What’s the news: Congress wrapped up its business in 2024 by failing to stop a fifth consecutive year of physician pay cuts that are threatening access to high-quality care, but Medicare Advantage (MA) plans learned from the Centers for Medicare & Medicaid Services that they are in line to get an average pay boost of 4.33% from 2025 to 2026.

Physicians, by contrast, are seeing 2.8% across-the-board cuts due to a broken and unsustainable Medicare payment system that especially affects patients with disabilities and those who live in rural areas. The congressional failure in late 2024 came despite AMA’s leading the charge to reform the Medicare payment system to avoid what AMA President Bruce A. Scott, MD, has called an “oncoming crisis” in medical care. 

Hundreds of physicians from across the country are expected to come out in force for the AMA National Advocacy Conference in Washington, D.C., Feb. 10–12. The goal is to show Congress the real-life impact of the broken Medicare payment system on patients and on physician practices and the communities across America that doctors serve. Learn more and register now.

Why it’s important: “While MA plans receive an increase beyond the expected health care inflation rate, Congress not only failed to provide a physician payment update but allowed a new round of cuts at the end of the lame duck,” noted Dr. Scott. 

“It's unbelievable they're giving insurance companies that had record profits an increase while at the same time cutting payment to physician practices that are struggling to survive,” added Dr. Scott, an otolaryngologist and head-and-neck surgeon in private practice in Louisville, Kentucky. 

“This contrast highlights the urgent need for Congress to prioritize linking payment to physician practices to the cost of providing care. Otherwise, with or without MA plans, patient access will suffer if physicians close their practices. A new Congress is meeting—it’s time for a new approach to physician payment reform.”

A bipartisan group of 10 House members introduced a bill last week to stop the 2.8% cut in Medicare payments to physician practices this year while providing a 2% payment update. The AMA strongly supports the legislation and will work with members to include it in upcoming legislation to fund the federal government beyond the March 14 statutory deadline. 

Reps. Greg Murphy, MD (R-N.C.), and Jimmy Panetta (D-Calif.), along with eight other House members, introduced the Medicare Patient Access and Practice Stabilization Act (PDF). This legislation, effective April 1, would prospectively cancel the 2.8% percent cut that took effect Jan 1. Similar legislation enjoyed bipartisan, bicameral support, but Congress failed to address the issue during the lame duck session.

In a separate statement, Dr. Scott noted that leading experts on Medicare payment agree change is badly needed. Last month, the Medicare Payment Advisory Commission (MedPAC) recommended “linking next year’s physician payment update to the growth in the cost of providing care, exhibiting a keen grasp of what is needed to help ensure patients will have continued access to care,” the AMA’s president said, adding that “Congress should take note.”

The AMA backs tying Medicare payment updates to the full Medicare Economic Index (MEI). After adjusting for inflation in practice costs, Medicare physician payment has actually dropped by 33% since 2001 (PDF). Acknowledging this reality, MedPAC voted last month to recommend that the 2026 payment update for physician practices be MEI minus 1 percentage point.

“This recommendation slightly adjusts the formula it endorsed last year to increase payment by 50% of MEI,” Dr. Scott noted. “While neither recommendation covers the estimated inflation that physician practices face, both approaches embrace the fact that Medicare payment updates need to be tied to inflation.”

It is clear, Dr. Scott added, that “the Medicare payment system is broken,” but he noted that “MedPAC has come up with a thoughtful response that heads in the right direction. Congress must prioritize Medicare reform this year. The status quo is unsustainable and unhealthy for our country.”

Learn more: Explore further with the AMA’s Medicare Basics series, which provides an in-depth look at important aspects of the Medicare physician payment system. With these six straightforward explainers on budget-neutrality rules, the Medicare Incentive-based Payment System (MIPS), MEI and more, policymakers and physician advocates can learn about key elements of the payment system and why they are in need of reform.

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