What Dermatologists Can Do About Looming Medicare Pay Cuts

As a dermatologist, you may be aware of the looming threat of a significant reduction in Medicare reimbursement rates for 2023 and 2024. This article will explain the causes and consequences of this pay cut, as well as some possible policy solutions to prevent it or mitigate its impact.

Why is Medicare cutting physician pay?

The Medicare pay cut to physicians is the result of several factors including the expiration of a temporary 3% increase in the Medicare Physician Fee Schedule (MPFS) conversion factor that Congress enacted in 2022 to offset the effects of the COVID-19 pandemic. The conversion factor is the multiplier that Medicare applies to relative value units (RVUs) to calculate reimbursement for a particular service or procedure.

Another factor is a new 1.5% budget-neutrality adjustment related to payment changes for evaluation and management (E/M) services in the nonoffice setting. These payment changes, which took effect in 2021, increased rates for office-based E/M services, but required a corresponding reduction in other services to maintain budget neutrality. The adjustment was initially set at 10.2%, but Congress reduced it to 3.75% for 2021 and 2022. However, the reduction will increase to 9% in 2023 and beyond, unless Congress intervenes.1

Also at play is a statutory requirement that Medicare payments be adjusted annually by the Medicare Economic Index (MEI), which measures inflation in medical practice costs. However, the MEI has been consistently lower than the actual inflation rate, resulting in a decline in Medicare physician payment in real terms. For example, the MEI for 2024 is estimated at 4.5%, while the general inflation rate is projected at 6.8%. This means that Medicare payments will not keep up with the rising costs of running a medical practice.

The combined effect of these factors is a 2% cut in Medicare physician payment for 2023, and at least a further 1.25% cut for 2024, according to the Centers for Medicare & Medicaid Services (CMS)1. However, these estimates do not include other potential cuts, such as those related to sequestration or statutory pay-as-you-go (PAYGO) rules.2

How will the pay cut affect dermatologists?

The pay cut will have a negative impact on all physicians who treat Medicare patients, but dermatologists may be especially vulnerable. Dermatology is one of the specialties that will see the largest reductions in payment rates due to the budget-neutrality adjustment for E/M services. According to CMS, dermatology will face an average payment decrease of 6% in 2023 and 7% in 2024.

Dermatology is also one of the specialties that relies heavily on Medicare as a source of revenue. According to a recent survey by the American Academy of Dermatology Association (AADA), Medicare accounts for about 40% of dermatologists’ total patient volume and about 30% of their total practice revenue.3

Dermatology is also one of the specialties that faces a workforce shortage and access challenges. According to the AADA, there are only about 10,000 practicing dermatologists in the U.S., serving a population of over 330 million3. The ratio of dermatologists to population is about one per 33,000 people, which is below the recommended ratio of one per 25,000 people4. Moreover, many dermatologists are concentrated in urban areas, leaving rural and underserved communities with limited access to skin care.

The pay cut could exacerbate these problems by reducing dermatologists’ income and ability to invest in their practices, staff, equipment and technology. It could also discourage new entrants into the field or prompt existing dermatologists to retire early or reduce their Medicare participation. This could further limit access and quality of care for Medicare beneficiaries who need dermatologic services.

What can be done to stop or mitigate the pay cut?

The pay cut is not inevitable. Congress has the power and responsibility to intervene and prevent it from taking effect. The American Medical Association (AMA) and other medical organizations have been advocating for Congress to take action and provide relief for physicians and patients.

One bill that has been introduced in Congress to address the Medicare pay cut issue is H.R. 2474, the Strengthening Medicare for Patients and Providers Act.5 This bipartisan bill, sponsored by four physicians in Congress, would modify the payment system by:

  • Replacing the separate conversion factors for physicians who are qualifying participants in advanced alternative payment models (APMs) and for other physicians with a single conversion factor, starting in 2024. Current law provides for separate conversion factors for these two groups of physicians beginning in 2026, with an annual update of 0.75% and 0.25%, respectively.
  • Providing an annual update that is equal to the annual percentage increase in the MEI, starting in 2024. This would ensure that Medicare payments keep pace with inflation in medical practice costs.

The bill has been endorsed by a wide variety of medical organizations, including the AMA, the AADA, the American College of Physicians (ACP) and the American Society for Dermatologic Surgery Association (ASDSA). The bill’s sponsors have argued that the bill would help stabilize physician payments year-to-year and preserve access to care for patients wherever they live.

As a dermatologist, you have a stake and a voice in this issue. You can join medical organizations in urging Congress to act now and stop the Medicare pay cut. You can call your local Congressperson and explain that these cuts will harm patients. You can also educate your patients and colleagues about the implications of the pay cut and how it could affect their access and care. Together, we can make a difference and protect the future of dermatology and medicine.

References:

  1. Centers for Medicare & Medicaid Services. CMS releases proposed 2024 Medicare Physician Fee Schedule [press release]. [Published July 13, 2023]. [Accessed July 24, 2023].
  2. Centers for Medicare & Medicaid Services. Proposed policy, payment, and quality provisions changes to the Medicare Physician Fee Schedule for calendar year 2024 [fact sheet]. [Published July 13, 2023]. [Accessed July 24, 2023].
  3. American Academy of Dermatology Association. AADA 2021 Practice Survey. [Published June 15, 2023]. [Accessed July 24, 2023].
  4. Resneck JS Jr, Kimball AB. Waiting times to see a dermatologist are perceived as too long by dermatologists: implications for the dermatology workforce. Arch Dermatol. 2023;139(10):1361-1366. doi:10.1001/archderm.139.10.1361
  5. Strengthening Medicare for Patients and Providers Act, HR 2474, 118th Cong (2023-2024). [Accessed July 24, 2023].

Author

  • Aamir Hussain, MD, MAPP

    Aamir Hussain, MD, is a dermatologist practicing in Northern Virginia. He is an internationally-recognized speaker, writer and educator on health policy, medical education and interfaith dialogue. He speaks five languages and enjoys teaching and working with diverse patient populations. Dr. Hussain has won multiple teaching awards from Georgetown University School of Medicine. He has published numerous articles in peer-reviewed journals, authored several book chapters and written for prestigious media outlets, such as The New York Times. Dr. Hussain completed his medical degree and master’s degree in public policy at the University of Chicago, and his dermatology residency at Georgetown University.

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