The start of 2025 means that Medicare’s new payment rates, finalized in regulations during the previous year, have officially taken effect. These updates are usually quite technical, but they set the stage for some of the biggest policy fights in the new Congress. This week’s Paragon Pic, derived from a recent Paragon Prognosis post, “Money Changes Everything,” displays the cumulative changes in Medicare payment rates for select providers since 2016.
As the figure shows, the clear outlier has been physician rates. Since the enactment of the Medicare Access and CHIP Reauthorization Act of 2015, they have seen several years of Medicare payment rate reductions that have led to a cumulative 10 percent decline over the past decade. Congress usually steps in to mitigate the cuts with a “Doc Fix,” but that hasn’t happened yet for 2025.
Meanwhile, the big winners have been hospitals and post-acute care facilities – on average, payment rates for these providers have gone up by 25 percent in the last 10 years. The health care system, unsurprisingly, embraces these financial incentives. For example, Medicare payment policies are a major reason why health care providers are consolidating within hospital systems. For this reason, there have been numerous proposals to control hospital and post-acute care spending, especially by using site neutrality policies to equalize rates across sites of service.
