Physicians Advocacy Institute
A broken federal physician payment system is one of the root causes of the U.S. health care crisis. Two decades of sustained Medicare payment cuts have driven many physicians to close their medical practices or sell to corporate entities like hospital systems, private equity firms or insurer-owned companies like Optum. An astonishing 80% of physicians are now employed by corporations, whose owners control whether their physician employees will treat Medicare patients. As costs rise and payments dive, many patients are unable to find physicians to treat them.
Conversations about the challenges patients and physicians face are necessary—but it is imperative to acknowledge dwindling Medicare payments to physicians as a root cause.
A January 2025 article from AARP Bulletin outlined obstacles to health care that patients encounter, including physician shortages and increasing corporatization of medical practices. The story, however, was incomplete without a comprehensive understanding of the ways the Medicare physician payment system contributes to these issues.
The Physicians Advocacy Institute and Texas Medical Association submitted a letter to the editor of AARP Bulletin to make clear the connection between low physician payment and the sharp declines in health care access and quality put forth in the article.
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To the editors of AARP Bulletin:
Health care is indeed in crisis, and we agree with you that access to care is of great concern. The AARP article “Where Have All The Doctors Gone?” paints a grim picture of the state of medical practice, with physicians struggling to overcome numerous pressures and patients unable to schedule an appointment with a physician—all to the detriment of care quality. This is a complex issue that demands urgent attention. But it is also a story that is incomplete without acknowledging an important structural challenge: perennial cuts in Medicare payments to physicians.
Our federal government’s broken physician payment system has lowered the physician Medicare fee schedule every year for more than two decades—even in times of high inflation, with higher labor and overhead costs. These cuts have resulted in a nearly 30% reduction in Medicare payments to physicians when adjusted for inflation. In sharp contrast, Medicare payments to hospitals have grown 60% over the same period. Private payers often follow Medicare’s lead, creating a race to the bottom in payment for physician services.
Amidst routine payment cuts and other pressures outlined in the article, it is no wonder that physicians have been forced to sell their medical practices. Of practicing physicians, nearly 80% are now employed, up from only a quarter of physicians in 2012. The buyers? Hospitals, private equity firms, insurer-affiliated organizations and other massive for-profit companies like Amazon that focus on maximizing shareholder profits, not providing the best care to patients. Unfortunately, these corporate owners’ policies impact how many employed physicians practice, undercutting their clinical decision-making and in some cases, undermining patient care. Chief among the consequences of this trend is limited access to care.
More than half of physicians who left independent practice to become employees of corporate-owned systems said declining reimbursement was a driving factor in their decision, according to a PAI study by NORC at the University of Chicago. More than half of employed physicians reported that practice ownership changes reduce their clinical autonomy, negatively affect their relationships with patients and undermine patient care. It is clear, then, why the most recent Physicians Foundation survey reported a concerning 60% of physicians suffering from professional burnout.
This underinvestment in physician services must end. Until Congress approves a sustainable overhaul of the Medicare reimbursement system that accounts for inflation, these concerning trends will continue and patient care will suffer further.
Kelly Kenney Chief Executive Officer, Physicians Advocacy Institute
Michael J. Darrouzet Executive Vice President & CEO, Texas Medical Association
**Note: The Physicians Advocacy Institute’s members include the California Medical Association, Connecticut State Medical Society, Medical Association of Georgia, Medical Society of the State of New York, Nebraska Medical Association, North Carolina Medical Society, South Carolina Medical Association, Tennessee Medical Association and Texas Medical Association.
