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 anticipated most physicians would transition to Alternative Payment Models (APMs) by 2020. However, the Centers for Medicare & Medicaid Services (CMS) has approved only a limited number of these payment models, leaving the majority of physicians unable to participate. As a result, these physicians continue to face stagnant payment rates without annual inflation adjustments.
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. 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.
Congressional leaders from both parties have vowed to reverse the March 2025 funding package cuts. Until then, however, the reduced payments remain in effect, leaving physicians and patients in limbo. Any future Congressional action must reverse these cuts and ensure long-term stability in Medicare payment systems. Failing to do so would represent a significant disservice to America’s seniors and the healthcare providers who care for them.
