Medicare physician pay for 2026 could be based on Medicare Economic Index

© MedPAC

Medicare reimbursement for physicians in 2026 and beyond was on the agenda for the December meeting of the Medicare Payment Advisory Commission (MedPAC).

The nonpartisan Commission began its two-day meeting on Dec. 12 with discussion about its recommendation to Congress. The commissioners generally agreed on the draft recommendation of Chair Michael Chernow, PhD. They also had a variety of comments on the staff presentation with data about beneficiary access, health care quality, and how physician pay could affect those in coming years.

Chernow noted MedPAC’s deliberations are a balancing act.

“I will just emphasize higher payments to providers in any type need higher premiums to beneficiaries and higher cost sharing for folks,” he said. “So, if you're actually concerned about access, which is the reasonable thing to be concerned about, understand that there's a demand and supply side thing going on. And so when we pay more, we really have to think about what we're getting for that. And while I understand the desire for physicians and others to get paid more, we also understand that in doing that, the cost is ultimately borne by beneficiaries and taxpayers and others.”

The commissioners had approximately 90 minutes of discourse on doctor pay, with more talk to follow. They did not address the looming 2.8% decrease in reimbursement for the 2025 Medicare Physician Fee Schedule (MPFS).

2026 recommendation

The draft recommendation to Congress for calendar year 2026 is:

• Update the 2025 Medicare base payment rate for physician and other clinician services by the projected increase in the Medicare Economic Index (MEI) minus 1%
• Enact the March 2023 recommendation to establish safety-net add-on payments in the MPFS for services delivered to low-income Medicare beneficiaries.

That 2023 recommendation included a 15% add-on for primary care physicians and other clinicians and a 5% add-on for all other clinicians. The add-on payments would not increase beneficiary cost-sharing and would not need offsetting payment cuts elsewhere. Generally the commissioners agreed on keeping that as part of MedPAC’s 2026 recommendation to Congress.

Current data

The meeting opened with the presentation, “Assessing payment adequacy and updating payments: Physician and other health professional services,” compiled by MedPAC staff.

In 2023, 1.4 million clinicians had 666 million encounters with 28.2 million patients. Payments from Medicare and fee-for-service beneficiaries totaled $92.4 billion. Using a sample evaluation and management (E&M) visit with Current Procedural Terminology code 99213, payment rates rose from $76.15 in 2020 to $92.47 in 2021. That will dip to $88.96 for 2025, but the new G2211 add-on code would add to that sample visit, for a projected total of $104.49. The recent payment rates for office visits have required offsetting decreases to the Medicare conversion factor used to calculate payment rates, according to the MedPAC staff report.

The Commission and staff evaluate payments based on beneficiaries’ access to care, quality of care, access to capital, and clinicians’ revenues and costs.

The staff noted quality is difficult to measure because Medicare does not collect much clinical information or patient-reported outcomes. The U.S. Centers for Medicare & Medicaid Services (CMS) use its Merit-based Incentive Payment System, but MedPAC for years has recommended abandoning that system as fundamentally flawed.

As for clinician costs, the MEI slowed in 2023 and is projected to moderate further, the MedPAC report said. Since 2000, the MEI has grown by 52%, more than the 14% in updates to physician reimbursement, but spending per beneficiary has risen 101%, according to the MedPAC figures.

The report cited SullivanCotter’s compensation and productivity surveys of 2024, noting doctors had an annual average 3.3% pay increase from 2019 to 2023. Physicians had median annual compensation of $352,000, ranging from $296,000 in primary care to $536,000 for radiologists.

Commissioners react

MedPAC’s job is not to determine if doctors are paid too much or too little, said Commissioner Lawrence Casalino, MD, PhD, of Weill Cornell Medical College. Rather, they must recommend policies to avoid overpayment to physicians or hospitals, while ensuring beneficiaries have access to excellent care, he said.

But when physician reimbursement lags behind inflation, it sends an extremely negative message to physicians and provides less money to invest in improving quality, Casalino said.

“The fee schedule is understood by physicians very personally, as individuals, and no one likes to be told that their annual pay each year, indefinitely, year after year, is not going to keep up with inflation,” he said. “Over time, I think that's likely to affect the morale of physicians and other clinicians, and that this can't help but result in worse access and lower quality of care.”

For physician pay, the MEI minus 1% could work for 2027 and 2028, but it would be more reasonable to recommend an update equal to inflation, Casalino said.

Commissioner Gregory P. Poulsen, MBA, of Intermountain Healthcare in Utah, said he agreed with Casalino, but for slightly different reasons. MedPAC reports note physicians and other clinicians are consolidating into larger organizations to improve the ability to negotiate higher payment rates from private insurers. But they also are dealing with electronic medical records, coordination of care, insurance travails with coding and documentation, labor shortages and high labor costs, Poulsen said. With all those factors, when physicians are negatively impacted by payment lower than their cost increases, that will lead to consolidation, he said. Commissioner Cheryl L. Damberg, PhD, of RAND Corporation, agreed.

