Medicare Physician Pay Gets a Permanent Raise: Annual Updates Tied to Economic Index Starting in 2026

The newly proposed Strengthening Medicare for Patients and Providers Act is looking to solve a perennial headache in healthcare: how Medicare pays doctors. Right now, physician payments are often subject to temporary fixes and expiring formulas. This bill changes that by making the annual update to the main Medicare payment calculation—the conversion factor—permanent and tied directly to inflation starting in 2026.

The End of the Annual Payment Cliffhanger

For years, doctors and hospitals have faced uncertainty because Medicare’s payment mechanisms often had expiration dates, forcing Congress to scramble for last-minute fixes. This legislation cuts that drama. Starting in 2026, the annual update to the single conversion factor will be automatically set to match the estimated percentage increase in the Medicare Economic Index (MEI). The MEI is essentially the measure of how much it costs doctors to run their practices—think wages, rent, equipment, and supplies. By linking the payment update directly to the MEI (SEC. 2), the bill ensures that physician payments keep pace with the actual rising costs of providing care.

What This Means for Your Doctor’s Office

If you rely on Medicare, this bill is about stability and access. When physician payments don't keep up with inflation, doctors—especially those in smaller practices or rural areas—can face tough choices about whether they can afford to keep taking Medicare patients. Imagine a family practice owner in a small town: their rent and staff wages go up every year, but if Medicare payments stay flat, they might have to limit the number of Medicare patients they see or even close their doors. This shift to the MEI-based update aims to prevent that by giving providers a reliable, economically relevant raise each year. It’s designed to keep more doctors in the Medicare system, which means better access for the 65 million Americans who use it.

The Cost of Stability: Who Pays?

While this change offers clear benefits for providers and Medicare patients, there’s a fiscal reality check. Linking payments to the MEI means that if healthcare operating costs rise rapidly, Medicare spending will also rise automatically. This could place a greater financial burden on the Medicare Trust Fund and, ultimately, on taxpayers (as noted in the analysis of SEC. 2). Essentially, the bill trades payment uncertainty for predictable, potentially higher, long-term costs. It’s a necessary trade-off for stabilizing the provider network, but it’s a cost that needs to be factored into Medicare’s overall financial health.