Medicare's doctor-pay formula finally moved — a little
Summary
A one-time statutory boost pushed Medicare's 2026 physician conversion factor to $33.40, up 3.26% from 2025's $32.35. It's the first real increase in years — but MedPAC's own figures show the fee schedule has grown just 14% since 2000 against 52% growth in practice costs, and 12,244 physicians have formally opted out of the program.
How the number gets set
The conversion factor is not set by a single formula anymore. Beginning in CY2026, statute splits it in two depending on whether a clinician participates in a qualifying Advanced Alternative Payment Model (A-APM). Both tracks got a one-year +2.50% increase mandated by statute, plus an estimated +0.49% adjustment for changes in work RVUs. On top of that, qualifying A-APM participants (QPs) got an extra +0.75% and everyone else (non-QPs — the large majority of billing physicians) got +0.25%. The net result, per CMS's fact sheet: the non-QP conversion factor rose from $32.35 to $33.40 (+3.26%), and the QP conversion factor rose to $33.57 (+3.77%).
View data as table
| 2025 conversion factor | $32.35 | |
|---|---|---|
| 2026 non-APM conversion factor | $33.40 | +3.26% |
| 2026 Advanced APM conversion factor | $33.57 | +3.77% |
That 2.50% statutory bump — not a routine annual update, but a one-time provision — is the reason 2026 stands out at all. Without it, the fee schedule would have moved by roughly a quarter of a percentage point, in line with the pattern that has held since 2015.
Two decades of falling behind
's own advisers have been documenting that pattern for years. MedPAC's June 2025 Report to Congress tracked the conversion factor against the Medicare Economic Index (MEI), the government's own measure of how fast a physician practice's costs — staff wages, rent, supplies, malpractice insurance — actually rise. From 2000 to 2023, MedPAC found, cumulative fee schedule updates totaled just 14%, while MEI growth totaled 52% — a 38-percentage-point gap between what Medicare pays per service and what it costs to deliver one.
View data as table
| Fee schedule updates (nominal rate changes) | +14% |
|---|---|
| Practice cost inflation (MEI) | +52% |
| Fee schedule spending per FFS beneficiary | +101% |
That gap did not translate directly into falling physician revenue. Fee schedule spending per fee-for-service beneficiary actually grew 101% over the same period — but MedPAC attributes that almost entirely to clinicians billing more services, and more intensive ones, per patient, not to higher per-service pay. The Commission's own conclusion: "even after adjusting for inflation, each FFS Medicare beneficiary generated more revenue for clinicians in 2023 than they did in 2000" — while the price of any single service kept losing ground to what it costs to provide.
The exit door stays mostly shut
The predicted consequence of a shrinking real conversion factor is physicians declining to take Medicare patients at all. So far, that has not happened at scale. KFF's analysis of CMS's Medicare Opt-Out Affidavits data found that, as of November 2024, 12,244 non-pediatric physicians — 1.2% of the total — had formally opted out of the program, filing the affidavit required to bill Medicare patients privately instead. describes that share as "similar to the shares reported in 2013 and 2022": broadly flat, not accelerating. Ninety-eight percent of non-pediatric physicians still participate.
The exits that do happen cluster hard by specialty.
View data as table
| All non-pediatric physicians | 1.2% |
|---|---|
| Neurologists | 3.2% |
| Plastic & reconstructive surgeons | 4.5% |
| Psychiatrists | 8.1% |
Psychiatrists opt out at nearly seven times the physician-wide rate, and account for 39% of every opted-out physician nationally — the clearest sign the payment formula's strain isn't distributed evenly. Most specialties — emergency medicine, oncology, radiology, pathology — sit at 0.1% or lower.
The takeaway
- 2026's raise is a one-time event, not a fix. A statutory +2.50% bump, not a new indexing rule, produced the conversion factor's first meaningful increase in years. The underlying formula — flat annual updates of 0.25% or 0.75% — resumes in 2027.
- The 38-point gap is MedPAC's own number. By the Commission's own count, fee schedule updates rose 14% from 2000 to 2023 while practice costs rose 52% — and MedPAC has recommended Congress replace the current updates with one tied to that inflation measure.
- Access hasn't cracked yet, but it isn't even. Only 1.2% of physicians have formally left Medicare, and that share has held roughly flat for over a decade — except in psychiatry, where nearly 1 in 12 physicians has opted out.
Conversion factor and RVU-adjustment figures are for CY2026 under -1832-F. Cumulative-change figures are MedPAC's own 2000–2023 analysis, the most recent period in that specific chart; MedPAC separately projects the gap between MEI growth and scheduled updates will widen further from 2025 to 2034. Opt-out figures are 's analysis of data as of November 2024, the most recent published snapshot.
Sources
- Centers for Medicare & Medicaid Services, Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule fact sheet (-1832-F, issued Oct. 31, 2025) — the 2025 and 2026 conversion factors, the statutory +2.50% one-year increase, the +0.49% RVU adjustment, and the QP/non-QP split. cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f
- Medicare Payment Advisory Commission (MedPAC), June 2025 Report to the Congress: Medicare and the Health Care Delivery System, Chapter 1 — Figure 1-2's cumulative 2000–2023 comparison of fee schedule updates (+14%), Medicare Economic Index growth (+52%), and fee schedule spending per FFS beneficiary (+101%), plus MedPAC's recommendation to tie future updates to MEI. medpac.gov/wp-content/uploads/2025/06/Jun25_Ch1_MedPAC_Report_To_Congress_SEC.pdf
- , How Many Physicians Have Opted Out of the Medicare Program? (analysis of Medicare Opt-Out Affidavits data, as of November 2024) — the 12,244-physician, 1.2% opt-out count, the 98% participation rate, and the specialty-level breakdown. kff.org/medicare/how-many-physicians-have-opted-out-of-the-medicare-program
Comments
Always open. Logged-in readers can annotate paragraphs in place.
Every service a doctor bills to Medicare — an office visit, a knee replacement, a chemotherapy infusion — is priced by multiplying a set of relative value units (work, practice expense, malpractice risk) by a single national number: the conversion factor. Change that one number and every physician payment in the country moves with it. For most of the last quarter-century, Congress and have moved it by less than inflation. In its CY2026 Physician Fee Schedule final rule (-1832-F, effective Jan. 1, 2026), raised the conversion factor more than usual — but the increase is a one-time statutory event, not a new trend.