The Medicare Payment Advisory Commission (MedPAC) has made a recommendation to link the upcoming year's physician payment update to the growth in care costs. This move aims to ensure that patients continue to have access to necessary healthcare services. The American Medical Association (AMA) expressed its support for this initiative, advocating for Medicare updates that reflect the full Medicare Economic Index (MEI), or practice cost inflation.
MedPAC's recent vote suggests a 2026 payment update for physician practices at MEI minus one percentage point. This recommendation slightly modifies last year's formula, which proposed an increase by 50 percent of MEI. While neither approach fully covers the estimated inflation faced by physician practices, both recognize the necessity of tying Medicare payment updates to inflation.
As MedPAC prepares to submit its report to Congress in March, the AMA urges lawmakers to consider MedPAC’s findings that current Medicare payments are inadequate and could threaten patient access to care. In December, Congress failed once again—this time for the fifth consecutive year—to prevent a cut in Medicare payments by 2.8%, despite rising practice costs estimated at 3.5% according to Medicare.
In contrast, Medicare Advantage plans are set to receive an average payment increase of 4.33% from 2025 to 2026. Physicians providing essential care face challenges while insurance companies see increasing profits.
The AMA calls attention to what it describes as a "broken" Medicare payment system and praises MedPAC's response as thoughtful and headed in the right direction. The organization stresses that Congressional action on Medicare reform is crucial this year due to an unsustainable status quo detrimental not only for healthcare providers but also for patients across the country.
