Proposed Medicare Reforms are Bad News for Taxpayers and Beneficiaries

The national debt is now above $40 trillion, or $117,000 for every man, woman, and child in the U.S. One key contributor to this surging red ink is Medicare, the taxpayer-funded federal insurance program for Americans 65 and over as well as some disabled individuals. The program costs taxpayers roughly $1 trillion per year, and this figure will only increase over time—absent reform.

Today, the House Energy & Commerce Subcommittee on Health will hold a hearing titled, “Examining Legislative Proposals to Reform Medicare Provider Payment and Bolster Health Care Cybersecurity” to consider a slew of reforms addressing this troubled program. But, until proposals address Medicare’s spending growth and reckless reimbursement policies, it will be more of the same for taxpayers and beneficiaries.

One significant piece of legislation poised for consideration is H.R. 8163, the Provider Reimbursement Stability Act of 2026. Introduced by Rep. Gregory Murphy (R-N.C.), this legislation would change the formula Medicare uses to calculate payments so that updates to specific medical services no longer trigger automatic system-wide fee reductions for independent physicians. The bill raises the spending threshold that forces mandatory budget cuts and places a 2.5 percent cap on annual payment rate fluctuations for provider reimbursements.

While “stability” may sound appealing to lawmakers, H.R. 8163 effectively dismantles Medicare’s primary fiscal guardrail—budget neutrality—to guarantee higher payments to providers. By raising the budget neutrality threshold from $20 million to more than $54 million and tying it to inflation going forward, the bill significantly shrinks the triggers that force spending offsets. In effect, whenever Medicare expands coverage or increases payment rates for specific procedures, the federal government will no longer be required to balance those cost increases with cuts elsewhere, resulting in billions of dollars in net-new uncompensated federal outlays over time that will be borne by taxpayers.

The 2.5 percent cap on payment rate changes for providers shields predominately-well-off physicians from needed fiscal changes and essentially forces taxpayers and the Medicare Hospital Insurance Trust Fund to absorb the un-offset excess. This bill will create more red ink and destabilize an already-expensive program in the name of “stability.”

Fortunately, commonsense reforms being considered by the Centers for Medicare & Medicaid  Services (CMS) would reverse this fiscal slide and put Medicare on firmer footing. Under current Medicare CMS rules, the program frequently pays twice for single patient encounters due to overlapping reimbursements for combined clinical services. When a patient receives an evaluation and management (E/M) office visit alongside a procedure with a global surgical period during the same appointment—such as examining a health condition and performing a minor outpatient procedure—providers can bill both services at near-full rates. Although combining these services into a single visit yields significant operational efficiencies for practitioners and added convenience for patients, the current payment structure fails to reflect those shared overhead and labor savings. Consequently, Medicare claims data shows that the program routinely provides duplicate compensation for overlapping clinical work and practice expenses.

To correct this systematic overpayment, CMS proposed a targeted payment adjustment in the calendar year (CY) 2027 physician fee schedule (PFS) proposed rule. Under the proposed policy, when an office visit and a procedure subject to a global period are billed for the same patient encounter, Medicare would reimburse the highest-valued service at 100 percent of its fee schedule rate while discounting all additional services billed that day to 50 percent. CMS previously floated a similar policy in the CY 2019 PFS proposed rule but unfortunately opted not to finalize it at the time. Revisiting the issue for CY 2027, the agency explicitly noted that existing billing practices likely duplicate payments across simultaneous services.

In addition to same-day visit discounting, the proposed rule addresses an unbundled cost inefficiency within Medicare’s global surgical packages. When Medicare reimburses a surgical procedure, the bundled rate is designed to cover both the operation and a designated number of pre- and postoperative follow-up visits. However, CMS’s ongoing analysis of claims data reveals that beneficiaries frequently do not receive the full complement of postsurgical checkups built into these bundled packages. Because practitioners receive the full bundled fee regardless of whether every postoperative appointment takes place, Medicare routinely pays for follow-up care that is never actually rendered. To lay the groundwork for reforming this gap, CMS is pausing an outdated data-collection rule and publishing its empirical findings to better align surgical package rates with care actually delivered to patients.

These long-overdue reforms are a far better alternative to H.R. 8163 for reining in the program’s runaway costs. Lawmakers need to get spending under control and ensure Medicare continues to serve beneficiaries at minimal cost to taxpayers.