Medicare Physician Payment Reform

The Academy believes it is critical for policymakers to work with the physician community to reform budget-neutrality policies in the Medicare Physician Fee Schedule — preventing inappropriate cuts and stabilizing physician payments. We also support enacting an annual inflationary payment update tied to the Medicare Economic Index (MEI), which would ensure consistent patient access to necessary care. The Academy is also committed to reducing Medicare program burdens and penalties, including those tied to the Merit-Based Incentive Payment System.

Without these reforms, Medicare patients risk losing timely access to essential ophthalmologic care. Cuts to Medicare physician reimbursement also affect Medicaid and commercial payer rates, which often benchmark against Medicare — disproportionately impacting small, independent practices serving rural and underserved communities.

The Academy is working with the American Medical Association, the Surgical Coalition, and other provider groups to press Congress to enact long-term Medicare physician payment reform legislation.

We consistently engage with the House GOP Doctors Caucus and House Democratic Doctors Caucus as they develop solutions to advance longer-term reform.

The Academy will continue to monitor annual Medicare Physician Fee Schedule rulemaking and push back against conversion factor reductions and other policies that harm ophthalmology practices and their patients.

Medicare physician payments have been eroded by a combination of budget-neutrality requirements, mandatory spending cuts, and payment freezes — creating a growing gap between what Medicare pays physicians and what it costs to run a practice.

Budget neutrality

Current law requires that changes to physician fee schedule payments be implemented in a budget-neutral manner. If CMS projects that net payment changes will increase total Medicare spending by more than $20 million, the agency must offset that amount — typically by reducing the conversion factor (CF) for all physician services. This statutory threshold was set in 1992 and has never been updated for inflation. It is now easily surpassed by even modest coding changes, forcing CMS to apply across-the-board downward adjustments to the CF year after year. In recent years, cuts to surgical specialties such as ophthalmology have been used to fund higher payments for primary care and other services.

Sequestration

Mandatory federal budget cuts enacted under the 2011 Budget Control Act impose a 2% annual reduction on Medicare payments. The 2% reduction is applied to the Medicare payment amount on every Part B claim after the patient’s coinsurance and/or deductible are calculated. Congressional action has extended this cut through at least fiscal year 2032.

Inadequate payment updates

From 2020 to 2025, physicians experienced a payment freeze enacted under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 — while hospitals, ambulatory surgery centers, and other Medicare providers continued to receive regular annual updates. Payment updates resumed in 2026, with MACRA requiring two annual CF adjustments: a 0.75% boost for physicians participating in Advanced Alternative Payment Models (APMs) and a 0.25% boost for all other providers. Most ophthalmologists do not qualify as APM participants and therefore receive the lower update.

Even with these annual adjustments, Medicare physician payment significantly lags behind inflation and rising operational costs. Tying the annual physician fee schedule update to the MEI — which measures changes in the cost of running a medical practice, including staff, equipment, and supplies — has emerged as a key policy goal for physician advocates.