This bill amends section 1848 of the Social Security Act to make the annual update to the single conversion factor used under the Medicare Physician Fee Schedule (PFS) equal to the Secretary’s estimate of the percentage increase in the Medicare Economic Index (MEI) for 2026 and each subsequent year. It also removes statutory language that created two separate conversion factors through 2025, establishing a single conversion factor after 2025.
Why it matters: the conversion factor is the dollar multiplier that turns work and practice expense RVUs into Medicare payment amounts. Tying its annual update to the MEI effectively links payment growth to CMS’s projection of input-cost inflation for physician practices.
That shifts the statutory yardstick CMS must use when setting yearly updates and has predictable implications for provider revenue, Medicare outlays, and budget dynamics for CMS and Congress.
At a Glance
What It Does
The bill amends 42 U.S.C. 1395w–4(d) so that, beginning in 2026, the annual update to the single conversion factor equals the Secretary’s estimate of the percentage increase in the Medicare Economic Index (MEI). It also strikes language that established two conversion factors through 2025, leaving one conversion factor thereafter.
Who It Affects
Directly affects physicians and non‑physician practitioners paid under the Medicare Physician Fee Schedule, CMS as the implementing agency, and entities that reference Medicare rates (including some private payers and contractors). Indirectly affects beneficiaries where changes in provider participation or access result from payment changes.
Why It Matters
By statute, the conversion factor determines per‑RVU dollar payment levels; linking its update to MEI aligns annual adjustments with CMS’s projection of practice input‑cost inflation rather than other measures or ad hoc policy changes. The change alters the baseline used in rate-setting and therefore the trajectory of Medicare Part B spending and provider revenue growth over time.
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What This Bill Actually Does
The bill is short and targeted: it instructs the Secretary of Health and Human Services to use the Medicare Economic Index — specifically the Secretary’s estimate of that index’s percentage increase — as the statutory formula for updating the single conversion factor under the Medicare Physician Fee Schedule starting in 2026. The MEI is the agency’s established metric for tracking changes in physician practice input costs (staff wages, rent, supplies, etc.), and the bill explicitly references the MEI definition already in statute (section 1842(i)(3)).
Mechanically, the conversion factor remains the PFS multiplier that converts RVUs into dollar payments. The bill does not change RVU values, coding, or other elements of how the PFS calculates relative values; it changes only the statutory rule that determines the percent change applied to that multiplier each year.
Because the statute requires the Secretary to use an ‘‘estimate’’ of the MEI, CMS will apply a projected, not final, MEI figure when setting the annual update.The conforming amendment removes language that created two separate conversion factors through 2025, so the single conversion factor regime continues after that point without the phased statutory bifurcation. The net effect is to fix the annual update mechanism to a single input‑cost index on a going‑forward basis, rather than leaving it subject to other statutory formulas or temporary arrangements.
That produces greater legal clarity about the update yardstick but leaves unchanged other statutory adjustments (geographic practice cost indices, budget‑neutrality requirements, or any offsets Congress might enact).
The Five Things You Need to Know
The bill amends 42 U.S.C. 1395w–4(d)(2) so the update to the single conversion factor for 2026 and each subsequent year equals the Secretary’s estimate of the percentage increase in the MEI.
The change takes effect for the 2026 update and applies to every subsequent year; it does not retroactively alter updates before 2026.
Section 2(b) removes statutory text that established two separate conversion factors through 2025, leaving a single conversion factor after 2025.
The statute references the MEI as defined in 42 U.S.C. 1395w–2(i)(3) (section 1842(i)(3) of the Social Security Act), meaning the Secretary will use the existing statutory MEI construct and publish an estimated percentage change for each year.
The bill changes only the statutory formula for the annual percentage update to the conversion factor; it does not change RVU calculations, coding, or other components of the physician fee schedule.
