My recent post about the 2027 Medicare physician payment cuts reached more than 67,000 people and drew 263 reactions, 277 comments and 98 reshares. I read nearly all of them. Some thanked me. Some questioned my motives. A few were angry. And many asked genuinely good questions that deserve a real answer, not a slogan.
This is that answer. I want to be clear about what is true, fair to the critics where they have a point, and specific about what I believe should change. I will end with something you can do in five minutes to help.
The Basics: What Is Actually Happening
CMS released its final 2027 physician fee schedule on November 4. It cuts the Medicare conversion factor by 2.31% for most clinicians and 1.83% for those in qualifying alternative payment models. In fairness, much of that cut comes from the expiration of a one-year, 2.5% increase Congress provided for 2026 only, rather than from a brand-new policy decision. But it lands on top of a long decline.
An AMA analysis finds that, adjusted for inflation in practice costs, Medicare physician payment has fallen about 33% since 2001, while the cost of running a practice has risen roughly 59%. For context, general consumer prices (CPI) have risen roughly 82% over the same period (2001 to 2025 annual averages). Whichever yardstick you choose, the direction is the same. According to the AMA, physicians are the only Medicare provider type without an automatic annual inflation update.
Your Questions, Answered
“I’ve never seen a broke doctor.”
I understand why it looks that way, and I won’t pretend every physician is struggling. But Medicare’s payment is revenue, not take-home pay. Staff, rent, malpractice coverage, billing, and the cost of chasing authorizations all come out of it first. The practices under the most pressure are small and independent, which is exactly the kind many patients prefer. And the fee schedule is not what drives Medicare’s cost. MedPAC reports about $93.8 billion in 2024, just over 15% of fee-for-service Medicare spending. By simple arithmetic, even a 25% cut would save under 4% of that spending. That is not a cost-control strategy. It is a squeeze on the people who deliver care.
“So, how does Europe make it work where doctors are paid far, far less?”
Part of the answer is that U.S. physicians start from a very different place: heavy upfront education debt and, in private practice, the overhead of running a small business. The larger part is administration. A 2020 study in the Annals of Internal Medicine found administrative costs were 34.2% of U.S. health spending in 2017, about double Canada’s share, and that physicians’ insurance-related costs were $465 per person in the U.S. versus $87 in Canada. Prior authorization and insurer interactions cost practices tens of billions of dollars a year. The problem is not only what we pay doctors. It is how much of every healthcare dollar is consumed before it ever reaches care.
Why don’t doctors just stop taking Medicare?
Some have, and several of you suggested it: “Just stop taking Medicare...” But then who treats the seniors who paid into the system? One reader asked exactly that: “Who treats them??” I would rather fix the payment than watch more physicians feel forced out of the program, because the patients who lose access are the ones who can least afford to.
Isn’t this just about money?
It is partly about money, because a practice cannot stay open without it. But it is also about access and independence. When payments fall year after year, practices limit new Medicare patients, cut staff, or sell to hospital systems and corporate groups, and patients lose the doctors who have time to know them. As one reader put it, “The whole payment model is broken.” I agree, and the changes below are meant to address that.
What I Would Change
1. Stop the cuts and index pay to inflation. Reverse the 2027 cut, and give physicians an annual update that at least keeps pace with the Medicare Economic Index (MEI), which tracks the real cost of running a practice. CPI would be a fair yardstick too, but the MEI is the minimum. Budget neutrality needs reform as well: the $20 million threshold that triggers cuts to other physicians when new services are added has not changed since 1994. The bipartisan Strengthening Medicare for Patients and Providers Act (H.R. 6160 in the 119th Congress, sponsored by Rep. Raul Ruiz) would create a permanent annual update tied to the MEI. It was introduced November 19, 2025 and referred to the House Energy and Commerce and Ways and Means committees. As of this writing it has 19 cosponsors and is still in committee. As one reader wrote, “Medicare law HAS to change.”
