Legislation was introduced in the U.S. House of Representatives this week that would make improvements to budget neutrality requirements within the Medicare physician fee schedule (PFS).
Budget neutrality is a statutory mechanism created in 1989. Under current law, increases of $20 million or more to the Medicare PFS — created by upward payment adjustments or the addition of new procedures or services — must be offset by cuts elsewhere.
The Provider Reimbursement Stability Act (H.R. 8163) does the following:
- Raises the existing $20 million budget neutrality trigger to $54.3 million.
- Starting in 2032, the bill also requires this figure to be increased by the cumulative Medicare Economic Index (MEI) no less frequently than every five years
- Requires the Secretary of Health and Human Services (HHS) to prospectively revise spending estimates and budget neutrality adjustments based on actual after-the-fact utilization rates derived from claims data.
- This provision only affects budget neutrality adjustments for newly unbundled codes where CMS has to estimate utilization—not changes to rates where CMS has historical utilization data for either an existing code or a set of codes, or where utilization crosswalks from existing codes are used for new codes.
- This provision is only triggered when the newly unbundled code in question exceeds 0.1 percent of the total estimated expenditures.
To mitigate misalignment between reimbursement rates and the actual cost of providing services, the legislation also requires CMS to update the direct cost inputs for practice expense RVUs, specifically clinical wage rates, prices of medical supplies, and prices of equipment, simultaneously and no less often than every five years.
The bill also requires the HHS Secretary, starting in 2027, to limit positive or negative increases to the Medicare PFS conversion factor to no greater than 2.5 percent each year. This cap will help to stabilize payments PFS payments and create some level of payment predictability.
The legislation was introduced by the following lawmakers:
Reps. Greg Murphy, MD (R-NC), Tom Suozzi (D-NY), John Joyce, MD (R-PA), Bob Onder, MD (R-MO), Brad Schneider (D-IL), Jimmy Panetta (D-CA), Mariannette Miller-Meeks, MD (R-IA), Kim Schrier, MD (D-WA), and Robin Kelly (D-IL).
The bill represents a major component of overhauling the Medicare physician payment system.