Low Medicare Reimbursement Rates Driving Provider Shortage and Negative Outcomes, Study Finds

A recent issue brief published by the Pacific Research Institute’s Center for Medical Economics and Innovation by Dr. Wayne Winegarden highlights growing concerns about low Medicare reimbursement and the impact of inflation-adjusted physician pay on patient care. “This undercompensating is leading doctors to leave the profession, dissuading medical students from entering the field, and contributing to longer wait times and diminished care quality for patients,” Dr. Winegarden says. Key findings from the study reveal:

• Inflation-adjusted Medicare payments to physicians have declined by 33% since 2001, as the Medicare Physician Fee Schedule has not been updated annually.
• The shortage of doctors is predicted to double by 2036, and medical school applications have dropped to the lowest level since 2017-18, following a decline over the past three years. This is only set to exacerbate the growing healthcare workforce shortage, leading to longer wait times, shorter appointments, and a lack of access to specialty care providers.
• More physicians are unable to sustain independent practices because Medicare reimbursement rates are higher for hospitals, as “the current system incentivizes provider consolidation and discourages doctors from staying in private practice.”
• This merging of lower-cost doctor practices into expensive hospital systems is increasing overall health care costs and limiting patient options for care.

The study offers both long-term and short-term reforms recommended by Dr. Winegarden. Immediate solutions include indexing physician payments to reflect the actual costs of running a medical practice, eliminating reimbursement disparities based on site neutrality, and advancing value-based care models. In the long term, Winegarden recommends shifting Medicare to a direct payment model that gives seniors greater control through health savings accounts. By providing patients with a $15,151 credit, patients could use that money to purchase health insurance and pay directly for their health care needs. This would allow patients and physicians to circumvent Medicare’s uneconomical pricing and set pricing that reflects value, in addition to lowering costs.

Overall, Winegarden’s recommendations point to the need for reforming physician Medicare payments to align with our economic reality, thereby enhancing patient outcomes.

To read the study from The Pacific Research Institute, click here.