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Physicians’ financial struggles from low Medicare reimbursement rates and high student debt threaten care quality and access, requiring urgent policy action.

Financial challenges exist for people in all professions, and medicine is no exception. Physicians encounter major obstacles when dealing with declining Medicare reimbursement and elevated student loan interest rates. These obstacles sometimes result in physicians experiencing serious financial difficulties, which may adversely affect their quality of care, negatively impacting healthcare delivery and access.  According to an article in the American Journal of Managed Care, the Centers for Medicare and Medicaid Services (CMS) is implementing significant changes to the Medicare Physician Fee Schedule (MPFS). This, in turn, poignantly alters the financial state of physicians. Aimed at amending historical systemic imbalances and improving the relationship between the value of provided services with reimbursements, CMS’s changes are particularly impactful on cognitive evaluation and management (E&M) services.

The article authors note that in 2021, CMS significantly altered the fee schedule by markedly raising the work relative value units (RVUs) for most E&M codes and acknowledging the majorly undervalued existence of E&M services (ranging from 14% to 28%) as compared to procedural codes. The authors of the article add that increasing the RVUs for services like diagnosis, treatment planning, and care coordination allowed CMS to more fittingly compensate physicians while making considerate decision-making more of a primary concern than procedural quantity.

With an anticipated $10-12 billion 4-year rise in E&M payments, the aforementioned 2021 CMS-driven alterations were merely the start of a multi-phase plan. CMS is currently adjusting the scaled conversion factor employed to determine pay rates for services not experiencing a rise in RVUs, suggesting a 3.4% conversion factor reduction designed to eradicate any financial deficit that remains from rising E&M but still safeguarding their higher valuations. Ironically, this rebalancing plan yields unbalanced results amongst the medical specialties. For instance, while family medicine might see a near 2% rise in permitted Medicare payments, fields like anesthesiology might confront an 8% reduction in Medicare reimbursements.

According to the article authors, this discrepancy occurs due to the fact that primary-care physicians and other cognitive specialists obtain a greater percentage of their revenue from E&M billings, as opposed to proceduralists like radiologists and anesthesiologists. As such, before considering the conversion factor reduction, rising E&M payments positively affect primary-care physicians notably more than proceduralists.

Along with Medicare reimbursement rates, skyrocketing student loans significantly affect the financial well-being of physicians. According to the American Association of Medical Colleges, the median debt burden for medical graduates in 2022 went up to $200,000. As a result, a great number of new doctors depend on federal loan programs to manage their sizeable student loan debts. What’s more, growing inflation has prompted a significant rise in interest rates for new federal student loans, jumping from 5.3% for 2021-2022 to 7.2% for 2023-2024 graduates. The Association of American Medical Colleges notes that for a standard $200,000 debt load repaid over 10 years, upwards of $24,000 in added interest costs exists. Furthermore, soaring borrowing rates increase the financial pressures felt by young physicians already dealing with compressed earnings while in their residencies.

The American Medical Association stresses just how crucial it is to address the rising financial strains felt by physicians facing reimbursement volatility and increased education costs. If substantial financial aggravation continues for physicians, it could potentially keep medical doctors from pursuing careers in healthcare, particularly those from low-income backgrounds. This, in turn, could elongate inequities both in specialties and in the geographic workforce landscape, worsening access gaps to one-fifth of the US population living in underserved rural and urban communities.

Bottom line, the article authors stress the urgency of policy interventions to address payment disparities and student debt, to keep the US healthcare system thriving. Ignoring these financial strains means that the healthcare system runs the risk for exacerbating workforce shortages and compromising the quality and accessibility of care. Future action must consider rebalancing fee schedules, protecting against specialty disparities, and broadening education-financing options.