Medicare Pay Cuts: 2.5% Reimbursement Reduction Looms

Doctors — especially specialists — are pushing back against proposed changes to Medicare payment that would tamp down on reimbursement next year.

Medicare’s proposed physician fee schedule for 2026 includes a base rate hike of 2.5%. But it also includes an efficiency adjustment that would reduce payment by 2.5% for thousands of procedures and changes to how regulators calculate practice expense that would lower reimbursement for services performed in facilities like hospitals.

The reforms are meant to account for increased efficiency in procedures that doctors perform frequently, realign payment for primary and specialty care, and recognize larger indirect costs for doctors in office-based settings.

Many physicians support those goals. But the policy changes themselves are a bad idea, doctors are warning the CMS.

Many of the thousands of comments on the rule were from individual physicians and provider trade associations saying that the proposals are overly aggressive, based on flawed reasoning and would further destabilize Medicare’s already shaky physician payment system.

“As one of only two Infectious Disease specialists in Southwest Louisiana, providing care to a very large number of patients on Medicare/Medicaid, the proposed cuts will force me to consider either restricting access to those populations or just retire, both decisions being equally painful,” one commenter wrote.

Taken together, the reforms would result in 37% of oncologists facing cuts between 10% and 20%; 80% of infectious disease doctors facing cuts of 5% or more; and more than 56% of internists facing cuts of 5% or more, according to the American Medical Association.

“Reducing Medicare reimbursement will affect my ability to delivery high quality patient care. Every year our business expenses go up, including the cost of staff salaries and equipment purchases and Medicare reimbursements keep going down,” another commenter, who identified themselves as a glaucoma specialist in California, wrote. “It is becoming too much to bear.”

‘Do not finalize the efficiency adjustment’

The CMS released the 2026 Medicare physician fee schedule in July. The rule, for the first time, includes an efficiency adjustment to certain work relative value units, which measure the resources used to furnish a service and become payment rates after a conversion factor is applied.

Regulators proposed a 2.5% decrease in work RVUs for most services, with further cuts every three years.

The adjustment is meant to correct Medicare historically overvaluing the time-based assumptions backing payment for these services, regulators said. Physicians have likely become more efficient at providing them over time as technology gets better and doctors gain experience, so Medicare is overpaying as a result, according to the CMS.

The proposal doesn’t include time-based codes, like for evaluation and management services or behavioral health. Still, the efficiency adjustment would result in cuts to more than 7,000 services — which equates to 95% of services provided by physicians, according to the AMA.

“This is not going to make America healthier,” the AMA wrote in a press release about the rule last week.

The adjustment is arbitrary and based on flawed assumptions, according to physician groups. In its comments on the rule, the AMA cited a study that found there has not been an efficiency gain in procedure times — and that some procedures are actually becoming more complex and are taking doctors longer to perform.

The proposal would also add significant administrative complexity for doctors and create distortions in measuring productivity, according to the Medical Group Management Association, which represents more than 15,000 medical groups.

That’s not to mention the additional financial stress on providers if Medicare further restricts reimbursement. Physicians already say that payment in the program, which covers almost 69 million Americans, isn’t adequate to cover the increasing cost of providing care. Part of the issue is that the CMS is required by law to make annual updates to Medicare physician pay budget neutral, so keeping pace with rising inflation is next to impossible.

Medicare reimbursement to doctors dropped 33% from 2001 to 2025 when adjusted for inflation in practice costs, according to the AMA.

If the efficiency adjustment goes through, it will aggravate the payment reductions that doctors have endured for decades, the American College of Rheumatology wrote in its comments on the fee schedule.

“The proposed across-the-board adjustment is not being appropriately applied and does not reflect the time and effort physicians use in providing thousands of services,” the ACR wrote. “The ACR strongly urges CMS to rescind this proposal and explore alternatives.”