2026 CMS Fee Schedule Updates and Workers' Compensation Costs
Anticipated updates to the Centers for Medicare and Medicaid Services' (CMS) fee schedule in 2026 are expected to have a minimal impact on workers' compensation medical costs, despite potential variations across states.
The National Council on Compensation Insurance (NCCI) reports that the CMS will implement a 3.3% increase in the physician conversion factor, following a series of reductions. This adjustment is largely facilitated by a temporary statutory payment measure, marking a significant shift for physician expenses, which account for approximately 40% of the nation’s workers' compensation medical spending. This change aims to balance financial perceptions of physician work.
Impact of CMS Adjustments
The CMS has also revised the Relative Value Units (RVUs), which will increase payments for Evaluation and Management services while decreasing those for Surgical services. This revaluation's effects on payers will depend on the service composition within their claims. These adjustments highlight CMS's efforts to align payments with the perceived value of different medical services.
Facility and Equipment Payments
Facility payment rates are expected to rise by 2.6%, continuing the trend seen in recent years. This is influenced by economic inflation and productivity adjustments. Given that facility costs also represent around 40% of workers' compensation medical expenditures, these updates suggest stability rather than a radical change. Additionally, the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) schedule will experience a 2.0% increase. Although this sector represents a smaller fraction of expenses, varying between 4% and 13% by state, most payments are not constrained by CMS’s Competitive Bidding Program.
State-Level Variations
The impact of federal fee adjustments may differ across states due to distinct state fee schedules, their alignment with CMS rates, and specific medical cost distributions. States that closely align with CMS schedules could see more significant shifts in cost dynamics. Insurers and employers must understand these variances to manage financial exposure effectively.
- Physician conversion factor: 3.3% increase
- Facility payment rates: 2.6% rise
- DMEPOS schedule: 2.0% increase
- State impact: Varies depending on alignment with CMS
Industry Observations
While these CMS updates might not significantly raise workers’ compensation medical costs compared to prior years, they require careful monitoring. Additional insights from industry players like Swiss Re Institute and The Hartford highlight emerging risks and rising liability claims, while reports from CPWR and First Connect address challenges like workforce safety and technology adoption. These factors contribute to the evolving market conditions that insurers and industry professionals must navigate.