After months of legislative efforts to address physician Medicare payment reform, key provisions were finally included in the One Big Beautiful Bill Act (OBBBA). Passed along party lines in Congress and signed into law by the President on July 4th, the bill includes a one-year, 2.5% increase to the Physician Fee Schedule (PFS) conversion factor, effective January 1, 2026.
This increase, while welcomed and necessary, fell way short of what was needed. Despite extensive advocacy efforts to apply the change retroactively and offset the 2.83% decrease from the 2024 rate of $33.29 to the current rate of $32.34 effective January 1, 2025, this 2.5% increase results in a conversion factor of $33.59 for 2026.
Though seemingly miniscule, these slight variances create a compounding effect since the dollar amount is multiplied by the relative value units (RVUs) assigned to each service to determine the Medicare payment rate paid to physicians. The RVUs are meant to cover both the cost of labor and practice expenses.
Because many private insurance companies adopt PFS rates as a benchmark for their own reimbursement models, even small changes in the conversion factor can ripple across the entire healthcare payment ecosystem. When these rates shift, they influence how much physicians are paid not just for Medicare patients, but across a wide range of insurance plans, amplifying the financial impact on practices and providers.
Unfortunately, the bill does not include an automatic cost of living adjustment (COLA) provision for future adjustments.
As other healthcare-related safety net programs suffer consequential cuts due to OBBBA, the change in the PFS rate conversion is a step in the right direction.
OBBBA also imposes significant changes to federal student loans, including lifetime loan limits for borrowers, impacting students pursuing higher education. Specifically, loan limits are $100,000 for graduate programs, and $200,000 for professional programs (e.g., medical and dental school). The law also phases out GradPLUS loans — an important tool to help students pay for education — that are currently capped at the total cost of attendance.
Gabriela Villanueva is CAP’s Government and External Affairs Analyst. Questions or comments related to this article should be directed to GVillanueva@CAPphysicians.com.