This white paper warns that declining Medicare physician reimbursements are undermining the stability of the U.S. healthcare system, leading to practice closures, burnout, and reduced access to care, particularly in rural and underserved areas. It points to structural flaws such as budget neutrality, the lack of inflation adjustments, and mounting administrative burdens that are worsening workforce shortages. The paper calls for urgent, collaborative reform and stronger physician advocacy to restore Medicare's role as the steady anchor of American healthcare.
The Anchor That Steadies the Ship for Us All Medicare was built as a boat to carry Americans safely through illness and aging. Its anchor, physician reimbursement, once kept the boat steady. Today, that anchor is dragging.
Declining payments, rising administrative demands, workforce shortages, and policy gaps are pulling the boat off course. Because Medicare sets the benchmark for nearly every other payer, its reimbursement rate shapes the stability of the entire healthcare ecosystem.
When payments are fair and sustainable, physician practices can keep their doors open, invest in innovation, and deliver the high-quality care patients deserve. But as reimbursements continue to erode, more practices face closure, burnout intensifies, and patients, especially in rural and underserved areas, lose access to care. Adjusted for inflation, Medicare physician pay has fallen sharply, weakening morale, discouraging efficiency, and straining the patient-physician relationship. Without meaningful reform, physicians cannot remain the stabilizing anchor Medicare was designed to rely on. We are all passengers on this boat. Every one of us will depend on it at some point in our lives, which means we all share a responsibility to keep it steady and its anchor strong.
The Reimbursement Challenges Dragging the Anchor Medicare physician reimbursements have steadily eroded, weakening the financial foundation of clinical care. Adjusted for inflation, Medicare physician pay has declined 33 percent since 2001 , while practice costs have risen 59 percent , and 2025 marks the fifth straight cut to the conversion factor.
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Medicare anchors the payment structure for most payers. Commercial and Medicaid rates often mirror or benchmark against Medicare’s fee schedule, so every Medicare cut triggers an across- the-board reduction in physician payment.
Key structural flaws continue to erode physician reimbursement:
• Budget Neutrality : CMS must offset any payment increase with a cut elsewhere, creating instability and pitting specialties against one another. Specialty societies have urged Congress to end budget neutrality , but progress remains limited , especially amid disruptions such as the 2025 government shutdown. • No Inflation Indexing : Unlike hospital payments, physician rates are not tied to inflation . The Medicare Economic Index (MEI) tracks rising costs but is not fully applied . • Medicaid Shortfalls : Medicaid often reimburses below the cost of care , far less than Medicare or commercial payers, forcing many physicians to limit the number of Medicaid patients they can serve. Impact: Eroding reimbursement has created financial instability, driven independent practice closures, and reduced access to care, especially for Medicare and Medicaid patients and those in rural or low-income communities. Administrative Overload Administrative demands remain one of the greatest barriers to patient-centered care. Physicians spend over seven hours each week on paperwork, documentation, and compliance. For every hour with patients, nearly two are lost to clerical tasks.
Key contributors include:
Prior Authorization : A major source of frustration and delay that diverts time and resources from patient care. ➢
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CMS plans to pilot the WISeR Model in 2026 in six states, using AI to automate parts of this process. While promising, it could also add new complexity .
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• EHR and Compliance Requirements : Documentation, reporting, and certification mandates often exceed their purpose, forcing physicians to focus on screens and checkboxes instead of patients .
Impact: Each new administrative mandate pulls physicians further from patient care, replaces care with paperwork, and erodes morale across the system.
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Physician Workforce at Risk The healthcare workforce is nearing a breaking point, and the patient safety net has been frayed to the point of failure . Shortages across nearly every specialty threaten access, quality, and continuity of care .
1 in 5 physicians are considering leaving medicine in the next few years.
• Physician Shortages : By 2034 , the U.S. could face a shortfall of up to 124,000 physicians , including 48,000 in primary care . • Nursing Deficit : By 2032 , retirements are projected to outpace new graduates , leaving a gap of more than 362,000 nurses . • Burnout and Disengagement : Administrative overload , stagnant pay, and misaligned incentives are fueling burnout . Many physicians are “ quiet quitting ,” focusing only on patient care and stepping back from other roles. New visa fees and other restrictive policies could further strain the workforce, deepening shortages and limiting access to care. Impact: A policy meant to steady the ship has instead opened new leaks, deepening the challenges facing physicians and threatening access to care. The No Surprises Act (NSA) & Independent Dispute Resolution (IDR) Process
The NSA and its IDR process, though well-intentioned, have left many physicians facing new obstacles that threaten the stability of their practices and care continuity.
For more NSA IDR resources, click for A to ZPAC blogs and Zotec Answers podcast episodes.
Impact: With fewer hands at the helm, the healthcare system grows harder to steer, and every lost clinician erodes our capacity for stable, reliable care.
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Artificial Intelligence (AI) Outpacing Policy AI is a powerful current rapidly transforming medical imaging , diagnostics , and scheduling, improving efficiency and accuracy, yet evolving faster than the policies meant to guide it.
Regulatory Gaps : Limited federal oversight and inconsistent state policies create challenges for
physicians licensed in multiple states and for patients seeking care across state lines.
Click the logo to learn more about AI and the future of breast cancer screening.
Governance Risks : Without clear standards and physician leadership in governance, AI may be deployed in ways that prioritize cost reduction over clinical judgment , threatening quality and patient trust.
Click the icon to learn more about AI governance.
Impact: AI represents both opportunity and risk, the storm gathering on the horizon. Without proactive policy and physician involvement, Medicare and the broader healthcare system may drift off course.
Why It Matters: Patients and Physicians Drift Together
This is not abstract policy. It is personal.
• When reimbursement fails , practices close .
• When administrative burdens grow , patient time shrinks .
• When burnout rises , care continuity suffers .
These challenges are not insurmountable, but they demand urgent, collective action to steady the system that anchors American healthcare.
For those ready to take action: explore our Healthcare Advocacy Toolkit for actionable steps, stay informed with our A to ZPAC blogs, and review our monthly wrap-up newsletters to follow the latest policy developments.
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