In proposed Medicare physician payment rule, CMS emphasizes Trump administration priorities

Medicare’s 2026 proposed rule for physicians is a key early chance for the Trump administration to shape U.S. healthcare policy in alignment with HHS Secretary Robert F. Kennedy Jr.’s Make America Healthy Again approach.

Some of the most noteworthy provisions thus represent an effort to shift resources to primary care and prevention and to crack down on potential waste in the system. Comments on the proposed rule are due by Sept. 12.

Payment rate

The conversion factor that determines the payment rate is proposed to increase after falling each year since 2021. A driver of the increase is a 2.5% payment boost for 2026, as legislated in the budget reconciliation bill signed into law by President Donald Trump on July 4.

As established in the Medicare Access and CHIP Reauthorization Act of 2015, next year is the first to include disparate payment rates based on whether a physician is participating in an advanced alternative payment model (APM).

For physicians in an advanced APM, the conversion factor would increase by 3.83% over 2025, to $33.59. Other physicians would be in line for a 3.62% increase, to $33.42.

“These incremental increases fail to reverse the long-term erosion in Medicare physician payment, which has not kept pace with inflation or practice cost growth,” the American Medical Group Association said in a written statement.

Even though the reconciliation bill provided for a payment bump, some advocates still considered the legislation a letdown because it did not follow through on a proposal to overhaul the Medicare payment system for physicians. In a version passed by the House in May, the fee schedule would have been replaced by an inflation-based annual update to better link reimbursement rates to practice costs.

Methodological changes

The 2026 conversion factor also includes a 0.55% across-the-board increase as a budget neutrality adjustment due to declines in certain RVUs.

For example, RVUs reflecting non-time-based services would be reduced by 2.5% based on the findings of a five-year look-back at productivity metrics.

“Only a small portion of the total codes are considered for revaluation annually, and CMS relies primarily on subjective information from surveys that have low response rates, with respondents who may have inherent conflicts of interest (since their responses are used in setting their payment rates),” the agency stated in a fact sheet on the proposed rule. “Research over time has demonstrated that the time assumptions built into the valuation of many [Medicare physician] services are, as a result, very likely overinflated.”

Due to perceived data limitations, CMS intends to shift the basis for its assessment of practice expenses away from the Physician Practice Information Survey, as compiled by the American Medical Association. Another concern with the current methodology is that it may hamper independent physician practices by underestimating their indirect costs, relative to hospital-employed physicians.

For certain services, including radiation treatment and some remote patient monitoring, CMS wants to base the payment rate on auditable hospital data, such as from Medicare’s hospital outpatient payment system.

“This approach promotes price transparency across settings, offers more predictable rate-setting outcomes and limits the influence of limited survey data,” CMS wrote in the fact sheet. 

Telehealth updates

While telehealth advocates hope for an extension of pandemic-era flexibilities that have allowed for expanded Medicare coverage of telehealth, any such move would have to come from Congress before the flexibilities expire Sept. 30. In the meantime, CMS proposes to streamline the criteria for updating the list of covered services. There also would be additional flexibility in the requirements for in-person visits following a telehealth visit for some services.

The accommodation allowing physicians to supervise a care encounter via telehealth would become permanent, although physicians with teaching responsibilities at academic medical centers would have to return to in-person supervision, except at teaching facilities in rural areas.

Boost for behavioral health

CMS wants to improve the coordination of behavioral healthcare by paying for the incorporation of such services as part of advanced primary care management. Three new G-codes would apply to integrated services, specifically initial and subsequent psychiatric collaborative care management, along with longer-term care management services for behavioral health conditions.

Expanded payment options also would apply to digital mental health devices, including those used to support patients with ADHD.

Targeting perceived waste

In a change that likely would slash payment for certain services, skin substitutes (used as a treatment for open wounds) would be viewed as incident-to supplies, instead of as biologicals, when provided in physician offices or hospital outpatient departments.

CMS said constraints are needed after the costs of such treatment increased from $252 million in 2019 to more than $10 billion in 2024, indicating many of the payments are for inappropriate care.

The restrictions would be beneficial for providers in accountable care scenarios.

“We applaud CMS for proposing new payment policies to pay for skin substitutes,” the National Association of ACOs (NAACOS) said in a written statement. “Unfortunately, many accountable care organizations continue to be held financially accountable for this unnecessary spending. In our shared fight against bad actors, more must be done to hold ACOs harmless for significant, anomalous and highly suspect billing.”

In subsequent years, payment for different skin substitutes would vary to align with a particular product’s FDA regulatory category.

Value-based payment push

The rule includes a proposal for a new pilot model, the Ambulatory Specialty Model (ASM), which would be mandatory in selected markets for specialists who treat Medicare fee-for-service beneficiaries with heart failure or low back pain. Similar to the hospital-focused Transforming Episode Accountability Model, which begins in 2026 and is intended to ramp up the bundled-payment approach in Medicare, the ASM would run for five years starting in 2027.

Performance measurement in the proposed model would be similar to the MIPS Value Pathways program within the Quality Payment Program, albeit with a narrower set of measures. Some measures would gauge tools designed to improve collaboration between specialists and primary care physicians.

Other updates in the overall rule would affect the main Medicare accountable care model, the Medicare Shared Savings Program, reducing from seven years to five the maximum window for participating in an upside-only track. That change would take effect in 2027. ACOs with fewer than 5,000 assigned beneficiaries in a given benchmark year would be ineligible for the MSSP’s Enhanced track and would need to settle for advancing to a higher Basic track.

NAACOS said the latest MSSP regulations ideally would have addressed issues such as the benchmarking methodology that essentially penalizes ACOs for past strong performance.

Drug payment changes

Proposed changes to the calculation of average sales price (ASP) for drugs and biologics include clarifying the definitions for bundled pricing and service fees and establishing that ASP must include units sold at maximum fair price, as set by Medicare’s drug price negotiations.

Tweaks to the determination of ASP would affect payments for Medicare Part B drugs, including those made available in the 340B Drug Pricing Program.