Federal Budget Bill Includes Medicare Pay Hike for MDs

The massive budget bill now being debated in Congress includes a proposal for raising Medicare pay for clinicians starting in 2026.

That could be good news for physicians who in 2025 saw a nearly 3% effective pay cut in Medicare reimbursement.

However, clinicians and advocates remain concerned about potentially large cuts to Medicaid, which covers about 71 million Americans.

The modest increase for 2026 Medicare pay is “welcome, but this is a large and complicated bill,” Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, told Medscape Medical News.

The House and Senate have yet to agree on the budget reconciliation bill.

Substantial Medicaid cuts also would likely have “negative repercussions for physician reimbursement,” Gilberg told Medscape Medical News.

“It remains to be seen how this will all net out in the end, but we appreciate our physician champions in the House working to address Medicare reimbursement shortfalls in an otherwise austere legislative package as it relates to healthcare,” Gilberg said.

A 2025 Medicare Pay Cut

Congress allowed a 2.83% cut in 2025 to the Medicare conversion factor, which is key to setting Medicare payment rates for services provided by about 1.3 million clinicians, including physicians, nurse practitioners, and physician assistants.

The Republican-controlled House Committee on Energy and Commerce has proposed raising the Medicare conversion factor equal to 75% of the estimated percentage increase in inflation, as determined by the Medicare Economic Index (MEI). In 2027 and following years, the increase would be 10% of that index.

Still, the committee’s Democrats called this week for more than just a stopgap Medicare pay hike.

“This is woefully underfunding the need to address inflation,” said committee member Rep. Raul Ruiz, MD (D-CA), who worked as an emergency physician before joining Congress. “The Medicare physician fee schedule needs a permanent fix, not this temporary, short-changed fix.”

Reconciliation Proves Challenging

The Medicare pay proposal is part of House Committee on Energy and Commerce’s section of a wide-ranging draft GOP legislative package, known as a reconciliation bill. The committee on Wednesday passed its section of the reconciliation text in a 30-24 vote along party lines.

Reconciliation is a special process in Congress that allows lawmakers to bypass some Senate procedural hurdles. It’s a rare chance for the majority party to move significant legislation without getting the bipartisan support usually required for Senate passage of bills.

Reconciliation requires House and Senate lawmakers to concur on a budget blueprint, which has proven challenging.

Continued Interest in Physician Payment

There’s strong bipartisan support in Congress for revising the Medicare physician fee schedule.

A bill introduced in 2023, which would have provided for an update equal to the annual MEI percentage increase, had 126 Democratic and 47 Republican co-sponsors.

Mark Miller, PhD, executive vice president of healthcare at the philanthropy Arnold Ventures, said Congress should try to shift Medicare away from its current reliance on the fee-for-service model.

Physicians earn revenue through both the volume of services provided and the price, as reflected in the payment rate, said Miller, a former executive director of the Medicare Payment Advisory Commission.

“Keeping in mind that Medicare physicians are financed by taxpayers and beneficiary premiums, payment rates should be deemed adequate when they assure beneficiaries have access to high-quality care — rather than blindly defaulting to the full Medicare Economic Index,” Miller wrote.

“That said, the long run updates…may be inadequate, and the Congress likely will need to revisit the updates — which will result in higher costs to taxpayers and beneficiaries,” Miller said.

He suggested offsetting these new costs with cuts to payments to Medicare Advantage plans for “upcoding,” or making patients appear more ill than they are.

Miller said savings could also be achieved by a shift to site-neutral policies, which would end higher pay for some services depending on the ownership of the facility.

Kerry Dooley Young is a freelance journalist based in Washington, DC. She has covered health policy for more than 20 years.