Medicare Physician Payment Reform

Each year, CMS releases the Calendar Year Medicare Physician Fee Schedule (MPFS) rule that establishes payment rates used to reimburse health care practitioners serving the Medicare population. Since 2020, Congress has failed to address Medicare's budget-neutrality adjustment, a mechanism that requires cuts to physician payment rates when certain Medicare spending increases. This has led to five consecutive years of cuts to the MPFS conversion factor (CF), the rate that determines how much Medicare pays physicians for their services. In 2024, CMS cut the rate by 2.83%. In June 2025, the One Big Beautiful Bill Act (H.R. 1) provided a temporary 2.5% increase for 2026. However, Congress has not passed a long-term fix to stop these automatic cuts and reform physician payment.

Additionally, providers are subject to the financial strain of keeping up with rising inflation rates. In 2025, practices faced a 3.6% increase in medical practice cost inflation, as measured by the Medicare Economic Index (MEI). The MPFS is the only Medicare payment system without an annual inflationary update, despite the burden of maintaining practices among extenuating challenges within the healthcare system.  The absence of an inflationary update, coupled with the recurring payment decreases, places a significant strain on medical practices. This is an unsustainable system that threatens the health care system and the delivery of patient care.

ASE recommends Congress to pass legislation eliminating the annual CF cut to payments in the yearly MPFS to stop the trend of cuts. Additionally, Congress and CMS need to work together on solutions that prevent further reductions, such as an annual inflation adjustment to the CF based on the MEI to ensure practices can keep pace with rising health care costs.