AMA: Medicare physician fee schedule spending dropped nearly $14B last year due to COVID-19

Photo of psychologist conducting an online therapy session with her patient
A new analysis from the American Medical Association found that mental health providers accounted for the most use of telehealth last year. (PeopleImages/GettyImages)

Medicare physician spending dropped by a massive 14% below expected levels in 2020 due to the COVID-19 pandemic, resulting in a $13.9 billion decline in reimbursements.

The study, released by the American Medical Association (AMA) Thursday, found that even though volumes rebounded in the middle of the year, spending remained well below pre-pandemic levels. The doctor group warned that the financial repercussions of the pandemic are lingering.

“Medical practices that have not buckled under financial strain continue to be stretched clinically, emotionally and fiscally as the pandemic persists,” said AMA President Gerald Harmon in a statement.

AMA’s analysis of Medicare physician fee service claims found that while all specialties were hit, some had more severe spending declines.

For example, evaluation and management spending declined by 50% by the end of March 2020 when the pandemic took hold. Imaging, procedures and testing spending also declined until mid-April by as much as 65% to 70% below expected levels, AMA added.

The spending declines varied by region as well. Some states, such as Idaho and Oklahoma, only saw a 9% decline in spending while Minnesota had a 22% decline.

The biggest drops occurred in the Northeast, which had some of the most severe outbreaks initially of the virus, and the upper Midwest. Other states in the South and West didn’t have as precipitous drops.

AMA also explored changes in telehealth spending, as the federal government loosened restrictions on reimbursement for the service at the onset of the pandemic.

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Mental health providers had the largest shares of telehealth spending in Medicare, with psychologists making up 38% and psychiatrists with 31%.

The $178 billion Provider Relief Fund passed last year under the CARES Act helped prop up physicians and offset some of the financial hit caused by the declines.

However, providers have cautioned that more relief and flexibility are needed as the pandemic has continued to roil finances.

AMA and other provider groups have implored Congress to forestall nearly 10% in cuts to Medicare payments expected to go into effect next year.