Health Issues

From understanding health insurance terminology like “deductibles” and “copays” to deciphering the contents of a bill, consumers can face various barriers when trying to understand the costs associated with their health insurance coverage. This lack of understanding may contribute to frustration and cost-related problems and can have far-reaching effects on consumer health and finances. The KFF 2023 Survey of Consumer Experiences with Health Insurance (“KFF Consumer Survey”) found that 27% of insured adults reported that their health insurance paid less than they expected for a bill they received from a doctor, hospital, or lab in the past twelve months, the biggest cost-related problem consumers reported experiencing. Efforts to make cost information more readily available and easy to understand could help reduce some of these problems.

The first brief of this two-part series on navigating health insurance complexities and consumer protections focused on how consumers understand what their health insurance covers, what they do when coverage is denied, and what federal protections exist to ensure that the information available to them and coverage determinations are fair, accurate, and timely. This second brief focuses on KFF Consumer Survey findings about consumers’ understanding of health insurance costs and examines existing federal protections that seek to address barriers to understanding the cost of coverage and care, such as price transparency, self-service price estimator tools, and simplifying cost-sharing designs.

KFF Consumer Survey Findings: Consumer Understanding of Costs Associated With Health Coverage

The KFF Consumer Survey included a nationally representative sample of 3,605 U.S. adults ages 18 and older with health insurance. The survey asked consumers how well they understand costs associated with their health coverage, cost-related health insurance terminology, and the difficulty level of comparing cost-related insurance options such as premiums and deductibles.

Three out of ten adults (30%) said that it was somewhat or very difficult to understand how much they would have to pay out-of-pocket when they use their health insurance. Marketplace (41%) and ESI (34%) enrollees were more likely to report this difficulty compared to Medicaid (16%) and Medicare (20%) enrollees (Figure 1). Insured White (30%) and Hispanic (32%) adults were more likely to report that it was somewhat or very difficult to understand how much they will have to pay out of pocket when they use health insurance compared to Black adults (23%). Additionally, insured adults ages 18-29 (35%), 30-49 (35%) and 50-64 (30%) were all more likely to report that it was somewhat or very difficult to know how much they will have to pay out of pocket when they use health insurance compared to those ages 65 and older (18%).

One-quarter (25%) of insured adults said that it was somewhat or very difficult to understand specific terms that their health insurance uses such as “deductible,” “copay,” “coinsurance,” “prior authorization,” or “allowed amount.” Those with Marketplace coverage (32%) and ESI (27%) were more likely to report that it was somewhat or very difficult to understand these terms compared to those with Medicaid (22%) and Medicare (19%) (Figure 1). Furthermore, Hispanic adults (31%) were also more likely to report difficulty in understanding these terms compared to White (23%) or Black (22%) adults. Insured adults between the ages of 18-29 (29%), 30-49 (30%), and 50-64 (25%) were all more likely to report difficulty in understanding these insurance terms compared to those ages 65 and older (17%).

One in four (25%) insured adults reported that it was somewhat or very difficult to compare the copays and deductibles for each plan option. Those with ESI (27%) and Marketplace (31%) coverage were more likely to report having this problem compared to those with Medicaid (13%) or Medicare (22%) (Figure 2). A larger share of insured White (24%) and Hispanic (27%) adults reported difficulty comparing the copays and deductibles for each option than Black (19%) adults. Additionally, insured adults ages 18-29 (28%) and those ages 30-49 (27%) were more likely to report that it was somewhat or very difficult to compare the copays and deductibles for each option compared to those ages 65 and older (21%).

About one in five (19%) insured adults reported that it was somewhat or very difficult to compare the monthly premiums for each coverage option. Those with Marketplace coverage (25%) were more likely to report having this issue compared to those with ESI (19%), Medicaid (12%), or Medicare (17%) (Figure 2). Insured Hispanic adults (22%) were more likely to report difficulty comparing the plan premiums than White (17%) adults. Insured adults ages 18-29 (24%), 30-49 (20%), and 50-64 (19%) were all more likely to report that it was somewhat or very difficult to compare the monthly premium for each option compared to those ages 65 and older (13%).

Federal Consumer Protections that Seek to Address Barriers to Understanding the Cost of Coverage and Care

The KFF Consumer Survey indicates that many consumers have gaps in understanding what they will have to pay for the services they need before they receive care. Federal reforms related to health insurance costs aim to simplify and standardize cost sharing, set guidelines for the coverage of certain health benefits, and promote price transparency. Some of these changes may enable consumers with private coverage to better understand their coverage options and out-of-pocket obligations for covered benefits. This section focuses primarily on federal protections for individuals with private health insurance (individual and employer-sponsored), though public programs like Medicare and Medicaid have established many consumer protections as well.

