Improving Physician Payment — ACP 2026 Advocacy Priority

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Protect patients’ access to care by ensuring fair and appropriate physician compensation in Medicare. Necessary changes include annual inflationary adjustments and increased payment for primary care services, modernizing budget-neutrality requirements for Medicare Physician Fee Schedule (PFS) and allowing physicians to waive patient cost-sharing associated with physician services in Medicare.

Why Physician Payment Reform Is Needed

Patient care has been jeopardized because the Medicare PFS is failing to provide physicians with the resources needed to keep pace with rising patient care costs. Unlike other parts of Medicare, the PFS does not have built in inflationary updates. As a result, physician payment rates have declined by a staggering 33 percent over the past two decades when adjusted for inflation. The financial instability of our Medicare payment system, combined with increased administrative burdens of running a physician practice, has led to physician burnout, market consolidation, and the closure of independent practices.

These challenges are particularly acute for primary care. Internal medicine physicians provide comprehensive, continuous care; manage complex chronic conditions; and improve patient outcomes and longevity. Yet primary care services remain undervalued under the Medicare PFS.

Without federal legislation that provides a payment increase reflecting rising inflationary pressures, patient access will be threatened, particularly in rural and underserved communities. In addition to failing to provide annual payment updates that keep pace with inflation, one of the structural challenges of the current PFS system is the statutory budget neutrality requirement. Under this requirement, any increases to physician services within the PFS final rule must be offset by an arbitrary across-the-board budget neutrality reduction to all services paid under the PFS.

Over the past several years, the physician fee schedule has repeatedly included across-the-board payment reductions due to the statutory budget neutrality requirements. Congress has periodically enacted temporary legislation to mitigate these scheduled cuts, but these short-term fixes have not addressed the underlying structural flaws in the Medicare physician payment system.

ACP’s Policy Position on Physician Payment Reform

We urge Congress to provide an annual positive update to the PFS. Congress should also ensure that the PFS includes annual updates consistent with the Medicare Economic Index. These updates should provide physicians with a stable and predictable payment system that reflects increases in the cost of delivering care.

All payment systems need to substantially increase payments for primary care commensurate with its value in achieving better outcomes and lower costs. Payment policies must recognize the value of primary care and ensure that payment is sufficient to help reverse the primary care physician shortage.

We support reforms to budget neutrality requirements in the PFS that would modernize the system and reduce annual Medicare payment reductions. We are also concerned that CMS may overestimate the utilization of newly established physician services, resulting in unnecessary reductions to physician payments through the application of the budget neutrality requirement.

Additionally, we are concerned that cost-sharing for physician services, such as Advanced Primary Care Management and Chronic Care Management, for patients with complex medical and social needs limits patient consent and uptake. We urge Congress to enact legislation that would allow physicians to waive patient cost-sharing for physician services.