Section-by-Section Breakdown
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Short title
Designates the bill as the "Strengthening Medicare for Patients and Providers Act." This provision has no substantive effect on Medicare policy; it simply provides the act’s public name for citation.
Make the PFS update equal to the MEI estimate
Rewrites subsection (d)(2) of section 1848 to require that the annual update to the single conversion factor equal the Secretary’s estimate of the percentage increase in the Medicare Economic Index for the year. Practically, CMS must calculate and publish a projected MEI percentage and use that projection as the statutory percent change applied to the conversion factor when finalizing the PFS rule for the year. This shifts the legal basis for the annual update to a single, input‑cost index and makes the update a function of CMS’s MEI projection rather than other statutory adjustments or discretionary policy decisions.
Remove statutory two‑conversion‑factor language
Deletes the clause that limited the existence of two separate conversion factors through 2025 and removes the subsequent language that defined those two factors. The immediate statutory effect is to eliminate the scheduled dual‑factor arrangement established elsewhere in law, so that after 2025 the statute presumes a single conversion factor whose update is governed by the MEI rule established in subsection (d)(2). This matters for stakeholders who had been planning around the temporary two‑factor structure because it clarifies the post‑2025 legal baseline.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Medicare‑participating physicians and non‑physician practitioners: tying the update to MEI ties annual payment changes to measured practice‑input inflation, which can protect revenue against rising costs and improve predictability for budgeting.
- Small, rural, and community practices that are sensitive to local input costs: an MEI‑based update can be more closely aligned with their expense trends than arbitrary or politically driven adjustments.
- Practice financial managers and health system revenue teams: a statutorily specified index creates a transparent forecasting input for annual revenue projections and capital planning.
- Specialties with rising practice expenses: specialties whose practice costs rise faster than other benchmarks may see relatively more consistent updates when the conversion factor follows an input‑cost index.
Who Bears the Cost
- Medicare program (and thus federal taxpayers): indexing updates to MEI can increase Part B outlays if MEI trends upward relative to prior statutory update measures, putting pressure on trust funds and the federal budget.
- CMS and OMB budgeting offices: the agency must produce and defend an annual MEI estimate and absorb any volatility between projected and actual MEI movements without a statutory reconciliation mechanism.
- Private payers and contractors that benchmark to Medicare: plans or payers that use Medicare updates as a benchmark may face higher commercial expense pressure if MEI‑based Medicare updates outpace previous benchmarks.
- Congressional appropriations and deficit‑management priorities: a stricter index link reduces Congress’s tactical flexibility to adjust the conversion factor for policy goals without changing statute.
Key Issues
The Core Tension
The bill reconciles two legitimate goals that pull in opposite directions: it gives providers predictability and ties updates to measured input‑cost inflation, but it simultaneously constrains policymakers’ ability to use conversion‑factor adjustments to control Medicare spending or target payment policy — creating a trade‑off between payment stability for providers and fiscal and policy flexibility for the government.
The bill resolves one ambiguity (post‑2025 conversion factor structure) but creates implementation and policy tensions. Requiring the Secretary to use an ‘‘estimate’’ of MEI ties payments to a projection; the statute contains no reconciliation or true‑up if the final MEI differs materially from the projection.
That means CMS will bear forecasting risk and providers will experience updates based on a forward estimate that may not track actual realized practice costs.
The bill anchors updates to input‑cost inflation, which improves transparency about the yardstick but narrows policy levers. Congress and CMS commonly use conversion‑factor adjustments to pursue productivity savings, target specialty payment changes, or implement temporary payment policy; an explicit index link reduces that latitude unless lawmakers amend the statute.
The bill also leaves unresolved how this change interacts with other statutory features — including budget‑neutrality adjustments, geographic practice cost indices, sequestration, or any discretionary offsets CMS or Congress applies when finalizing the PFS rule. Finally, the composition of the MEI (which inputs it includes and how it weights them) will be contested, since stakeholders can influence whether the index favors or disfavors particular specialties or practice models.
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