MedPAC Calls for Tying Medicare Payment to Inflation with a Permanent Update
By Phil West

Through its latest recommendations, the Medicare Payment Advisory Commission (MedPAC) reiterated its support for a foundational pillar of Texas Medical Association advocacy – that Medicare physician payment be tied to inflation with a permanent update that would give practices a strong foundation from which to care for patients going forward.  

“The Commission’s studies have shown that we’re doing a good job of taking care of the Medicare patients, but this is not reflected in how we’re compensated,” said Gary J. Sheppard, MD, chair of TMA’s Council on Socioeconomics.  

MedPAC is an independent and bipartisan congressional agency established to advise Congress on Medicare issues. In its March 2025 report to Congress, the agency urged using the Medicare Economic Index (MEI) – a measure of physician practice cost inflation used by the Centers for Medicare & Medicaid Services (CMS) – to update physician payment.    

“Given recent inflation, input-cost increases in 2026 – which are currently projected to be 2.3% – could be difficult for clinicians to absorb,” report authors noted.  

Using the projected 2.3% growth in MEI for that year minus 1 percentage point, MedPAC recommended increasing the 2026 physician payment rate by 1.3%, which it noted is “above current-law updates of 0.75% [for alternative payment models] or 0.25% [for all other clinicians]. 

“The recommendation would be a permanent update that would not expire at the end of 2026 and therefore would be built into subsequent years’ payment rates. This approach differs from the temporary updates specified in current law for 2021 through 2024, which have each increased payment rates for one year only and then expired.”  

The report also went on to reiterate its March 2023 recommendation to Congress to “establish new, permanent safety-net add-on payments for clinician services furnished to fee-for-service Medicare beneficiaries with low incomes.”  

MedPAC projected “the Commission’s recommended safety-net add-on policy would increase the average clinician’s fee schedule revenue by 1.7%,” including a 4.2% increase for primary care physicians.”  

The two policies combined, it estimated, “would increase fee schedule revenue by an average of 5.7% for primary care clinicians and by an average of 2.5% for other clinicians. This recommendation would balance the need to provide adequate payments to clinicians with the need to limit growth in beneficiaries’ cost sharing and premiums. 

TMA and the American Medical Association continue to advocate for tying physician payment to the full MEI. 

These recommendations come in the wake of a fifth consecutive year of physician payment cuts, contributing to what AMA calculates as a 33% decline in inflation-adjusted payments from 2001 to 2025.  

Dr. Sheppard also noted that while MedPAC’s proposed pay adjustment for 2026 wouldn’t quite keep pace with the rising costs for physicians, especially those operating private practices, in the way the TMA and AMA-backed full MEI would, it would at least narrow the widening payment gap they have been navigating for nearly 25 years.  

“The lack of any predictable, positive, and inflationary based payment update … is contributing to the collapse of independent practices,” TMA said in a June 2024 letter to Washington, D.C. echoing Dr. Sheppard’s current concerns. 

“In studying options, MedPAC saw the overwhelming evidence that a new approach was needed,” said AMA President Bruce A. Scott, MD, in AMA’s coverage of the vote.  

Congress is currently considering House Resolution 879, which would reverse the latest 2.83% Medicare pay cut and provide a 2% pay increase through Dec. 31. Keep up with TMA’s federal and state advocacy, and contact the Physician Payment Resource Center to address any existing payment issues.