As the 118th Congress draws to a close, Congress could still enact reforms to the Medicare Physician Fee Schedule (PFS) in an end-of-the-year package. Members of both parties are acutely interested in Medicare PFS reform, but expectations must be balanced against significant pressure within the House Republican Conference to punt major legislative funding vehicles to the next Congress.
In recent years, Congress has been particularly active in mitigating cuts to the PFS while generally avoiding broader policy changes. In 2020, via the Consolidated Appropriations Act, 2021, Congress provided a 3.75% increase in payments under the PFS for Calendar Year (CY) 2021. This mitigated what was going to be a roughly 10% cut to the conversion factor for CY 2021. To further reduce strain on the PFS, Congress delayed the implementation of a new add-on code, G2211, for visits with complexity inherent to primary care and other longitudinal care until CY 2024, which had the potential to redistribute billions of dollars within the PFS in 2021.
Congress again provided payment bumps to the PFS in the Protecting Medicare and American Farmers from Sequester Cuts Act (3% payment increase for CY 2022), the Consolidated Appropriations Act, 2023 (2.5% and 1.25% increases, respectively, for CY 2023 and CY 2024), and the Consolidated Appropriations Act, 2024 (a 2.93% increase from March 10, 2024 to December 31, 2024). However, with the implementation of G2211 in CY 2024 and a lack of an annual inflationary update, budgetary pressures continue to grow within the PFS.
Currently, congressional interest in PFS reforms are centered around the following policy proposals:
- Increasing the PFS’s budget neutrality threshold.
- Mitigating the PFS payment cut finalized in the CY 2025 PFS final rule.
- Providing an annual inflationary update.
- Updating the direct cost inputs regularly.
First, increasing the PFS’s budget neutrality threshold is a popular proposal among Members of Congress; the current $20 million threshold has not been updated since the implementation of the PFS in 1992. This proposal is included in three bills under consideration in Congress: H.R. 6371, the Provider Reimbursement Stability Act (Rep. Greg Murphy (R-NC)); S. 4935, the Physician Fee Stabilization Act (Sen. John Boozman (R-AR)); and H.R. 6545, the Physician Fee Schedule Update and Improvements Act (Rep. Mariannette Miller-Meeks (R-IA)). All three bills propose to increase the threshold to $53 million and increase it every five years by the cumulative increase in the Medicare Economic Index (MEI). This proposal cleared the House Committee on Energy and Commerce on December 6, 2023, via H.R. 6545, increasing the likelihood the PFS budget neutrality threshold could be included in an end-of-the-year omnibus package.
Second, Congress is likely to mitigate the 2.83% PFS conversion factor cut articulated in the CY 2025 PFS final rule, given that Congress has enacted positive adjustments to the PFS conversion factor in recent years. This effort is included in another bipartisan bill led by Murphy, H.R. 10073, the Medicare Patient Access and Practice Stabilization Act, which would provide a 4.73% update to the PFS for 2025, mitigating the finalized PFS cut while also providing a 1.93% inflationary update (which is equal to one-half of the MEI). Action could also arise in the Senate based on a November 21, 2024 letter signed by a bipartisan group of 41 Senators to Leaders Chuck Schumer (D-NY) and Mitch McConnell (R-KY) urging action to “address the 2.8 percent payment cut and create stability in the Medicare program for our nation’s seniors.” While there is strong bipartisan, bicameral interest in this issue, action could be delayed until the next Congress. Should that happen, it would lead to questions of whether any such payment mitigation policy would be retroactive or enhanced to reflect a full year of relief as occurred for CY 2024.
Third, lawmakers are considering adjusting the PFS conversion factor based on an annual inflationary update. The PFS is one of the only Medicare payment systems without an inflationary update, and according to the American Medical Association, Medicare PFS payments have declined by 29% since 2001 when adjusted for practice cost inflation. To address this, H.R. 2474, the Strengthening Medicare for Patients and Providers Act (Rep. Raul Ruiz (D-CA)) would update the conversion factor based on the increases to the MEI. However, this proposal – as introduced – will have significant headwinds for inclusion in a year-end package because it has not advanced out of the Energy & Commerce or Ways & Means committees and would likely come with a significant Congressional Budget Office score. Such a large offset will be extremely difficult to find and agree on. Nevertheless, more modest versions of the inflationary update concept will continue to be contemplated as 2024 comes to a close, as well as into the next Congress.
Fourth, both H.R. 6545 and H.R. 6371 would require the Centers for Medicare & Medicaid Services (CMS) to update the direct cost inputs for the practice expense (PE) relative value units of clinical staff wage rates, medical supplies, and equipment costs no less than every five years. PE input updates could be welcomed for some services since many inputs have not been updated in years. CMS may find it difficult to implement this requirement, however, given historical limitations in obtaining consistently reliable PE information. Still, the bipartisan advancement of H.R. 6545 in the House makes it a possible candidate for inclusion in a year-end package.
These four proposals have garnered significant attention in recent months among Members of Congress. For example, on October 11, 2024, Reps. Miller-Meeks and Jimmy Panetta (D-CA) led a letter to House leadership urging the passage of a legislative fix to stop the proposed CY 2025 2.8% cut to the conversion factor, enact targeted reforms to statutory budget neutrality requirements, require CMS to review PE inputs no less than every five years, and provide physicians with a payment update that reflects inflationary pressures. The letter was signed by a bipartisan group of 233 Members of Congress.
Additionally, on May 17, 2024, Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) released a white paper outlining potential reforms to the PFS. The white paper describes the committee’s areas of interest for future PFS reform, including limiting budget neutrality adjustments to the conversion factor, providing for an inflationary update for PFS payments, ensuring the accuracy of PFS inputs, incentivizing participation in Alternative Payment Models (APMs), and reforming the Merit-based Incentive Payment System (MIPS). Similar to the Senate Committee on Finance, the House is also considering reforms to APMs, such as extending the APM Incentive Payment. The House is also looking at allowing late submissions of MIPS data (with a corresponding penalty).
Finally, there is the element of congressional legacies at stake for four retiring members of the GOP Doctors Caucus: Reps. Larry Bucshon (R-IN), Michael Burgess (R-TX), Drew Ferguson (R-GA), and Brad Wenstrup (R-OH). The GOP Doctors Caucus has, along with their physician colleagues on the Democratic side – Reps. Ami Bera (D-CA), Raul Ruiz (D-CA), and Kim Schrier (D-WA) – made these PFS reforms its central focus. The desire and urgency to get at least one of these reform policies across the finish line and into law will be immense.
The congressional actions to date demonstrate the significant interest in reforming the PFS; however, stakeholders are still waiting to see whether there will be a legislative vehicle for such reforms, and if so, what health care policy priorities beyond the likely Medicare and Medicaid extenders will make the cut. These questions of size and scope of an overall package are at the very top levels of congressional leadership, as well as subject to the broader desire of the incoming Trump Administration. Only a few weeks remain until Congress’s self-imposed December 20 deadline to fund the federal government and perhaps address these significant and pressing PFS payment reduction and reform issues before 2025. Otherwise, the 119th Congress and a possible massive budget reconciliation process await these PFS reform issues.
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