I. Financing: Declining investment and fee-for-service payment are hindering primary care clinicians’ ability to meet growing patient needs

Primary care is the foundation of any health care system that delivers timely, high-quality, and equitable care. Yet, in the United States, we have decades of evidence demonstrating that our primary care foundation is fractured and that the health of US residents is suffering as a result. Despite spending more on health care than any other developed nation,^{10, 11} the US has lower life expectancy than that of peer nations.^{12, 13} Many people in the US do not have timely access to primary care,^{7, 14} and even when patients do get an appointment, they are often dissatisfied with rushed visits and lack of attention to their needs.¹⁵ Why is the wealthiest nation in the world seeing the poorest health outcomes? It all boils down to money: where we invest it, how we invest it, and who we spend it on.

It is probably no surprise that nations that spend more on primary care have better health outcomes.^{5, 16} In the US, states that invest more in primary care have fewer emergency room visits and avoidable hospitalizations.¹⁷ Unfortunately, as a nation, we invest on average only 5 cents of every health care dollar on primary care.18 Besides the underinvestment in primary care, there is also a lack of transparency about whether funds designated for primary care are actually reaching these practices, especially as they are increasingly owned by large health systems.

The last two years of tracking primary care spend in the Scorecard report have demonstrated not only historically low levels of investment, but also ongoing low investment in primary care regardless of payer.⁷ The year 2022 was no different. Using the Medical Expenditure Panel Survey (MEPS), we once again found that investment dropped when using the narrow definition of PC spend (primary care physicians only) (Figure 1).

Figure 1. Primary Care Spending (on Physicians) Continues to Decline for All Payers (2012—2022)

Data Sources: Analyses of Medical Expenditure Panel Survey data, 2012–2022.

Notes: The primary care narrow definition is restricted to primary care physicians only. Primary care specialties included family medicine, general practices, internal medicine, geriatrics, pediatrics, and osteopathy. 

This underinvestment in primary care continues despite rising health care burden and evidence that primary care leads to better overall health, fewer hospital visits, and lower rates of chronic disease. Over the past decade, the average number of chronic diseases per person in the US has been rising,^{19, 20} as is the incidence of mental health conditions.²¹ As a patient’s first stop in the health system, primary care can prevent or identify chronic disease and mental health conditions early,^{4, 22, 23} as well as provide comprehensive, coordinated care.²⁴ 

Although primary care spend has dropped for all payers, a particular concern is the drop in Medicare and Medicaid primary care spending, which have had the steepest decline over the past year. Given that the swelling Medicare population experiences higher rates of chronic disease,²⁵ and that more than half of US children are covered by Medicaid,²⁶ it is troubling that a smaller share of these public program dollars are being directed toward primary care. Moreover, Medicare sets the benchmark for all other payers in its physician fee schedule, so when Medicare primary care investment falls, other payers may see that as permission to follow suit. As a result, the decreasing federal investment in primary care is alarming and demands immediate correction. As we note later in this report, the payment system also detracts from physicians’ ability to spend time with community-based training. 

Undervalued primary care services mean insufficient revenue generation for practices and lower salaries for clinicians 

Low primary care spend is rooted, in part, in the Medicare Physician Fee Schedule (PFS), which disproportionately rewards procedural care rather than cognitive care — the history taking, clinical assessment, care coordination, and management of multiple chronic conditions.²⁷ The fee schedule is based on relative value units (RVUs), which are a valuation of every service a physician provides. An RVU is assigned to each service using the Resource- Based Relative Value Scale, which draws, in part, on a survey of physicians developed in the 1980s. Although a committee of physicians known as the Relative Value Scale Update Committee (RUC) updates this scale annually, its recommendations rely, partially, on surveys of physicians, who may inflate the complexity and time demands of their work to protect their interests. This in turn raises questions about whether the RUC’s assessments reflect the true value of services.^{27–29, 30} To illustrate this point, a study in 2013 concluded that cognitive care generates an hourly revenue of $87, whereas a screening colonoscopy, a relatively routine and low-risk outpatient procedure, generates an hourly revenue of $320.²⁷ 

Our analysis of per visit revenue for the five specialties with the highest volume of ambulatory visits in MEPS further illustrates this discrepancy in valuation between cognitive and procedural specialties (Figure 2). When comparing one of the most procedure-intensive internal medicine subspecialties, gastroenterology, to general primary care, we find that, in 2022, average per-visit revenue for primary care ($259) was one-fifth of that for gastroenterology ($1,092). Since commercial and Medicaid payers use Medicare rates as a reference, this stark disparity is multiplied.³¹ It underscores the structural problems with the current Medicare PFS, which prioritizes and financially incentivizes procedural care over the cognitive, relationship-based care central to primary care practice (Figure 2). 

