CMS Unveils Bold Plan for Physician Pay and Medicare Reform
The Centers for Medicare & Medicaid Services (CMS) has rolled out a proposed rule for the 2026 Medicare Physician Fee Schedule (PFS) that promises significant changes to how doctors are compensated and how Medicare operates. Announced on July 14, this plan includes a 3.8 percent pay increase for physicians, marking the first hike in five years after a series of cuts. The proposal aims to balance improved compensation with substantial cost-saving measures, addressing long-standing concerns about wasteful spending in the healthcare system.
Health and Human Services Secretary Robert F. Kennedy Jr. highlighted the dual focus of the initiative, stating, 'The plan will save billions on wasteful spending while boosting rates for doctors and modernizing Medicare services.' This approach seeks to protect independent medical practices, which have faced financial pressures from declining reimbursements over the past decade. Kennedy also credited Dr. Oz's leadership in shaping a rule that 'modernizes CMS payment systems, eliminates perverse incentives, and harnesses better data to improve care for patients with chronic disease while protecting the future of hometown doctors.'
Addressing Chronic Disease and Reducing Wasteful Spending
A key component of the CMS proposal is its emphasis on enhancing care for chronic conditions, a growing concern for Medicare recipients. The rule introduces new quality measures for primary care management and a payment model specifically designed to improve outcomes for patients with chronic diseases. This shift reflects a broader goal to move away from incentivizing costly procedures and instead focus on preventive and ongoing care, as noted by Kennedy's earlier comments on the system's tendency to drive doctors toward expensive surgeries rather than chronic disease management.
Alongside better care models, CMS is targeting unnecessary expenditures, such as the overuse of skin substitutes in treatments. The agency estimates that cracking down on such practices could save billions, redirecting funds to more effective healthcare services. Additionally, a competitive bidding program for medical goods like glucose monitors and insulin pumps is under consideration, aiming to further reduce costs without compromising patient access.
Impact on Physicians and Future of Medicare Access
For many physicians, the proposed 3.8 percent pay bump offers a much-needed reprieve after years of reimbursement cuts that have threatened the viability of independent practices. The American Medical Association has previously warned that ongoing reductions—such as the 2.8 percent cut proposed last year—jeopardize older adults' access to care, urging Congress to act. This latest CMS rule, with its two separate conversion factors for payment models as mandated by statute, attempts to address these concerns by aligning compensation with value-based care goals.
However, challenges remain as practice costs continue to rise—projected at 3.6 percent for 2025—potentially outpacing the proposed increase. Rural hospitals, also feeling the strain of looming cuts, are exploring service expansions to weather financial pressures. As CMS moves forward with this rule, the balance between cost savings, physician support, and patient care will be critical in shaping the future of Medicare for millions of Americans.