The Medicare Payment Advisory Commission’s (MedPAC’s) most recent report recommends a 0.5% increase to Medicare’s 2027 physician fee schedule (PFS) payment rates above what current law would require, while signaling the need for a permanent Medicare payment solution, a principle medicine has long advocated.
The Texas Medical Association is keeping an eye on any federal developments resulting from these new recommendations, anticipating further recommendations in the annual MedPAC follow-up report, expected in June.
MedPAC’s March 2026 report explains that for 2027, current law calls for PFS payment rates to decline by 1.7% for physicians participating in an advanced alternative payment model (A-APM), and to decline by 2.2% for all other physicians, relative to 2026 payment rates.
The 2027 PFS reductions reflect the net effect of two statutory provisions: (1) the expiration of the one-year 2.5% increase for 2026 only through the federal budget bill known as the One Big Beautiful Bill Act, and (2) an increase of .75% for physicians participating in an A-APM and a .25% increase for all other physicians in 2027, pursuant to the Medicare and CHIP Reauthorization Act of 2015 (MACRA).
To lessen the impact of a 1.7% and a 2.2% decrease for physicians participating in A-APMs and all other physicians, respectively, in 2027, MedPAC recommends an increase of 0.5% to current-law payment rates for 2027.
MedPAC’s recommended 0.5% positive adjustment for 2027 payment rates would result in net payment rate reductions of 1.2% for physicians participating in A-APMs and 1.7% for all other physicians, relative to 2026.
While MedPAC acknowledges its recommendation would still constitute an overall reduction in payment compared to 2026 payment rates, it notes that the decrease “would be smaller than what would otherwise occur under current law.”
“At some point, this is going to be financially not feasible anymore,” said Tina Philip, DO, vice chair of TMA’s Council on Socioeconomics and an independent family physician in Round Rock. “Independent practices can't afford to take these pay cuts, and they can't absorb them like a bigger system can.”
MedPAC notes that it would recommend a permanent update built into future years’ payment rates, arguing that such a recommendation would balance the need to provide adequate payment to physicians while curbing cost-sharing and premiums for patients and “[maintaining] financial pressure on clinicians to constrain their costs.”
However, the most recent MedPAC report shows MedPAC’s commissioners did not vote on a recommendation to establish a permanent update built into future years’ payment rates, as they did in their June 2025 report.
TMA has long called for tying Medicare payment rates to the Medicare Economic Index (MEI), which the Centers for Medicare & Medicaid Services (CMS) uses to calculate physician practice cost inflation. Though MedPAC mentions adopting a permanent MEI-based methodology, it does not explicitly recommend it as in past years.
“When adjusted for inflation, Medicare physician payment rates have declined 33% from 2001 to 2025,” TMA said in a letter to CMS on Sept. 12, 2025, urging a fix via Congress. “Many practices already operate on extremely thin margins as operational costs continue to rise. This directly threatens patient access to timely, high-quality care, particularly in underserved areas.”
Federal legislation addressing this longstanding concern for TMA and other physician advocacy groups was recently introduced in the House.
As of this writing, TMA is still analyzing the newly introduced Provider Reimbursement Stability Act. According to a preliminary American Medical Association analysis, H.R. 8163 would address a key component of organized medicine's comprehensive approach to reforming Medicare payment by amending federal budget neutrality requirements that mandate any pay increases and decreases in the fee schedule be offsetting, and by regularly aligning that budget ceiling with MEI.
Read Texas Medicine Today for updates and learn more about TMA’s federal advocacy.
Phil West
Associate Editor
(512) 370-1394
phil.west[at]texmed[dot]org
Phil West is a writer and editor whose publications include the Los Angeles Times, Seattle Times, Austin American-Statesman, and San Antonio Express-News. He earned a BA in journalism from the University of Washington and an MFA from the University of Texas at Austin’s James A. Michener Center for Writers. He lives in Austin with his wife, children, and a trio of free-spirited dogs.