2. Site-neutral payment, starting with outpatient care. The same service should not be paid on different terms depending on the building it happens in. The AMA has said the pay gap between hospital outpatient departments and physician offices puts independent practices at a competitive disadvantage. I would begin with outpatient facility fees, move those dollars into the professional payment, and phase the change in over 12 to 36 months so hospitals can adjust. A physician working in an expensive hospital setting could pay a fair overhead charge, so the facility’s costs are still covered.
3. Independent physicians, with real clinical leadership. I would like to see physicians function as independent entities, closer to the Canadian model: in private practice they pay their own overhead, and in a hospital they pay a defined overhead charge or none at all. In many employment models, compensation is benchmarked to a percentile of the MGMA survey, commonly the median, and tied to RVUs, a formula that does not reflect the value a physician brings. The physician is the reason the patient comes through the door, and the physician’s judgment drives the care that follows. Yet in many corporate models the person with the leadership title is an administrator, not a clinician. The people who understand medicine should have a real say in how it is run.
Physician-owned hospitals. Physicians should also be allowed to own and operate hospitals. The ACA effectively froze new physician-owned hospitals after 2010, and bipartisan legislation (H.R. 4002 in the 119th Congress, the Patient Access to Higher Quality Health Care Act of 2025, introduced June 12, 2025 by Rep. Beth Van Duyne) would lift those restrictions. The AMA and MGMA are among the groups supporting it, and as of this writing it has 12 cosponsors and is still in the Energy and Commerce and Ways and Means committees. I recognize the concern about self-referral. My answer is transparency and oversight, not a blanket ban, because competition from physician-led institutions is one of the few forces that can check a market dominated by large systems.
4. Training reform. CMS funding for residency can continue. What I would change is who controls the training. Program directors and attendings should not all be hospital employees working under the hospital’s margin pressures. Residents do real clinical work for long hours and should be paid accordingly. Australia and New Zealand, where specialty colleges oversee training and graduates start with far less debt, offer a model worth studying. Trainees there also work long hours, so it is not a pay fix by itself.
5. Fix the insurance layer. Replace Medicare Advantage with secondary coverage on top of traditional Medicare, similar to Medigap, and remove HMO-style plans. If private insurance remains, it should work under clear rules:
No prior authorization.
Prompt payment. Medicare already requires clean claims to be paid or denied within 30 days; the same deadline, with interest when it is missed, should apply to every payer and should cover claims held for review.
No clawbacks without due process. Money should not be taken back until an independent review and all appeals are complete, with a short look-back limit for honest mistakes. Criminal proof is reserved for fraud.
Tort reform to curb the avalanche of lawsuits that drives defensive medicine and overhead.
As one reader put it, “Pay Drs and eliminate insurance companies.” I would not go that far, but I understand the frustration.
6. Cover what works. Medicare should not cut coverage of well-researched treatments such as diagnostic nerve blocks and therapeutic ablations for the older patients who need them. For many patients with chronic pain, these procedures can reduce reliance on more medication or more surgery.
7. Some skin in the game, and a pressure valve. I believe patients should pay something for some services, and that physicians should keep fee-for-service as the base, with quality measures built on top. I also support more direct primary care and direct-pay arrangements, so that traditional Medicare covers the broad base and self-pay care serves as a pressure valve for people who want and can afford more. I would also open Medicare to buy-in at any age and eventually fold Medicaid into it, but only after physician payment is fixed. Otherwise we are enrolling more patients in a program that pays less every year.
Where I May Be Wrong
Hospital facility fees pay for real costs, such as emergency readiness, nursing and equipment, which is why I propose a phase-in rather than an overnight change. Replacing Medicare Advantage would mean some seniors lose benefits like dental and vision, and secondary coverage has its own premiums, so a transition needs to protect them. And the research on tort reform is mixed on how much it saves. Physician ownership of hospitals raises a real self-referral concern, which is why I pair it with transparency and oversight. I would rather say so than pretend the trade-offs do not exist.
