The traditional bundled payment model for surgeries assumes a set number of postoperative visits, yet data shows that only 17% of those visits occur in ten-day packages. This striking discrepancy serves as a catalyst for a broader reevaluation of how the Medicare Payment Advisory Commission (MedPAC) approaches physician reimbursement in 2026. The commission is currently navigating a complex landscape where technological advancements and shifting workforce dynamics have made legacy payment models increasingly obsolete. As federal expenditures continue to rise, the pursuit of “payment accuracy” has become the primary objective for policymakers. This goal requires a meticulous alignment of reimbursement rates with the actual resources, time, and overhead utilized by healthcare providers. By scrutinizing the intricacies of the physician fee schedule, MedPAC aims to eliminate misaligned incentives that currently favor certain modalities or billing structures over more cost-efficient alternatives. This ongoing analysis is not merely a technical exercise but a fundamental rethink of the financial relationship between the government and the medical community, ensuring that every dollar spent reflects the contemporary reality of care delivery rather than historical assumptions that no longer hold true in a modern clinical setting.
Evaluating the Fiscal Impact of Telehealth
The debate surrounding telehealth reimbursement has intensified as the healthcare industry moves beyond the temporary flexibilities established during the previous decade. A central point of contention for the commission is the concept of payment parity, which mandates that virtual visits be reimbursed at the same rate as in-person encounters. Recent data presented to the commission suggests that this model may no longer be fiscally sustainable or representative of actual practice expenses. Federal analysis indicates that a standard video-based patient visit involves approximately 71% less in direct practice expenses compared to a face-to-face encounter. For instance, the common office visit code 99214 incurs roughly $33.57 in direct expenses when performed in person, but that figure drops to just $9.72 for an audiovisual visit and $8.10 for an audio-only call. This significant reduction in cost is primarily driven by the decreased need for clinical staff, such as nurses or medical assistants, who are typically responsible for physical tasks like rooming patients and recording vital signs.
Despite the clear economic advantages of virtual care, the commission remains divided on how to implement rate adjustments without compromising beneficiary access. Some commissioners argue that paying identical rates for different modalities is fundamentally flawed, especially when a physician provides care from a home office with minimal overhead. They suggest that unless a patient is located in a remote clinic that requires on-site support staff, the reimbursement should strictly reflect the lower cost of home-based virtual care. On the other hand, there is a strong concern that aggressive price cutting could stifle the very innovation that has improved chronic disease management through frequent digital touchpoints. Lowering telehealth payments might inadvertently drive patients back to physical clinics that are already struggling with capacity issues and long wait times. Consequently, any reform must balance the need for taxpayer savings—estimated at $278 million for certain services in the current cycle—with the preservation of a convenient and efficient care delivery system.
Reforming Incident-To Billing: The Need for Transparency
Another critical area of focus for MedPAC involves the reform of “incident-to” billing, a legacy administrative practice that allows non-physician practitioners, such as nurse practitioners and physician assistants, to bill for services under a supervising doctor’s identifier. This mechanism enables a medical practice to receive 100% of the physician fee schedule rate, even though direct billing by these practitioners would normally result in only an 85% reimbursement. In 2022, nearly 39% of all office visits performed by nurse practitioners and physician assistants were billed this way, totaling approximately 38 million encounters. This practice creates a significant transparency gap, as it obscures the identity of the actual provider and makes it difficult for Medicare to accurately evaluate the quality of care or the specific contributions of the advanced practice workforce. The commission has increasingly noted that this lack of data impedes program integrity efforts and prevents a clear understanding of how care is being distributed across different specialties and primary care settings.
The path toward mandatory direct billing is seen by many as a necessary step to professionalize the role of advanced practice clinicians and improve the accuracy of Medicare data. Proponents of this shift argue that the current system essentially treats these highly skilled professionals as secondary components of a practice rather than independent providers of essential care. By requiring direct billing, Medicare would gain the ability to track outcomes more effectively and ensure that reimbursement levels are appropriate for the level of training and the specific services rendered. While there is some concern that removing the 15% financial incentive might discourage practices from hiring these practitioners, the high demand for healthcare services in 2026 suggests that the impact on the workforce would be negligible. Furthermore, shifting away from incident-to billing would likely benefit the broader healthcare system by providing the granular data needed to refine future payment models and ensure that specialty practices are not disproportionately benefiting from an administrative loophole.
