Doctors could see 3.8% Medicare pay bump in 2026

The Trump administration has proposed Medicare payment increases for physicians next year, offering up to 3.8% for those in outcome-based models and 3.3% for others. A significant component of the proposal involves overhauling billing code valuations by shifting from AMA survey data to Medicare actuary calculations, which is projected to decrease payments for non-time-based procedures by 2.5% in 2026. This methodological change is expected to benefit time-based specialties like family medicine while potentially reducing revenue for procedure-heavy fields such as radiology, signaling a notable shift in reimbursement dynamics aimed at addressing historical underinvestment in primary care, alongside new experimental payment models.

Analysis

The administration has proposed a significant shift in Medicare physician reimbursement for 2026, which presents a mixed outlook for healthcare providers. While the headline figures suggest a pay increase of 3.3% to 3.8% for physicians, the more consequential change is a structural overhaul of how payments are calculated. The Centers for Medicare and Medicaid Services (CMS) intends to move away from the American Medical Association's survey-based system to one based on Medicare actuary calculations reflecting five years of cost inflation. This change is explicitly designed to reallocate payments, resulting in a projected 2.5% decrease for non-time-based procedural codes. Consequently, specialties like family medicine, geriatrics, and psychiatry, which rely on time-based billing, are expected to see favorable reimbursement adjustments. Conversely, procedure-heavy specialties such as radiation oncology and radiology face potential revenue compression. While industry groups like the Primary Care Collaborative view this as a positive step toward correcting historical underinvestment in primary care, others like the American Medical Group Association argue it falls short of the comprehensive systemic reform needed to address an underfunded reimbursement model.

Key Decisions for Investors

• Investors should evaluate exposure to healthcare providers, potentially favoring companies focused on primary care, geriatric, and psychiatric services, which are positioned to benefit from the proposed increase in payments for time-based codes.
• Caution is warranted for investments in companies heavily reliant on procedural reimbursements, particularly in specialties like radiology and radiation oncology, as they face direct revenue headwinds from the proposed 2.5% payment reduction for non-time-based codes.
• Monitor companies in niche areas like advanced wound care (skin substitutes) and chronic disease management (low back pain, heart failure), as proposed payment model changes and experiments could significantly alter their revenue streams and market dynamics.
• Recognize that these are proposed rules and subject to change; therefore, track the regulatory approval process and any congressional actions, as the final implementation will determine the ultimate financial impact on specific healthcare sub-sectors.