In a disappointing turn of events, Congress failed to prevent a 2.8% Medicare Physician Fee Schedule payment cut for 2025, allowing it to take effect on January 1. When factoring in medical practice inflation, the cut amounts to a 6.3% reduction in real terms, further straining the nation’s healthcare system.
The payment reduction stems from the expiration of a temporary 2.93% Congressional update to the conversion factor at the end of 2024 and the ongoing freeze on fee schedule inflation updates until 2026 under the Medicare Access and CHIP Reauthorization Act (MACRA).
"When Congress enacted MACRA in 2015, it only provided payment updates through 2020, inaccurately assuming that all physicians would be in Alternative Payment Models by then, according to the California Medical Association. Unfortunately, CMS has since only approved a handful of payment models, leaving most physicians unable to participate in value-based APMs, while at the same time being denied annual inflation updates.
While a bipartisan agreement to stop the cuts seemed within reach, Congressional leaders ultimately scaled back the year-end legislation adopted on December 20, 2024. This bill, which funds the government only through March 14, 2025, extended pandemic-era telehealth waivers until March 31 but failed to address the Medicare payment cuts.
California physicians, like their colleagues nationwide, are expressing outrage, and CMA continues to urge Congress to take action to reverse the cuts. The cuts come when many practices are already struggling to stay afloat. The impact will likely force physicians to retire early, limit the number of Medicare patients they serve, or close their doors altogether, ultimately reducing access to care for millions of Americans.
Many Congressional leaders in both parties have since vowed to reverse the cuts in the March 14, 2025, legislative package to keep the government funded. But for now, the cuts are in effect and claims are being paid at the lower amount until Congress intervenes.
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