Medicare Budget Neutrality Isn't Very Neutral

A new survey's findings show that physician reimbursement has per patient decreased by 2.3% between 2005 and 2021.

The Medicare budget neutrality requirement is intended to balance the program’s expenditures against its budget as new services are added and volume increases. However, the findings of a new study by the Harvey L. Neiman Health Policy Institute show that hasn’t been the case.

Researchers examined the changes in payments for Part B services for 100% of traditional Medicare beneficiaries between 2005 and 2021.

Looking at the changes in payments for Part B services for all Medicare beneficiaries between 2005 and 2021, researchers found that physician reimbursement per patient decreased by 2.3% and patients saw a 45.5% increase in services.

Additional findings showed a 9.9% increase in payments per beneficiary across all medical providers and suppliers and a 206.5% increase in payments to non-physician practitioners. Payments to limited-license physicians increased by 16.3% and those to medical suppliers increased by 44.4%.

Low Medicare reimbursement rates continue to be a pain point for providers. In March, President Joe Biden signed a spending bill which cut the Physician Fee Schedule reimbursements rate down to 1.69%.

In a statement, Joshua Hirsch, MD, Neiman Institute affiliate senior research fellow, warned that the continued decline of Medicare reimbursement may negatively impact patients’ access to care.

“Continued decline of Medicare reimbursement relative to reimbursement by private insurance incentivizes providers to favor privately insured patients,” he said. “Our study pinpoints the extent to which real decreases in reimbursement are occurring despite greater consumption of care.”

Catherine “Mindy” Chua, DO, chief medical officer of Davis Health System, previously told HealthLeaders about how the cut will affect health systems and the physician practices they own.

“The physician fees are going to the hospitals to maintain the physicians they employ. We are not going to be decreasing what physicians are paid because Medicare is cutting our reimbursement,” she said. “You are not going to keep physicians if you do that.”