Apart from pay, health care access for many beneficiaries is objectively terrible, said Commissioner Brian Miller, MD, MBA, MPH, of Johns Hopkins University.

“If we look at just from numbers, it doesn't seem bad. But if we are the patient or we are the clinician, it's not good,” Miller said. “It doesn't matter if it's similar or slightly better to private markets, it's still objectively not good. We have a labor productivity problem in health care. I think that that is something that we should mention in here, because these access data actually tell us that our access is a lot worse than we thought it is.”

In a larger sense, CMS is a policy operator struggling to operate a fee-for-service Medicare plan while also being a plan regulator – two very hard jobs, Miller said. He called for large-scale modernization for Medicare to become a market regulator of publicly funded health benefits programs executed by the private market.

While wait times are concerning, the access measures show Medicare beneficiaries are not necessarily waiting longer than commercially ensured people, and in some cases wait less time, said Commissioner Stacie B. Dusetzina, PhD, of Vanderbilt University School of Medicine.

“And so there is a question of how much more payment fixes that, versus, this is really a market constraint issue that I think is a problem for everyone who needs health care services,” she said.

MedPAC should use a bit more conservative approach and drill down on access data, said Commissioner R. Tamara Konetzka, PhD, of the University of Chicago. She said the Commission is not sure payment rates could fix any problems and she would be reluctant to support spending more taxpayer and beneficiary money to solve a problem of physician well-being or morale in the future.

Lack of data on health care quality is frustrating, and the Commission and staff should get some discrete variables that tell a story about the care that’s being provided, said Commissioner Robert A. Cherry, MD, MS, of UCLA Health. Electronic health records log details such as blood pressure, hemoglobin A1c management, or body mass index in primary care, or antibiotic use, narcotic use or wound care management in specialty care, he said.

Physician reimbursement will not easily remediate drivers of workforce dissatisfaction and consolidation, said Commissioner Scott Sarran, MD, MBA, of Harmonic Health and Triple Aim Geriatrics. But he agreed the messaging to physicians is important.

The formula MEI minus 1% could become fixed in people’s minds, but it is two different things if inflation is 1% or inflation is 10%, said Commissioner Lynn Barr, MPH, of the Barr-Campbell Family Foundation.

“I don't want us to get used to a minus one number when the inflation number could be anywhere from, you know, zero to whatever, right?” Barr said. “And so I think that's kind of a dangerous – I just want to make sure that people don't expect to see a fixed number in the future. That just wouldn't make any sense to me.”

As for quality, she noted two measures are life expectancy and quality of life – and that life expectancy has been declining.

More money will not necessarily fix dissatisfaction in the health care system, said Commissioner Betty Rambur, PhD, RN, FAAN, of the University of Rhode Island. “It’s the working conditions,” she said. Nurses are fleeing bedside care to work in primary care, which is less disheartening that working in an understaffed facility, Rambur said.

In the MedPAC data, 62% of beneficiaries had challenges or problems accessing mental health care. That is a striking figure and probably a gross understatement that does not account for people who have an access problem and then give up, said Vice Chair Amol Navathe, MD, PhD, of the University of Pennsylvania’s Perelman School of Medicine.

“I don't think that physician updates are going to be the way that we solve that problem, but I think it's just very, very striking data,” he said.

Commissioner Kenny Kan, FSA, CPA, CFA, MAAA, of Horizon Blue Cross Blue Shield, agreed with fellow commissioners that Medicare has a multifactorial problem that the Commission cannot solve in one year.

Commissioner Joshua Liao, MD, MSc, of University of Texas Southwestern Medical Center, agreed on the multifactorial nature of the problem and that year to year, any one change may not move behavior much.

“I'm also a primary care trained general internist, and I think a lot about developing and recruiting primary care clinicians alongside advanced practice professionals as well. I look forward to the opportunity to debate what are the factors, major and minor,” Liao said. “But I think not making some of these changes is not going to help. I think that's fairly clear to me. It doesn't help morale and happy to talk more about that in future discussions.”

It also would help if physicians valued primary care more, said Commissioner Gina Upchurch, RPh, MPH, of Senior PharmAssist, who referred to the American Medical Association/Specialty Society RVS Update Committee, known as the RUC.

“I also just want to put out there that if the RUC would value primary care more, it might help us in many ways with these workarounds that we create. So just put that out there,” Upchurch said.

Commissioner Wayne J. Riley, MD, MPH, MBA, of State University of New York Downstate, echoed Liao’s comments.

“I too, Josh, as you know, as a primary care general internist, I worry about the cumulative effect down down the road, in terms of getting young men and women to pursue primary care, internal medicine, advanced practice nursing and et cetera,” Riley said. “So I think this discussion has really distilled where we need to think about this going forward.”

MedPAC accepts public comments about its meetings by emailing meetingcomments@medpac.gov.

The presentation for the physician reimbursement discussion was compiled by MedPAC principal policy analysts Rachel Burton, MPP, Geoff Gerhardt, MPP, Briand O’Donnell, MPP, and Ledia Tabor, MPH. Gerhardt and O’Donnell also participated in the online meeting.