Most physicians know the drill: The Centers for Medicare & Medicaid Services (CMS) during the summer publishes the proposed Medicare Physician Fee Schedule for the following year, usually cutting physician payment even further.
The AMA, other organized medicine groups and physicians spend the end of the year pushing back against the cuts.
Rinse and repeat for two decades, with the same scenario already beginning to play out for 2027 rates. AMA analysis (PDF) has revealed the result: Physician pay, when adjusted for inflation in practice costs, has declined 33% since 2001—an unsustainable path.
But an AMA-backed bill before the U.S. House of Representatives could finally break the cycle.
The Patients First Act of 2026 (H.R. 9693) is a comprehensive measure that, if passed, would finally make structural changes needed to prevent cuts and create a payment system that helps ensure physicians can keep their doors open and provide seniors with quality, value-based health care.
Two major changes that the AMA has called on Congress to make for years to right an out-of-whack payment system that the bill addresses:
- Establishing automatic, annual inflation-based payment updates.
- Modernizing budget-neutrality policies.
“This comprehensive, bipartisan legislation represents an important opportunity to reform the Medicare physician payment system and replace the annual cycle of cuts and temporary patches with a payment system that is stable, predictable, and reflective of growth in the actual costs of delivering care,” wrote AMA CEO John Whyte, MD, MPH, in a July letter of support for the bill.
The AMA letter (PDF) was sent to Reps. John Joyce, MD (R-Pa.), Kim Schrier, MD (D-Wash.), and Greg Murphy, MD (R-N.C.), chairs of the GOP Doctors Caucus and the Democratic Congressional Doctors Caucus. The three physician representatives introduced the bill, which amounts to a major reform of the Medicare Access and CHIP Reauthorization Act (MACRA). At this article’s deadline, the proposed legislation had 41 cosponsors.
The bill—the most comprehensive Medicare physician payment reform bill to date—also would establish a physician-led process for developing simplified, clinically relevant quality measures and give doctors greater opportunities to participate in alternative payment models (APMs). It aligns with the “Characteristics of a Rational Medicare Physician Payment System” (PDF), a framework that aims to ensure financial stability and predictability, promote value-based care and safeguard access to high-quality care for patients who depend on small, rural and independent practices. The AMA and more than 120 state medical associations and national specialty societies have endorsed the framework.
The AMA is leading the charge to reform the Medicare payment system and is asking physicians to write their representatives to urge them to cosponsor the Patients First Act.
Establishing annual updates
Physicians are the only Medicare provider type who do not receive an annual payment update tied to inflation.
The Patients First Act would change that for good.
The bill would establish a permanent, annual payment update linked to the Medicare Economic Index (MEI), minus 1 percentage point. For qualifying APM participants, the update would be set at MEI minus 0.5 percentage points.
All physicians would receive a payment boost under the Patients First Act, with nonmetro areas and work-intensive procedures seeing bigger gains. For example, for a 30-to-39-minute office visit today, a physician in Dallas is paid $131. Under the bill, that physician would receive $134, a 2.2% increase. Meanwhile, physicians in the rest of Texas today are paid $129 for that visit type. Under the Patients First Act, they would be paid $132, a 2.5% increase.
To strengthen physician payment and patient access, the bill:
- Provides a statutory floor and ceiling on the annual updates. The floor protects physicians in low-inflation years by ensuring the update cannot be less than 25% of MEI, while the ceiling caps the update at no more than 75% of MEI in high-inflation years. This provides stability and predictability.
- Requires a report to Congress on the adequacy of the new payment updates that assesses its impact on system capacity, timely beneficiary access to services and consolidation of independent practices.
- Extends and increases the work geographic practice cost index floor, benefiting physicians in many rural areas and 34 entire states. It uses new money to extend the 1.00 work Geographic Practice Cost Index (GPCI) floor for an additional 5 years, from 2027 through 2031, and increase it to 1.025, leading to a 2.5% increase in the work relative values for all localities that are subject to this floor. The bill also provides a 2% increase in the work GPCI for all other localities through 2031. These increases are applied any year in the five-year window that inflation is above 2%. It is expected to not only increase Medicare payment rates but to help physicians whose compensation is tied to the work relative values.
Rectifying budget neutrality
Another flaw that has hindered physician payment updates are budget-neutrality requirements. The Patients First Act includes text from the Provider Reimbursement Stability Act (H.R. 8163) to reform policies by correcting for utilization misestimates, raising the annual limit and requiring regular updates to direct practice expenses.
Now, CMS must cut physician payment rates when policy changes or new service codes are expected to increase Medicare spending more than $20 million in a year. That budget-neutrality threshold has been unchanged since 1994.
The Patients First Act would raise the threshold to $57.64 million in 2028, indexing it to the cumulative MEI growth every five years starting in 2033.
Further reforming budget neutrality, the bill would create a correction process for utilization misestimates (PDF) starting in 2029.
It’s not uncommon for CMS to overestimate how many new claims will be submitted for a service added to the physician fee schedule. For example, CMS estimated that there would be 5.6 million new claims submitted when transitional care-management services were added in 2013. However, fewer than 300,000 claims were submitted that first year, and it was still fewer than one million claims after three years.
Based on this overestimation alone, Medicare physician payments were cut by more than $5.2 billion between 2013 and 2021. These redistributions are not added back under the current system, resulting in permanent cuts in Medicare physician payments across the board.
Under the Patients First Act, CMS would have to compare its estimated utilization against actual utilization for certain new, separately payable services and reconcile the difference—positive or negative—through a prospective conversion-factor adjustment.
The correction would be applied on a two-year lag in the fee schedule for the “assumption correction period.” For example, a 2029 misestimate is corrected in the 2031 fee schedule. Reconciliation would be triggered when the gap between the estimated and actual expenditures exceeds 0.1% of total physician fee schedule spending for the year. If CMS overestimated utilization, the adjustment is negative; if it underestimated, the adjustment is positive. These corrections would be exempt from budget neutrality, so fixing the errors wouldn’t trigger offsetting cuts elsewhere in the fee schedule.
The Patients First Act would also require CMS to update the direct costs inputs behind practice-expense relative value units (RVUs) at least every five years, updating all categories together and in consultation with physician specialty societies. This includes clinical staff wages, supply prices and equipment prices.
The bill also would cap budget-neutrality adjustments to no more than 2.5% a year, beginning in 2027, while leaving the underlying requirement in place.
Learn more about the bill and Medicare physician payment reform at the FixMedicareNow.org.
