Health care spending in the United States remained relatively flat from 2019 to 2021 and only increased 2.7% in 2021, reaching $4.3 billion or $12,914 per person. Physician services account for 15% of health care spending (Figure). Relative value units (RVUs) signify the time it took a physician to complete a task multiplied by a conversion factor (CF). When RVUs initially were created in 1992 by what is now the Centers for Medicare &Medicaid Services (CMS), the CF was $32.00. Thirty-one years later, the CF is $33.89 in 2023; however, it would be $66.00 if the CF had increased with inflation.1 If the proposed 2024 Medicare physician fee schedule (MPFS) is adopted, the payment formula would decrease by 3.4% ($32.75) relative to the 2023 fee schedule ($33.89), which would be a 9% decrease relative to 2019 ($36.04).2,3 This reduction is due to the budget neutrality adjustment required by changes in RVUs, implementation of the evaluation and management (E/M) add-on code G2211, and proposed increases in primary are services.2,3 Since 2001, Medicare physician payment has declined by 26%.4 Adjustments to the CF typically are made based on 3 factors: (1) the Medicare Economic Index (MEI); (2) an expenditure target performance adjustment; and (3) miscellaneous adjustments, including those for budget neutrality required by law. Despite continued substantial increases in practice expenses, physicians’ reimbursement has remained flat while other service providers, such as those in skilled nursing facilities and hospitals, have received favorable payment increases compared to practice cost inflation and the Consumer Price Index.4
The United States spent $4255.1 billion on health care in 2021. Where did it all go? Values presented are in millions of dollars. Data from the Centers for Medicare & Medicaid Services.1
The CMS will not incorporate 2017 MEI cost weights for the RVUs in the MPFS rate setting for 2024 because all key measures of practice expenses in the MEI accelerated in 2022. Instead, the CMS is updating data on practice expense per hour to calculate payment for physician services with a survey for physician practices that launched on July 31, 2023.5 The American Medical Association contracted with Mathematica, an independent research company, to conduct a physician practice information survey that will be used to determine indirect practice expenses. Physicians should be on the lookout for emails regarding completion of these surveys and the appropriate financial expert in their practice should be contacted so the responses are accurate, as these data are key to future updates in the Medicare pay formula used to reimburse physicians.
Impact of Medicare Cuts
The recent congressional debt limit deal set spending caps for the next 2 fiscal years. Dermatology is facing an overall payment reduction of 1.87% (range, 1%–4%).2,3 The impact will depend on the services offered in an individual practice; for example, payment for a punch biopsy (Current Procedural Terminology [CPT] code 11104) would decrease by 3.9%. Payment for benign destruction (CPT code 17110) would decrease by 2.8%, and payment for even simple E/M of an established patient (CPT code 99213) would decrease by 1.6%. Overall, there would be a reduction of 2.75% for dermatopathology services, with a decrease of 2% for CPT code 88305 global and decreases for the technical component of 1% and professional component of 3%.2,3
Medicare cuts have reached a critical level, and physicians cannot continue to absorb the costs to own and operate their practices.4 This has led to health market consolidation, which in turn limits competition and patient access while driving up health care costs and driving down the quality of care. Small independent rural practices as well as those caring for historically marginalized patients will be disproportionately affected.
Proposed Addition of E/M Code G2211
In the calendar year (CY) 2021 final rule, the CMS tried to adopt a new add-on code—G2211—patients with a serious or complex condition that typically require referral and coordination of multispecialty care. Per the CMS, the primary policy goal of G2211 is to increase payments to primary care physicians and to reimburse them more appropriately for the care provided to patients with a serious or complex condition.2,3 It can be reported in conjunction with all office and outpatient E/M visits to better account for additional resources associated with primary care, or similarly ongoing medical care related to a patient’s single, serious condition, or complex condition.3 Typically, G2211 would not be used by dermatologists, as this add-on code requires visit complexity inherent to E/M associated with medical care services that serve as the continuing focal point for all needed health care services and/or with medical care services that are part of ongoing care related to a patient’s single serious condition or a complex condition.2,3
Initially, the CMS assumed that G2211 would be reported with 90% of all office and outpatient E/M visit claims, which would account for a considerable portion of total MPFS schedule spending; however, the House of Medicine disagreed and believed it would be 75%.2,3 Given the extremely high utilization estimate, G2211 would have had a substantial effect on budget neutrality, accounting for an estimated increase of $3.3 billion and a corresponding 3.0% cut to the CY 2021 MPFS. Because of the potential payment reductions to physicians and a successful advocacy effort by organized medicine, including the American Academy of Dermatology Association (AADA), Congress delayed implementation of G2211 until CY 2024. Modifier -25 cannot be reported with G2211. The CMS revised its utilization assumptions from 90% of all E/M services to an initial utilization of 38% and then 54% when fully adopted. The proposed 2024 payment for G2211 is an additional $16.05.2,3
Advancing Health Equity With Healthcare Common Procedure Coding System G Codes
The CMS is proposing coding and payment for several new services to help underserved populations, including addressing unmet health-related social needs that can potentially interfere with the diagnosis and treatment of medical conditions, which includes paying for certain caregiver training services as well as payment for community health integration services.2,3 These are the first MPFS services designed to include care involving community health workers, who link underserved communities with critical health care and social services in the community. Additionally, the rule also proposes coding and payment for evaluating the risks related to social factors that affect a patient’s health, such as access to affordable quality health care, that can take place during an annual wellness visit or in combination with an E/M visit.2,3 As dermatologists, we should be familiar with this set of G codes, as we will likely use them in practice for patients with transportation needs.