Addressing Inaccuracies: The Physician Fee Schedule
The broader Physician Fee Schedule (PFS) is currently undergoing a period of intense scrutiny, particularly regarding the influence of the RVS Update Committee (RUC). This panel, led by the American Medical Association, has historically provided the recommendations that CMS uses to assign values to medical services through Relative Value Units (RVUs). However, critics within the commission have pointed out that many of these valuations have become stagnant and fail to account for the efficiencies gained through modern technology and improved clinical workflows. There is a growing consensus that the fee schedule is “out of whack,” overvaluing certain specialized procedures while underfunding the cognitive work essential to primary care and chronic disease management. Because the physician fee schedule is governed by budget-neutrality requirements, any effort to increase the value of one service necessitates a corresponding cut elsewhere, making the revaluation process a high-stakes, zero-sum environment that often pits different medical specialties against one another.
To move toward a more dynamic and data-driven system, MedPAC is exploring the potential for independent expert panels that could provide an alternative to the current specialty-driven survey process. The goal is to move away from subjective assessments of “work effort” and toward a model that incorporates objective data on time and resources. While CMS has already initiated some changes, such as revaluing Evaluation and Management (E&M) visits to better support office-based care, the commission believes that more systemic reform is required to keep pace with the rapid evolution of medical practice. This includes a more frequent review of codes that have seen significant volume increases, which often indicates that a procedure has become easier or faster to perform and may therefore be overvalued. By ensuring that the fee schedule remains a living document that reflects current medical realities, the commission hopes to create a more equitable distribution of resources that rewards high-value care and discourages the overutilization of outdated or inefficient services.
Overhauling Surgical Bundles: Accuracy in Postoperative Care
The discrepancy between the number of postoperative visits included in “global surgical packages” and the number of visits actually performed remains a major point of fiscal concern. Medicare typically pays a single bundled rate for a surgery that includes the procedure itself and a set number of follow-up visits over a 10-day or 90-day period. However, comprehensive research has revealed a massive disconnect in this model: only 17% of the visits included in 10-day bundles and less than half of those in 90-day bundles are ever delivered to the patient. This suggests that the federal government is effectively paying for billions of dollars in healthcare services that never occur. The commission is currently weighing two primary solutions to this problem: either unbundling the visits so that surgeons must bill for each follow-up encounter individually or maintaining the bundle while significantly reducing its total value to reflect the actual frequency of care provided during the recovery period.
While unbundling would provide the highest level of accuracy and data transparency, many commissioners favor maintaining the bundled structure to avoid the administrative complexity of processing millions of additional individual claims. However, there is a strong push to lower the value of these bundles to prevent what is essentially an unearned windfall for surgical practices. An additional layer of complexity involves the trend of surgeons delegating postoperative care to primary care physicians or other community-based providers without a corresponding transfer of the bundled payment. This shift in the workload puts an undue burden on primary care systems while the original surgeon retains the full reimbursement for “global” care. To address this, the commission is looking at ways to ensure that payments follow the patient, ensuring that the providers who actually perform the follow-up work are the ones receiving the compensation. This reform is seen as a vital component of protecting the Medicare trust fund and ensuring that surgical reimbursement is based on delivered services rather than theoretical clinical protocols.
Strategic Shifts: Future Considerations for Laboratory Services
The final pillar of the current MedPAC deliberations focused on the billions of dollars spent annually on clinical laboratory tests and the absence of cost-sharing for beneficiaries in this sector. As laboratory technology advanced, the cost of specialized genetic and molecular testing soared, with some individual tests now costing between $3,000 and $5,000. Despite these high price tags, most Medicare beneficiaries do not face any out-of-pocket costs for laboratory services, a policy that differed significantly from almost every other part of the Medicare program. The commission examined data suggesting that private payer rates for nearly 800 common tests were substantially lower than what Medicare currently paid, leading to a projected 16% reduction in Medicare rates starting in 2027. This potential for significant savings highlighted the need for a more proactive approach to laboratory fee management and the implementation of safeguards to prevent the overutilization of high-cost diagnostic tools.
The discussions concluded that implementing modest cost-sharing for expensive, specialized tests could serve as a valuable tool for encouraging more prudent utilization by both providers and patients. By introducing a financial element to the decision-making process for high-cost diagnostics, the commission aimed to ensure that these tests were only ordered when clinically necessary and likely to impact the patient’s treatment plan. Furthermore, actionable steps were identified to improve the collection of private payer data, ensuring that Medicare rates remained competitive and reflected the true market value of laboratory services. Moving forward, the commission emphasized the importance of protecting rural health clinics and ensuring that any price adjustments did not inadvertently limit access to essential diagnostic services in underserved areas. These deliberations provided a clear roadmap for legislative recommendations intended to modernize the laboratory fee schedule and secure the long-term sustainability of the Medicare program through data-driven price corrections and strategic cost-sharing initiatives.
