MedPAC proposes tying physician pay to inflation

In its annual report, the Medicare Payment Advisory Commission, or MedPAC, recommended that Congress align physician pay to inflation in 2026.

Specifically, the independent congressional agency suggested that Congress tie physician payment rates to the Medicare Economic Index (MEI) minus one percentage point in 2026. The MEI measures changes in physicians' operating costs.

MedPAC, which consists of 17 appointed members, is required to issue a report to Congress each March containing recommendations for updating Medicare fee-for-service payment systems.

This year's update recommendation, which MedPAC estimates would be equivalent to 1.3% based on CMS' MEI projections, would be built into future years' payment rates. This differs from 2021 through 2024, in which payment rates increased for one year only and subsequently expired.

"Under current law, in 2026, payment rates are expected to increase by 0.75 percent for clinicians in advanced alternative payment models (e.g., accountable care organization models that involve some financial risk) and 0.25 percent for all other clinicians," the report stated.

"Given recent high inflation, cost increases in 2026—which are currently projected to be 2.3 percent— could be difficult for clinicians to absorb. Yet current payments to clinicians appear to be adequate, based on many of our indicators."

MedPAC acknowledged that these findings were mixed, leading it to settle on recommending that Congress move forward with an update equal to CMS' projected MEI increase minus one percentage point.

The commission also doubled down on its 2023 recommendation that Congress should establish permanent safety-net add-on payments to low-income fee-for-service Medicare beneficiaries.

MedPAC estimated that safety-net policy combined with the recommended update would increase the average clinician's fee schedule revenue by 3%, though it would vary by provider specialty and share of services delivered to low-income Medicare beneficiaries.

MedPAC's recommendations arrived during a period of uncertainty about the future of Medicare, after industry groups strongly urged Congress to undo a 2.8% payment cut, to no avail.

The American Medical Association (AMA) welcomed MedPAC's advice to Congress and urged lawmakers to take the commission's recommendations into account.

"This recommended policy change is needed to ensure patients will have continued access to quality care. Medicare is broken. Under the financial stress, burnout has become an occupational hazard for physicians," said AMA President Bruce Scott.

"As these cuts pile up year after year, more and more physicians are closing their practices, leaving patients without access. It just makes sense that payment must keep pace with increasing costs. Other providers already have automatic, yearly updates, and physicians are the foundation of health care."

Jill McKeon has covered healthcare cybersecurity and privacy news since 2021.