Medicare spending in 2020 hit hard by pandemic: report

Medicare spending down due to patients’ COVID-related concerns.

A recent report on Medicare spending in 2020 confirms what many physicians already knew anecdotally: it was down substantially, largely due to patients’ COVID-related concerns.

The report, commissioned by the American Medical Association, found that claims for services covered under the Medicare Physician Fee Schedule (MPFS) totaled $82.9 billion in 2020. That was a 12.7% drop from the previous year’s total of $95 billion, and 14% below the year’s expected level of $96.9 billion.

“Physicians experienced a significant and sustained drop in Medicare revenue during the first 10 months of the pandemic,” AMA President Gerald E. Harmon, M.D. said in a news release accompanying the report. “Medical practices that have not buckled under the financial strain continue to be stretched clinically, emotionally and fiscally as the pandemic persists.”

The report’s release comes as the AMA and other physician groups are lobbying Congress to head off across-the-board cuts in Medicare payments that could total nearly 10% beginning in 2022. Those reductions would come from:

  • a 3.75% cut in the Medicare Physician Fee Schedule (PFS) conversion factor,
  • a 4% cut resulting from the American Rescue Plan Act, passage of which triggered a budget sequester required by the 2019 Pay-As-You-Go Act, and
  • reinstatement of the 2% Medicare sequester that has been in place since passage of the 2011 Budget Control Act

“As struggling physician practices face a difficult and precarious road to recovery, now is the time for financial stability in Medicare,” Harmon said in the statement.

The largest dropoff in actual MPFS spending relative to expected spending—32%--occurred during the second quarter of the year, but was also down by 9% and 10%, respectively, during the third and fourth quarters. The first quarter saw a 2% decrease.

Broken down by specialty, the biggest actual-to-expected decline was in physical occupational therapy, which had a gap of 28%. That was followed by occupational therapy (26%) and otolaryngology (24%).The differences for family medicine, internal medicine and general practice were 12%, 10% and 7%, respectively.

The sole exception to the trend was telehealth, which saw its share of MPFS spending jump from 0.1% pre-pandemic to 5% in 2020 thanks to Congress’s loosening of restrictions on telehealth fee-for-service visits. Clinical social work had the highest percentage—50%—of visits conducted via telehealth during the year, followed by clinical psychology (38%) and psychiatry (31%.) For family medicine, general practice, and internal medicine the percentages of telehealth visits were 10%, 9% and 8%, respectively.