Medicare physician payment advocacy

More than 67 million people rely on Medicare for their health care coverageβ€”and on family physicians for comprehensive, continuous care.

Image of physician helping an elderly patient.

Some 20% of the U.S. population is enrolled in Medicare, whose beneficiaries make up about one of every four patients in a typical family physician’s practice. That's why the AAFP advocates to improve Medicare physician payment. Stable, appropriate compensation for primary care services means family physicians can focus on caring for Medicare beneficiaries, and that care for these patients will not be interrupted.

Unfortunately, primary care services have long been undervalued in the Medicare physician fee schedule (MPFS), which leads to further devaluation across virtually all other payers that tie their payment rates to Medicare’s or use Medicare’s valuation when setting rates.

What is the Medicare physician fee schedule?

Medicare reimburses physicians and other clinicians through the MPFS. As established by statute, this annually updated rule sets payment rates for more than 10,000 health care services, including office visits, diagnostics and surgeries.

Three components determine Medicare payment rates:

  1. Clinician work

  2. Practice expenses

  3. Professional liability insurance

  • Each of these is measured in Relative Value Units (RVUs) meant to reflect the cost and effort of a service and adjusted for geographic cost differences. The total RVUs are then multiplied by a conversion factor, which the rule updates each year to calculate physician payment.

Each service a clinician delivers is identified by a unique billing code. The fee schedule sets a baseline payment for these codes, but actual reimbursement may vary depending on factors such as the service location, provider type, and whether the service was delivered in a Health Professional Shortage Area (HPSA).

The AAFP submits comprehensive comments to CMS each year between the proposal of the following calendar year’s MPFS and when that rule is made final, reflecting input from numerous stakeholders, including the Academy.

What is budget neutrality and why does it matter?

By statute, CMS cannot raise clinician payment in one area of the MPFS without lowering payment elsewhere in the fee schedule. This means Medicare cannot appropriately pay for all of the services a patient might need, perpetuating inequities in the fee schedule.

The Academy has long urged Congress to end or adjust this mandate, which stifles investment in primary care and fails beneficiaries.

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Recent AAFP communications

Joint communications with other organizations