Providing Consumers with Cost Specific Information: Price Transparency

Federal reforms to private insurance aim to increase price transparency and promote competition among hospitals and among insurers, reduce health care costs, encourage patients to price-shop at different facilities by providing an estimate of patient out-of-pocket costs for a health care service or prescription drug, and help consumers make better plan selections. Reforms would allow consumers to look for price information about a service in at least three ways:

Search listed pricing information available on hospital and plan websites: Most hospitals in the U.S. are required to establish, update annually, and make public on the internet a comprehensive machine-readable file containing a list of their “standard charges” for all items and services that they provide. Standard charges are the regular rates established by hospitals for items and services. Standard charges alone are generally of less value to insured consumers when determining their out-of-pocket costs than the “allowed amount,” which is the maximum amount a specific health plan will pay for a covered benefit. This hospital price transparency requirement was included in the Affordable Care Act (ACA), with more extensive federal regulations (incorporating additional forms of pricing, including allowed amounts) issued in 2019 and effective in 2021. Separate federal price transparency standards require employer-sponsored plans and insurers to post on a publicly accessible internet site three machine-readable files disclosing different forms of pricing information specific to each plan: in-network provider-negotiated rates, historical out-of-network allowed amounts (the maximum amount a plan will pay for a covered health service received from an out-of-network provider), and prescription drug rates. Health plans and insurers must update these machine-readable files at least monthly and clearly state when it was last updated. This “Transparency in Coverage” requirement was created by 2020 regulations interpreting a provision in the ACA related to consumer transparency. These postings have been required since 2022, although full implementation of the prescription drug reporting was delayed.

The information posted to date under these two requirements is anything but consumer-friendly, as experts have noted their own problems evaluating the data. Data scientists and other researchers have reported finding this information overwhelming and sometimes inaccurate and difficult to decipher. As third-party entities aggregate this data to assist employer plans to make purchasing decisions and public policy researchers to evaluate costs, consumers themselves likely have limited ability to use the raw data on their own. There are few studies of the consumer experience with this machine-readable data, especially whether they know it is available, and their ability to understand and use it.

Use a self-service or price estimator tool: In an effort to alleviate the complexity and possible confusion that was perhaps anticipated by policymakers when requiring the posting of large amounts of data in digital files, federal rules also require that more “consumer-friendly” tools be available so that consumers can obtain information about out-of-pocket costs before they get a service or drug. Under the hospital transparency regulation, hospitals must also compile and display online a “consumer-friendly” list of at least 300 “shoppable” services (e.g., having a baby, getting a hip replacement), including 70 services specified by the Centers for Medicare & Medicaid Services (CMS) and any additional procedures chosen by the hospital. The list must include a plain language description of each procedure, discounted cash prices, payer-specific (i.e., private insurers, Medicare, Medicaid) negotiated prices, and de-identified minimum and maximum negotiated prices for all third-party payers for an item or service. As an alternative to this “consumer-friendly” list, a hospital can instead create and maintain an online price estimator tool that:

• Provides estimates for at least 300 shoppable services (including the 70 CMS-required services).
• Is displayed on the hospital website for easy access (i.e., does not require payment or the creation of an account to use the estimator tool); and
• Allows consumers to obtain an estimate of the amount they will be expected to pay the hospital for the shoppable service before they receive it.

The Transparency in Coverage regulation requires plans and insurers to provide cost-sharing information via an internet self-service tool that consumers can use to obtain personalized out-of-pocket estimates for in- and out-of-network health care items and services (including prescription drugs and medical equipment). Plans and insurers must make other information—such as the negotiated rate for a service, and whether the service is subject to prior authorization—available through a billing code or service description search. This rule was fully effective in 2024.

In addition, in 2020 Congress passed and President Trump signed the Consolidated Appropriations Act (CAA), which required plans and insurers to make a “price comparison tool” available on the internet, in paper form, and by telephone. Since this tool is similar to the Transparency in Coverage self-service tool, federal agencies state in guidance that they have deferred enforcement of this CAA price comparison tool requirement.

Review an Explanation of Benefits before care is received (Advanced Explanation of Benefits (AEOB)): In addition to the transparency initiatives above, Congress also included in the CAA another transparency-related protection—the Advanced Explanation of Benefits—to help consumers better understand their expected out-of-pocket cost for a service before they receive it so they can budget and/or compare cost to other providers. This was part of the No Surprises Act, a group of consumer protections included as part of the CAA.

When scheduling care or upon request health care providers and facilities must provide a personalized good faith estimate of the provider’s expected charges to the consumer’s employer plan or insurer. The plan or insurer must then use this information to create an Advanced Explanation of Benefits for the consumer that includes standard Explanation of Benefits information such as the provider’s expected charge, what the plan expects to pay, and the amount the consumer is expected to pay.

Implementation of this provision of the law has been challenging, according to CMS, as it will require coordination between providers and plans, and likely the development and testing of a single industry-wide electronic interchange standard. The agencies involved had convened an industry working group as well as consumer testing with prototype Advanced Explanation of Benefits. The rule’s 2022 effective date has been delayed.

