are facing a handful of potential Medicare financial hits, stemming in part from Medicare budget neutrality requirements. When updates to E/M services and other payment policy changes went into effect on Jan. 1, 2021, the Centers for Medicare & Medicaid (CMS) finalized a decrease to the PFS conversion factor of about 10%. Due in part to #MGMAAdvocacy, Congress passed legislation that would largely prevent the CY 2022 cuts, temporarily stabilizing reimbursement for one year.

As we approach the end of the year, we look again to Congress to avert the cuts. Several members of Congress have spearheaded an effort to inject more money into the PFS to extend the current 3.75% payment adjustment increase into CY 2022. You can advocate for your medical practice by sending a template letter to your congressional members asking them to address these cuts before the end of the year.
In addition to the impending 3.75% payment cut, medical groups may also face the imposition of a 4% Statutory PAYGO sequester resulting from passage of the American Rescue Plan Act and the resumption of the 2% sequester stemming from the Budget Control Act of 2011.

MGMA will continue to be the voice of medical practices in Washington and advocate on your behalf to prevent these cuts!

For future updates on the 2022 Medicare PFS proposed rule and a variety of regulatory and legislative issues impacting medical practices, subscribe to the weekly Washington Connection email newsletter.


Our ability at MGMA to provide great resources, education and advocacy depends on a strong feedback loop with healthcare leaders. To be part of this effort, sign up for MGMA Stat and make your voice heard in our weekly polls. Sign up by texting “STAT” to 33550 or visit Polls will be sent to your phone via text message.

Additional resources:

About the Author

Claire Ernst
Claire Ernst JD
Director, Government Affairs MGMA

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