MedPAC Proposes Changes to Medicare Physician Payment Rates for 2027

The Medicare Payment Advisory Commission (MedPAC) has proposed adjustments to 2027 physician payment rates within Medicare's fee-for-service system. A 1.25% increase is suggested for physicians engaged in advanced alternative payment models, while a 0.75% increase is proposed for others. However, with the lapse of a temporary 2.5% pay increase, these adjustments effectively translate to a pay reduction of 1.2% for participating physicians and 1.7% for others compared to 2026 levels.

MedPAC's goal is to ensure adequate compensation for clinicians while managing beneficiary costs, focusing on curbing cost-sharing and premium growth. This recommendation, grounded in the Medicare Economic Index (MEI) minus 1%, reflects economic influences on healthcare costs. Paul Masi, MedPAC's Executive Director, reiterated the relevance of the ongoing recommendation from 2025, stressing the necessity to enhance payment levels, especially in post-acute care settings where provider margins remain notably high.

Medicare's expenditure disparity, with estimates suggesting that 14% more is spent on Medicare Advantage (MA) plan enrollees than on traditional fee-for-service beneficiaries, sparks concern. Factors such as favorable selection and coding intensity contribute to the projected $76 billion spending gap in 2026. Despite progress, MedPAC continues to scrutinize MA spending impacts, with Paul Masi pointing to practices like chart reviews and diagnosis coding inflation through health risk assessments. In addition, the Medicare Part D program faces rising expenses, driven by shifting financial responsibilities and rising drug spending projections, with plan bids expected to increase substantially.