Medicare physician payment has long needed a fix, and organized medicine is backing a new federal bill aiming to repair some of the underlying faulty components of the calculations that have for decades plagued practices' viability and patients' access to care.
The Provider Reimbursement Stability Act of 2026 (H.R. 8163) would update the budget neutrality threshold that requires any payment increases or decreases to offset one another; more fairly adjust incorrect billing codes under budget neutrality rules; require the Centers for Medicare & Medicaid Services (CMS) to more accurately and timely evaluate the costs of running a medical practice; and limit large payment swings in either direction.
The proposed neutrality fix at the center of the bill aims to reduce instances where relatively small payment updates trigger redistribution cuts in other parts of the fee schedule, per TMA staff. Organized medicine has long argued the current structure can create winners and losers among physicians as CMS works around federally legislated mandates to redistribute payments within the allotted fee schedule budget.
For example, with the $20 million budget neutrality threshold, if CMS projects a $30 million increase in payments for a new or updated service, it must cut other physician payments by $10 million.
“We have one potential bill that answers some of the problems [in Medicare payment calculation] that would be a very important to be a step in the right direction,” said Texas Medical Association President Bradford W. Holland, MD. “It does move us closer to where we need to be" to help support the sustainability of physician practices, he added.
According to the American Medical Association, when adjusted for inflation, physician Medicare payment has declined 33% from 2001 to 2026.
H.R. 8163, introduced March 30 by Rep. Greg Murphy, MD (R-N.C.) and backed by numerous physician co-sponsors, would address outdated factors in payment calculations by:
- Raising the Medicare physician fee schedule budget neutrality threshold – unchanged since it was established in 1992 – from $20 million to $54.3 million, i.e., raising the cost cap on changes to the fee schedule to allow CMS to make larger payment increases for certain services without immediately triggering cuts to others;
- Starting in 2032, continuing to adjust the budget neutrality threshold “not less often than every five years,” using the Medicare Economic Index (MEI) used to calculate physician practice inflation;
- Providing updates to the direct costs used to calculate practice expense measures known as relative value units, or RVUs, and revisiting those at least every five years to better account for inflation; and
- Limiting positive or negative increases to the Medicare physician fee schedule conversion factor to no greater than 2.5% each year.
“Physicians in America who see Medicare patients are being forced to close their doors because of increasing medical costs and persistent cuts to their reimbursements,” Representative Murphy said in a joint press release. “By updating the Medicare Physician Fee Schedule reimbursement policies, we can protect private practice and ensure access to affordable, high-quality care across the country for generations to come.”
In the same announcement, AMA President Bobby Mukkamala, MD, added the bill “allows for a recalibration so that unnecessary cuts can be avoided. That’s good budgeting and good medicine.”
Dr. Holland also points out that passage of this legislation would be best coupled with one permanently tying Medicare physician payment to the MEI, which medicine also continues to advocate for.
“At a minimum, you need to have Medicare physician payments at the amount of cost it takes to care for Medicare patients,” he said.