MedPAC concerned that MPFS increases won't cover physician costs

The Medicare Payment Advisory Commission (MedPAC) has released its June report to Congress and is expressing concern that Medicare Physician Fee Schedule (MPFS) increases won't adequately cover physician costs.

The commission has suggested that Congress maintain a flat MPFS payment rate for 2025 but that in 2026, the rate should increase by 0.75% per year for physicians participating in advanced alternative payment models (A-APMs) and by 0.25% for all others.

However, MedPAC is concerned that these MPFS increases won't adequately cover clinicians' costs (measured by the Medicare Economic Index [MEI]) when it comes to inflation, which it expects to increase by an average of 2.3% per year from 2025 through 2033. The increases in MPFS payment rates starting in 2026 are "far below the expected growth in the MEI," the commission noted.

"This gap between the growth in clinician input costs and updates to PFS payment rates could, over time, create incentives for clinicians to reduce the number of Medicare beneficiaries they treat or stop participating in Medicare entirely," MedPAC wrote.

As such, the commission suggested Congress take one of the following approaches:

  • Update the practice expense portion of the fee schedule payment rates by the hospital market basket, adjusted for productivity.
  • Update the total fee schedule payment rates by the MEI minus 1 percentage point.

"The second approach would be simpler to implement than the first, would not lead to different rate increases among clinicians in different specialties, and would reduce or eliminate the need for policymakers to revisit fee schedule update policy in the near future to provide separate increases to the work portion of fee schedule payments," it wrote.

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