Report links Medicare reimbursement policies to America’s doctor shortage

A new report from the Pacific Research Institute’s Center for Medical Economics and Innovation claims a federal government policy is contributing to the shortage of doctors in the U.S. 

An issue brief, authored by Dr. Wayne Winegarden, a senior fellow in business and economics at PRI and director of CMEI, makes the argument that stagnant and below-market Medicare reimbursement rates are accelerating a national doctor shortage and degrading access to care.

In the brief titled “It’s Time for Medicare to Stop Shortchanging Physicians,” Winegarden outlines how Medicare’s payment structure, untethered from inflation and rising operational costs, is forcing many doctors out of practice, deterring new medical students from entering the field, and diminishing the quality and timeliness of patient care.

“Medicare has effectively imposed income controls on doctors,” said Winegarden. “These unsustainably low reimbursement rates are creating a cascade of negative outcomes, discouraging private practice, worsening the doctor shortage, and ultimately threatening the quality of care patients receive.”
In the brief, Winegarden argues that:

• Physician pay has sharply declined: Inflation-adjusted Medicare payments have dropped by 33% since 2001.
• Doctor shortages are worsening: The U.S. currently lacks 37,000 physicians, a gap projected to widen to 86,000 by 2036.
• Unequal reimbursements distort care delivery: Medicare’s payment system favors hospitals over independent doctors, driving costly consolidation and reducing patient options.
• Fewer students are entering the field: Medical school applications fell for a third straight year in 2024, reaching their lowest point since 2017.

Troubling trends

Winegarden warns that these trends are pushing the healthcare system toward a crisis where fewer doctors, longer wait times, and diminished care quality will become the norm unless structural reforms are implemented.

He advocates both near- and long-term reforms aimed at stabilizing the physician workforce and restoring balance to the Medicare payment system. In the short term, Winegarden suggests tying Medicare payments to actual practice costs, eliminating payment discrepancies between hospital and outpatient settings, and bolstering value-based care initiatives.

For more lasting change, he proposes transitioning Medicare toward a direct payment model where seniors manage personal health savings accounts. Under this approach, beneficiaries could receive approximately $15,151 annually to purchase coverage and pay providers directly, encouraging price competition and rewarding value.

“Patients are paying the price for Washington’s broken physician payment system,” said Winegarden. “We must modernize Medicare to reward value, preserve choice, and support the financial viability of independent physicians.”