Advocacy in action: Leading the charge to reform Medicare pay

What’s at stake

Stable and adequate Medicare payments are essential to protect seniors’ access to care and support the physicians who treat them. Yet, for decades, the Medicare Physician Fee Schedule (MPFS) has faced growing instability, driven by four key challenges.

Key challenges

• No inflationary updates
  • Since 2001 Medicare physician payments—when adjusted for practice cost inflation—have dropped 33%. Other Medicare providers (e.g., hospitals, Medicare Advantage) receive statutory based inflationary updates, but physicians are excluded.
  • Congress provided a one-time 2.5% update for 2026 in the One Big Beautiful Bill Act, but this temporary fix disappears in 2027—returning physicians to inadequate 0.25%-0.75% updates that fall far below projected practice cost growth.
• Flawed budget neutrality rules
  • Arbitrary cuts triggered by inaccurate Centers for Medicare & Medicaid Services (CMS) projections permanently reduce payments. For example, the G2211 “Inherent Complexity” code associated with Evaluation and Management services caused a $1 billion annual loss to the MPFS. Congress has repeatedly spent billions on short-term patches, creating financial uncertainty and instability in the Medicare program.
• Merit-based Incentive Payment System (MIPS) burdens
  • MIPS adds costly, complex reporting with little link to improved outcomes. Penalties disproportionately fall on small, rural and solo practices while large systems are rewarded simply for compliance.
  • A JAMA Health Forum study found that it costs an estimated $12,811 and more than 200 hours per physician, per year to comply with the Medicare Merit-Based Incentive Payment (MIPS) system.
• Limited alternative payment model (APM) options
  • Many specialties and rural physicians lack access to alternative payment models. The continued threat of APM incentive payments expiring automatically and statutory requirements of higher revenue qualification thresholds further slow progress toward value-based care.

The system’s growing financial instability is due to a confluence of fiscal uncertainties physician practices face related to the pandemic, statutory payment cuts, lack of inflationary updates and significant administrative burdens. 

The discrepancy between what it costs to run a physician practice and actual payment combined with the administrative and financial burden of participating in Medicare is encouraging market consolidation and threatens to drive physicians out of rural and underserved areas.

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The AMA’s position

To stabilize Medicare payments and protect seniors’ access to care, Congress must:

1. Provide annual inflationary updates tied to practice costs
   1. Permanently tie Medicare payments to the Medicare Economic Index (MEI) to reflect real practice costs.
2. Fix budget neutrality
   1. Raise the threshold and require CMS to prospectively correct conversion factor cuts when projections associated with newly unbundled codes that have a utilization assumption are wrong.
3. Restructure MIPS
   1. End the “tournament” penalty/bonus model and ensure timely data feedback.
4. Expand APM options
   1. Extend the APM incentive payment, freeze thresholds, and develop more specialty-specific and rural models. 

AMA advocacy in action

The AMA has: 

• Developed a set of principles (PDF) supported by more than 120 other medical societies to guide advocacy efforts on Medicare physician payment reform.
• Achieved consensus across medicine to pursue four pillars of Medicare payment reform:
  • Establish an annual inflation-based payment update for Medicare physician payments.
  • Revise policies and processes used to adjust payments to maintain budget neutrality.
  • Simplify and improve the clinical relevancy reporting programs under the Merit-based Incentive Payment System.
  • Extend policies that support practices wanting to transition to value-based payment systems.
• Advocated for Congress to provide a permanent annual inflationary Medicare payment updates tied to the Medicare Economic Index (MEI) to reflect real practice costs. AMA has re-endorsed the Strengthening Medicare for Patients and Providers Act.   
• Advocated for Congress to stop the budget neutrality cut that took effect on January 1, 2025.  Physician payment was increased 2.5% for 2026 in the Once Big Beautiful Bill Act. AMA is working with Members of Congress on bipartisan, bicameral legislation to reform the Medicare budget neutrality process.
• Advocated for Congress to reform the Medicare MIPS program. AMA is working with Members of Congress on bipartisan, bicameral legislation to reform the to end the tournament style penalty/bonus model and ensure timely data feedback. 

Advocacy resources

• Recently adopted AMA policy on Medicare payment.
• Chart: Medicare conversion factor with and without temporary patches (PDF).
• Chart: Medicare provider updates for 2025 (PDF).
• Chart: Medicare updates compared to inflation in practice costs (2001-2025) (PDF).
• Chart: Key measures of practice expense in the Medicare Economic Index (PDF).
• The principles: Characteristics of a rational Medicare physician payment system (PDF).
• Use the Physicians Grassroots Network to tell Congress to protect America’s Medicare patients.
• Learn about how you can take part in the fight to fix Medicare on behalf of your patients and practices at the AMA's Fix Medicare Now website.
• The AMA's Medicare Basics series provides an in-depth look at important elements of the Medicare physician payment system. 

Learn more

Visit AMA Advocacy in Action to learn more about the advocacy priorities the AMA is actively working on.

Get involved

The AMA works to generate support for policies critical to the nation’s health care system—and we can’t do it without your help. Learn more about ways to get involved with AMA advocacy.