The Payment-Value Paradox in Pediatrics

By any reasonable measure, pediatric care is one of the clearest examples of prevention in American healthcare. Pediatricians immunize, identify and address developmental concerns, support good behavioral health, manage chronic disease, and help families establish healthy habits in and out of the office. If prevention matters, why do so many pediatric practices face such significant challenges?

The answer is shaped by several factors, including insurance coverage, the widening scope of pediatric practice, workforce shortages, disparate physician compensation, under-reimbursed care, and our system spend on primary care at the macro level. Peek behind the curtain and you will discover pediatrics exposes a glaring contradiction at the center of American healthcare. 

Nearly half of children in the United States receive coverage from Medicaid or the Children’s Health Insurance Program (CHIP). Medicaid/CHIP are essential to ensuring access to care but are also a major reason pediatric practices operate under financial pressure. Medicaid payment rates continue to trail Medicare and commercial rates for comparable primary care services. [i] [ii]

To make matters worse, the scope of primary care, and especially pediatric care, has expanded dramatically over the past two decades. Today’s pediatricians are expected to identify developmental delays, screen for maternal and adolescent depression, address behavioral health concerns, coordinate specialty care, manage chronic conditions, monitor social and environmental risk factors, and help families navigate increasingly fragmented systems of care. This list is not hyperbole. The Bright Futures/AAP preventive care schedule includes screening for child development, maternal or adolescent depression, behavior, and social and emotional concerns, among others. [iii] This means pediatrics is being asked to do more work for less money.

This growing crisis is also impacted by the increasingly complex challenges pediatricians are being asked to manage in their exam rooms every day. According to CDC data from the 2023 Youth Risk Behavior Survey, “adolescent mental health continues to worsen,” as forty percent of high school students reported persistent feelings of sadness or hopelessness, twenty percent seriously considered attempting suicide, and nine percent reported attempting suicide. [iv] Those statistics arrive in pediatric offices not as data, but as young patients and their families and caretakers. 

Workforce data tracks with what we understand about practices operating under increased burden and financial pressure, as pediatric workforce shortages continue to affect access. Children’s hospitals reported ongoing pediatric workforce shortages in 2024, with the most acute shortages in mental and behavioral health specialties. [v] This only makes it that much more difficult for pediatrics to refer patients into these specialties.

Pediatrician compensation could very well be adding insult to injury. Medscape’s 2025 Pediatrician Compensation Report placed average pediatrician compensation at approximately $265,000, among the lowest physician specialty averages reported that year. By contrast, a similarly positioned internal medicine physicians reported average compensation of approximately $294,000, a roughly ten-percent gap. [vi]

The financial shortfall is evident in a macroeconomic sense, too. Despite years, even decades of discussion about the value of prevention, population health, and value-based care, the overall Federal and state investment in primary care is low. According to the 2025 Primary Care Scorecard, primary care accounted for less than five percent of total healthcare spending in the United States in 2022, and Medicaid devoted just 4.3 percent of spending to primary care. [vii] There are state models paying primary care in the low teens as a percentage of the total cost of care today, so we know between four and five percent is grossly subpar.

When the return on investment is considered, these glaring, specialty-wide gaps and disparities become even harder to justify. In 2024, the CDC estimated that routine immunizations administered to children born between 1994 and 2023 will prevent approximately 508 million illnesses, thirty-two million hospitalizations, and more than 1.1 million deaths. The same analysis estimated $540 billion in net direct cost savings and $2.7 trillion in net societal savings. [viii] That’s trillion with a “T.”

This examination of pediatrics as a specialty reveals an uncomfortable contradiction at the heart of the American healthcare system. We enthusiastically claim to be a system that values prevention, yet across the system, we undervalue and underinvest in pediatrics. We know pediatrics is the specialty responsible for laying the foundation for a lifetime of health and primary care prevention, yet we allow it to rely heavily on a payment source that systemically fails to support the expanding scope of critically important care it provides. Why would we do that?

Geoffrey Rose famously described the "prevention paradox," which basically states interventions that produce substantial benefits for a population may offer little apparent benefit to an individual. [ix] While not the same thing, the pediatric specialty faces a similar paradox I will refer to as the payment-value paradox. Consider well-child visits, for example. They generate a modest payment to the pediatrician, but the true value of the service can last decades or a lifetime. Early identification of developmental concerns, behavioral health needs, chronic disease, and social challenges can change the trajectory of patients’ lives. This exceptional value, however, does not show up on the day of the exam. The return on investment appears years later and can endure long after the pediatrician has done his, her, or their work, retired, and moved on. Unfortunately, our healthcare payment system does not compensate pediatrics for that long-term value.

So, what do pediatric practices need to escape this payment-value paradox?

Above all else, the pediatric specialty needs what all primary care needs. Pediatrics needs more financial investment in the form of a population based payment. In many ways, federal policymakers have already acknowledged the general primary care funding problem and are addressing it in this way. [x] CMS is increasingly testing prospective monthly payments to primary care in models such as Making Care Primary and ACO PC Flex. CMS is doing this because it knows fee-for-service reimbursement fails to support the ever-growing work between primary care visits. The difficulty for pediatrics is that these reforms are directed at Medicare populations, while pediatrics continues to receive subpar fee-for-service payment. So pediatrics is left to operate in a fiscal environment that policymakers are actively moving away from elsewhere. I ask again, why would we do that?

Second, pediatrics needs advocacy support. Because nearly half of American children receive coverage through Medicaid or CHIP, pediatric practices are more exposed to the consequences of Medicaid payment policy. [xi] The challenge can be particularly dire for independent pediatric practices, which generally lack the supplemental funding streams, institutional infrastructure, and negotiating leverage inherent to large health systems. [xii] Independent pediatric practices often have valuable perspectives on these policy issues. The challenge is finding the time and capacity to participate in those discussions while simultaneously running a practice. 

Our healthcare system has become very skilled at talking about prevention, but we need to fairly compensate the professionals doing the work of prevention. If prevention truly matters, as we all suggest, then pediatrics should be among the most financially sound and legislatively supported specialties. That so many pediatric practices continue to face financial and operational pressures suggests we still have a lot of important work to do.

[i] AAP technical report on Medicaid and CHIP

[ii] AAP analysis of Medicaid/CHIP child enrollment

[iii] Bright Futures/AAP Preventive Care Schedule

[iv] CDC adolescent mental health data from 2023 YRBS

[v] Children’s Hospital Association pediatric workforce shortage fact sheet

[vi] Medscape Pediatrician Compensation Report 2025

[vii] 2025 Primary Care Scorecard, Milbank Memorial Fund / Physicians Foundation

[viii] CDC MMWR on routine childhood immunization benefits

[ix] Historical perspectives on prevention paradox: When the population moves as a whole

[x] ACO PC Flex (ACO Primary Care Flex) Model

[xi] AAP: Bold Reforms Needed to Improve Children’s Access to Health Care

[xii] Medicaid and the Children’s Health Insurance Program: Technical Report