Figure 2. Per Visit Revenue for Primary Care Is One-Fifth of Revenue for Procedure-Heavy Specialties (2012—2022)

Data Sources: Analyses of Medical Expenditure Panel Survey data, 2012–2022.

Notes: The primary care narrow definition is restricted to primary care physicians only. Primary care specialties included family medicine, general practices, internal medicine, geriatrics, pediatrics, and osteopathy.

Because of this undervaluing of cognitive services, primary care physicians are underpaid compared to their specialty physician counterparts.³² Since the 1980s, when services were first valued by the RUC, primary care has become increasingly complex. An aging population with more chronic disease means more conditions and medications that need to be managed — and more time spent coordinating care. Adding to this complexity in the past decade is the omnipresence of personalized digital technology. PCPs now spend a disproportionate amount of time, relative to subspecialists, answering patient emails and portal messages and integrating data from wearable devices.³³ Additionally, the administrative burdens of insurance prior authorizations, quality reporting, and patient paperwork — including medical leave, disability, and other forms — disproportionately fall on PCPs, increasing their workloads to unsustainable levels. Finally, while essential to the care of patients, attention to screening for health-related social needs and coordinating with social services has added more complexity to the primary care visit.

Health systems and payers continue to ask PCPs to accomplish more within a more complex environment but do not compensate them appropriately. Despite this increased responsibility, PCP salaries have failed to catch up to those of subspecialists due largely to this outdated payment system that makes it challenging to bill procedures and, at times, receive any reimbursement at all for these essential primary care services.³⁴ The latest Medscape survey of physician salaries shows that PCPs are among the lowest-paid physicians, earning, on average, 30% less than all other specialists.³⁴ Similar findings are seen in the nonphysician workforce, with a 20% salary gap reported between PAs in primary care and those in subspecialty fields.³⁵ While this wage gap is lower for NPs, the most recent study from 2018 shows a 7.1% difference in hourly wages for nurse practitioners who work in primary care settings and those in subspecialty settings.³⁶

Fee-for-service undermines primary care’s ability to provide high-quality care

In addition to undervaluing primary care services, the US is not yet broadly implementing payment models conducive to building and maintaining a high-quality primary care system. The current FFS paradigm that health care is built on is incompatible with the nature of primary care. By definition FFS rewards discrete services rather than complex, comprehensive, and coordinated care that is difficult to capture with individual visit codes. As highlighted in the NASEM report, high-quality primary care requires a payment model that enables practices to pay for an entire team to deliver care and not just a clinician who delivers services. The idea is that primary care practices are responsible for the health of their patient population, and to fulfill this responsibility, they need teams and infrastructure that allow for timely, comprehensive, continuous, and coordinated care.⁵ Team members like front-desk staff, medical assistants, nurses, community health workers, behavioralists, social workers, pharmacists, and others are all essential to providing high-quality primary care, but their services are not reimbursed sufficiently or at all in a fee-for-service system.

Providing primary care practices with sufficient resources requires moving toward a payment system with prospective payments and financial rewards for provision of high-quality care. The shift away from FFS-only payments has been tracked by organizations such as the Health Care Payment Learning and Action Network (HCPLAN). The organization’s latest survey of health plans in 2023 showed that 40.6% of all health care payments were purely FFS (Figure 3). Mirroring the HCPLAN findings for primary care specifically, a survey of primary care physicians conducted by the Commonwealth Fund found that over 75% report FFS payments while less than half receive any revenue from value-based payment models.³⁷ Although there has been modest movement away from FFS-only models over time, progress has been slow.³⁸ The absence of all-payer alternative payment models to ease reporting burdens and streamline processes for primary care practices, along with the overall lack of investment in primary care, have further hindered the pace and effectiveness of payment model changes.

Figure 3. Slow Progress on Increasing Percent of Health Care Payments from Fee for Service to Alternative Payments (2015—2022)

Data Sources: Figure created from data found in the HCP-LAN Alternative Payment Model Measurement Effort Report from 2017–2024. https://hcp-lan.org/apm-measurement-effort 

Progress on Policy Solutions: Payment

There have been some policy shifts that may impact primary care spending in the next several years. In this section we list the NASEM committee recommendations for payers and highlight recent progress. Although progress has been made in payment policy, the vast number of models proposed by the Centers for Medicare and Medicaid Services (CMS), as outlined here, underscores the fragmented nature of these efforts.