Help Me Help You
Policy changes when representatives hear from the people they serve. Copy, paste and send the letter below to your representative and senators. Fill in the brackets, and it takes about five minutes.
Dear [Representative/Senator name],
I am writing as a [patient / physician / concerned constituent] from [city, state] to ask you to act on Medicare physician payment.
CMS has finalized a 2.31% cut to the Medicare conversion factor for most clinicians, effective January 1, 2027. Adjusted for inflation in practice costs, Medicare physician pay has already fallen about 33% since 2001. When payments shrink while costs rise, practices limit new Medicare patients or close, and seniors lose access to care.
I urge you to:
Reverse the 2027 Medicare physician payment cuts.
Cosponsor and support H.R. 6160 (119th Congress, sponsored by Rep. Raul Ruiz), the Strengthening Medicare for Patients and Providers Act, so physician payment rises each year with the Medicare Economic Index (MEI).
I also ask that you support H.R. 4002 (119th Congress, sponsored by Rep. Beth Van Duyne), the Patient Access to Higher Quality Health Care Act of 2025, so that physicians can own and operate hospitals. Please tell me where you stand on these issues.
Sincerely, [Name, city, state]
Disclosure
This article reflects the author’s clinical perspective and interpretation of publicly available data and rulemaking, and quotes from public comments are shared without names. It is intended for educational and discussion purposes and is not legal, financial or policy advice. Medicare rules, rates and pending legislation continue to change.
About the Author
Dr. Mahajer is double board-certified in Physical Medicine and Rehabilitation and Sports Medicine, and fellowship-trained in Interventional Pain and Sports Medicine at the Icahn School of Medicine at Mount Sinai Hospital. He is the Founding Physiatrist of Osso Health in South Florida.
Sources
AMA, Medicare physician pay since 2001: https://www.ama-assn.org/practice-management/medicare-medicaid/medicare-physician-pay-has-plummeted-2001-find-out-why
AMA, budget neutrality and the Patients First Act: https://www.ama-assn.org/practice-management/medicare-medicaid/bill-would-put-end-yearly-patches-medicare-physician-pay
MedPAC, March 2026 report, chapter 4: https://www.medpac.gov/wp-content/uploads/2026/03/Mar26_Ch4_MedPAC_Report_To_Congress_SEC.pdf
AHA, CY 2027 physician fee schedule final rule: https://www.aha.org/news/headline/2026-11-04-cms-issues-cy-2027-physician-fee-schedule-final-rule
Himmelstein et al., Annals of Internal Medicine (2020), via Healio: https://www.healio.com/news/primary-care/20200106/a-third-of-us-health-care-spending-stems-from-administrative-costs
Casalino et al., Health Affairs (2009), cost of physician practice interactions with health plans
Medicare claims payment timelines: https://medicare.fcso.com/claims/new-provider-roadmap-claims-submission
H.R. 6160 (119th Congress) text: https://www.congress.gov/119/bills/hr6160/BILLS-119hr6160ih.htm
H.R. 4002 (119th Congress) text: https://www.congress.gov/119/bills/hr4002/BILLS-119hr4002ih.htm
MGMA letter supporting H.R. 4002 (Nov. 3, 2025): https://www.mgma.com/advocacy-letters/november-3-2025-mgma-supports-the-patient-access-to-higher-quality-care-act-of-2025
Medical Economics, physician-owned hospitals and the ACA: https://www.medicaleconomics.com/view/-a-landmark-moment-is-medicare-ready-to-revive-physician-owned-hospitals-
BLS CPI-U annual averages, 2001 (177.1): https://www.bls.gov/regions/northeast/data/consumerpriceindex_us_table.htm
CPI-U calendar-year average, 2025 (322.6): https://ir.mit.edu/projects/cpi-u/
