Dive Brief:
- An influential congressional advisory group voted on Thursday to recommend that Medicare increase physician reimbursement next year, but retreated from its previous position that annual payment updates should be linked to inflation — a reform long sought by doctors.
- Members of the Medicare Payment Advisory Commission voted 15-2 to support a 0.5 percentage point increase to Medicare’s physician reimbursement in 2027 above current law. If Congress takes MedPAC’s advice, physicians would see their base rates increase between 0.75% and 1.25% next year, depending on whether or not they participate in value-based arrangements.
- Physician groups said they welcomed any improvement to Medicare rates, but that doctors’ reimbursement in the federal insurance program for seniors and disabled Americans will continue to be inadequate without meaningful reform.
Dive Insight:
Provider groups have been pushing Medicare to increase its reimbursement for years, arguing that the program’s annual payment updates haven’t kept pace with the rising costs of providing care.
Medicare payment rates to physician practices have dropped 33% since 2001 when adjusted for inflation, according to the American Medical Association. Meanwhile, practice costs have continued to tick up, with the Medicare Economic Index — a measure of healthcare inflation — rising 3.5% in 2025.
Part of the issue is that the CMS is required by law to make annual updates to Medicare physician pay budget neutral, so keeping pace with rising inflation is next to impossible.
Congress usually steps in to increase Medicare’s payment to physicians. But waiting on lawmakers to act is stressful and at best a temporary fix, doctors say, arguing that the unpredictable payment makes it difficult for physicians to hire staff or make other investments in their practices.
To make payment more reliable and better reflect the costs of doing business, last year MedPAC recommended that Congress tie annual Medicare payment updates for doctors to the MEI.
Specifically, the advisory commission, which was established in 1997 to advise Congress on Medicare issues, said that lawmakers should link Medicare rate hikes to the MEI minus one percentage point.
The recommendation was a compromise with industry, given that physician groups support the underlying reform to Medicare’s payment chassis but wanted a steeper rate hike, such as MEI plus one percentage point.
But now, MedPAC is eschewing the framework altogether, a fact that two dissenting commissioners said fueled their vote against the group’s draft recommendation for 2027.
MedPAC arrived at the MEI minus one update after years of work to reconcile the tension between physicians losing money on Medicare and the program needing to control growing costs, according to commissioner Kenny Kan.
Kan, a New Jersey Blues plan executive who voted against the 2027 recommendations, said that the new draft guidance boils down to a -2.2% payment update for doctors.
Brian Miller, the second dissenting member, agreed the recommendation was low, especially given the high rates Medicare secures for hospitals.
“I want to be clear that this recommendation from MedPAC is a net negative payment update for physicians,” Miller, an associate professor of medicine at Johns Hopkins University, said. “We are not seeing the forest for the trees with this year’s update.”
MedPAC Chair Michael Chernew defended the draft recommendation for next year, noting it essentially equals MEI minus one — even if moving to MEI minus one is no longer the group’s actual recommendation to Congress.
It was always the commission’s intent to use MEI minus one as a mathematical baseline, and make a payment recommendation relative to that, Chernew, the director of a health market research lab in Harvard Medical School’s Department of Health Care Policy, said.
And, with increased provider billing intensity, Medicare revenue for doctors should land higher than whatever base payment rate Congress enshrines.
“We have an above current law update,” Chernew said. “With some of the other coding things going on, the total revenue is probably going to be a little bit more than that one way or another.”
Physician lobby the AMA said it welcomes the rate update recommended by MedPAC. But “it is disappointed that the commission has stepped back from the solution it endorsed just months ago, a point that two commissioners noted today,” Dr. David Aizuss, the chair of the AMA’s board, said in a statement Thursday.
“Linking Medicare physician payment updates to MEI as MedPAC itself suggested last June would provide stability for physician practices and certainty for patients, particularly those in rural and underserved communities, that access to their physician won’t be compromised,” Aizuss added.
MedPAC also voted to recommend that Medicare keep hospital reimbursement at current law in 2027. Commissioners reupped their support for Congress implementing a tool called the Medicare Safety-Net Index, which they said would better direct Medicare funds to hospitals serving low-income and high-need patients.
MedPAC also voted to support a 4% cut to skilled nursing facilities and a 7% cut for home health agencies and inpatient rehab facilities in 2027 compared to current law.
