Malpractice Premiums Rise but Medicare Reimbursement Doesn’t

These are financially challenging times for physicians. Payors are reimbursing less. Inflation is at a four-decade high. And the costs of practicing medicine keep rising. That includes medical malpractice insurance rates, which a newly published American Medical Association (AMA) report finds are climbing at rates not seen since the turn of the century. Adding to the difficulties are an influential panel’s recommendations against raising Medicare Physician Fee Schedule rates in 2023.

AMA Report Documents Rise in Malpractice Rates

After nearly a decade of fairly stable rates, year-to-year medical liability insurance premiums have increased significantly in each of the past three years, according to the AMA Policy Research Perspectives report, which is based on data published in the Annual Rate Survey Issue of the Medical Liability Monitor (MLM), considered the nation’s most comprehensive source of data on medical liability insurance premiums. Consider these numbers:

Malpractice Insurance Year-to-Year Premium Rate Increases, 2018 to 2021

Year	Share of Premiums that Increased from Previous Year
2018	13.7 percent
2019	26.5 percent
2020	30 percent
2021	30 percent

Source: AMA Policy Research Perspectives, “Prevalence of Medical Liability Premium Increases Unseen Since 2000s Continues for Third Year in a Row”

“The medical liability insurance cycle is in a period of increasing premiums, compounding the economic woes for medical practices that struggled during the past two years of the pandemic,” noted AMA president Gerald E. Harmon, MD, in the organization’s press release announcing the report. “The increase in premiums can force physicians to close their practices or drop vital services.” According to the report, the increases are being driven not by fundamental adjustments to base premium rates but by deteriorating underwriting results, lower loss reserve margins and lower returns on investment that began before the pandemic started. The problem isn’t just that rates are rising but how big the increases are. Increases of 10 percent or more have become more widespread. Thus, 7.5 percent of all premiums increased 10 percent or more in 2021, as compared to only 1.0 percent in 2016, 0.1 percent in 2017, 3.9 percent in 2018, 3.6 percent in 2019, and 5.2 percent in 2020. Increases of 10 percent or more were reported in 12 states:

States Where Largest Increases in Liability Premiums were Reported, 2020-2021

State	% of Comparisons that were Increases >=10%	Size of Largest Increase	% of Comparisons that were Increases	Comparisons (N)
Illinois	58.9%	35.3%	80.6%	129
West Virginia	41.7%	24.9%	75.0%	12
Missouri	29.6%	32.3%	44.4%	27
Oregon	20.0%	33.5%	60.0%	15
South Carolina	16.7%	12.5%	50.0%	18
Idaho	11.1%	10.0%	33.3%	18
Kentucky	7.4%	13.2%	33.3%	27
Delaware	6.7%	18.4%	20.0%	15
Washington	6.7%	10.0%	60.0%	15
Michigan	5.4%	13.1%	38.7%	93
Texas	4.9%	12.1%	26.5%	102
Georgia	3.7%	13.3%	44.4%	27

Source: AMA Policy Research Perspectives, “Prevalence of Medical Liability Premium Increases Unseen Since 2000s Continues for Third Year in a Row”

MedPAC Tells Congress Not to Raise Physician Medicare Pay in 2023

Physicians got another dose of bad financial news on March 15 when the influential Medicare Payment Assessment Commission (MedPAC) recommended that Congress not raise Part B Medicare Physician Fee Schedule rates in 2023. “We expect volume and revenue to return to pre-pandemic levels (or higher) by 2023,” according to the report that the panel responsible for providing guidance on Medicare rate policies is required to submit to Congress each year in advance of the rate setting process. While MedPAC’s prediction about return to pre-pandemic normalcy may or may not pan out, the punchline for physicians participating in Medicare is what the report omits, including the fact that:

• Physicians have gone several years without a meaningful Medicare pay increase;
• Inflation is at a 40-year-high; and
• The 2 percent Medicare sequester penalty will soon be reinstated.

None of this seems to have factored into MedPAC’s analysis. “Overall, access to clinician services for Medicare beneficiaries appears stable and comparable to that for privately insured individuals,” the report states. Not surprisingly, physician groups took issue with the report, which the Medical Group Management Association (MGMA) called “deeply troubling.” Meanwhile, HHS secretary Xavier Becerra indicated last week that he’s concerned about physicians’ financial struggles and “definitely interested” in considering reform of the Medicare Physician Fee Schedule.