ACTION 1.1: Payers should evaluate and disseminate payment models based on their ability to promote the delivery of high-quality primary care, not short-term cost savings. 

• Making Care Primary — Announced in June 2023, this model from the Center for Medicare and Medicaid Innovation (CMMI) offers three tracks (Building Infrastructure, Implementing Advanced Primary Care, and Optimizing Care and Partnerships), which move payment to primary care from purely FFS with some financial support to build infrastructure and financial rewards for quality in track 1, to a hybrid model in track 2, to fully prospective population-based payment in track 3. This is a 10.5-year model focused on long-term savings.

ACTION 1.2: Payers using FFS models for primary care should shift toward hybrid reimbursement models, making them the default over time. For risk-bearing contracts, payers should ensure that sufficient resources and incentives flow to primary care. 

• The CMMI has announced multiple payment models to support the delivery of high-quality primary care, including:
  • Accountable Care Organization (ACO) Primary Care Flex Model — Announced in March 2024, this CMMI model aims to implement prospective primary care payment into the Medicare Shared Savings Program to support innovations in care delivery through implementation of team-based care.
  • Continuation of Primary Care First — Launched in 2021, this multipayer model alters the payment structure for primary care clinicians from traditional FFS to prospective payments with a potential bonus for quality.
  • Continuation of ACO Realizing Equity, Access and Community Health (ACO REACH) — This model, which began in April 2021, offers two voluntary risk-sharing options in which participating providers agree to Medicare claims reductions and receive at least part of their compensation through their ACO.
  • States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model — Started in September 2023, this total cost of care model requires states to make explicit commitments to increasing the portion of health care spending going to primary care. 
• Blue Shield of California’s Primary Care Pay-for-Value Hybrid Payment Model, a value-based model launched in 2021, provides participating practices with prospective per member, per month payment while limiting FFS payments for services such as immunizations and wellness visits. 

ACTION 1.3: CMS should increase the overall portion of health care spending for primary care by improving the Medicare fee schedule and restoring the RUC to its advisory nature. 

• The 2024 Medicare Physician Fee Schedule includes a separate add-on payment via the G2211 code for longitudinal care, a cornerstone of high-quality primary care. For the 2025 fee schedule, CMS has introduced three new codes (G0556, G0557, G0558) for Advanced Primary Care Management (APCM) services that have the potential to both pay primary care clinicians more and pay them differently. These codes will consolidate elements of existing care management codes like chronic care management (CCM), transitional care management (TCM), and principal care management (PCM) alongside virtual communication services. Unlike traditional codes, these are not time-based and eliminate time frame restrictions, easing administrative burdens. While significant, widespread implementation of these codes alone is unlikely to bridge the reimbursement gap between primary care and subspecialists. 
• The Pay Primary Care Physicians Act (S. 4338), introduced by Senators Sheldon Whitehouse (D-RI) and Bill Cassidy (R-LA) in 2024, aims to reform Medicare payments to better support primary care. The proposed legislation encourages a shift to “hybrid payments” that combine steady, up-front value-based payments with some FFS elements. Additionally, the bill proposes reducing patient cost-sharing for select primary care services and establishing a technical advisory committee to help CMS set more accurate fee schedule rates, thereby making primary care more sustainable and attractive for providers while also reducing reliance on emergency and specialty care. 
• The ACO Primary Care Flex Model’s Request for Applications asks respondents to answer how they would better value primary care. 
• The relaunch of the bipartisan Congressional Primary Care Caucus in 2024 signals policymaker interest in the valuation of primary care.

ACTION 1.4: States should facilitate multipayer collaboration and increase the portion of health care spending for primary care 

• Currently 22 states have efforts related to primary care spending, ranging from multipayer collaboratives to define and measure primary care spend to targets for primary care spend in their states.³⁹ 
• Since the last report, New Mexico, Rhode Island, and Utah have enacted legislation related to primary care spend, and New York has legislation pending to increase spend by all payers to at least 12.5%. In October 2024, California set its first primary care target of 15% of total health spending. 
• The AHEAD model also requires states to facilitate multi-payer participation in efforts to increase spending for primary care. 

Notes

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