Although the Advanced Explanation of Benefits has not yet been implemented, providers and facilities must provide a good faith estimate to uninsured and self-pay patients upon request or in advance of a scheduled service, within a specified timeframe. If the final bill is $400 or more above the good faith estimate, consumers may be able to dispute the bill through a patient-provider dispute resolution process. Eligible consumers may submit a complaint to CMS if the provider did not give the patient a good faith estimate or if the provider does not honor a dispute resolution in the patient’s favor.

Simplifying Cost Sharing and Other Consumer Out-of-Pocket Payments to Limit Cost and Address Complexity

The ACA ushered in new federal requirements to limit out-of-pocket spending for consumers with private insurance, with protections that set parameters for the design of certain health plan options and limited cost sharing so that it is the same whether the consumer has employer coverage or other private coverage on- or off- Marketplace. Marketplace plans have gone further through standardized plan options. The No Surprises Act’s reforms address balanced billing, eliminating it for certain services. All look to make costs more understandable and predictable for patients. These protections include:

Maximum out-of-pocket limit: All non-grandfathered private plans are required to set an annual cap on cost sharing for essential health benefits received in-network. These dollar limits are adjusted each year. For the 2025 plan year, the maximum out-of-pocket limit is $9,200 for self-only coverage and $18,400 for family coverage. Once a consumer reaches the maximum out-of-pocket limit, the insurer is required to cover 100% of the cost of essential health benefit services received in-network for the remainder of the plan year.

Ban on annual and lifetime dollar limits: All private plans, including grandfathered plans, are prohibited from imposing annual or lifetime dollar limits on coverage for essential health benefits, whether for in-network or out-of-network services. An annual dollar limit refers to the maximum amount an insurer would pay for covered benefits within a given year, whereas a lifetime dollar limit is the total dollar amount that a health plan would pay for as long as a consumer was enrolled in the plan. Prior to the passage of the ACA, an estimated 70 million people in large employer plans, 25 million in small employer plans, and 10 million with individual coverage had lifetime limits on their health coverage.

Zero-dollar cost sharing for certainpreventive services: Under the ACA, all private, non-grandfathered plans must cover a range of preventive services and not apply cost sharing, including:

• Evidence-based screenings and counseling for adults recommended by the U.S. Preventive Services Task Force (USPSTF) with an “A” or “B” rating such as cancer screenings, prenatal care, and medications that help prevent heart disease
• Routine immunizations for adults and children recommended by the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices such as influenza, measles, and COVID-19
• Preventive care for infants, children, and adolescents recommended by Health Resources and Services Administration’s (HRSA) Bright Futures Program such as well-child visits, autism screening, and fluoride supplements
• Additional preventive services for women as recommended by HRSA’s Women’s Preventive Services Initiative such as contraception, breast cancer screening, and breastfeeding supplies and support

Marketplace standardized plan options: Plans in the Marketplace are separated into categories — Bronze, Silver, Gold, or Platinum — based on the amount of cost sharing they require. In general, plans with lower cost sharing have higher premiums, and vice versa. For example, Bronze plans have the highest cost sharing but lower premiums, and Platinum plans have the lowest cost sharing but higher premiums. There can be substantial variation in plan details, even within the same insurer (e.g., premiums, provider networks, covered benefits, plan network types).

Standardized plan designs (also known as “easy pricing”) were created to simplify and streamline plan comparison and selection offered on the federally facilitated Marketplace (FFM), state-based exchanges using the federal platform (SBE-FPs), and some state-based Marketplaces (SBMs) by applying the same deductibles, copays, coinsurance, and out-of-pocket maximums to each category of essential health benefits across all Easy Price plans in the same metal level. For example, in 2025, the annual deductible for covered services under all Gold level Easy Price plans is $1,500, regardless of insurer. By contrast, other non-standardized Gold level plans might have different deductible and copay amounts.

Standardized plan design options were also designed to improve affordability by covering certain services before the deductible is met. All Easy Price plans must waive the deductible and instead apply a fixed dollar copay (e.g., $30 for a Gold Easy Price plan) for the following items and services: primary care and specialist office visits, urgent care visits, outpatient visits for mental health and substance use disorder treatment, physical therapy visits, and generic and preferred-brand drugs.

Not all Marketplace plans are standardized, though Marketplace plans must offer a standardized plan option at every product network type, metal level, and throughout each service area where they offer non-standardized plan options. Insurers can still choose to offer non-standardized plan options in the individual market but are limited to two plan options per product network type (i.e., HMO, PPO, EPO, POS) for plan year 2025.

Research has shown that having too many choices can confuse consumers and lead to them choosing suboptimal coverage. As implemented to date, HealthCare.gov’s requirement to offer standardized plan options may have increased, not decreased, the number of plan choices consumers face. Though consumers in most areas will continue to have a large number of plan choices for the foreseeable future, over time, that number may become more manageable.

Prohibition on balance billing for certain out-of-network care: Also known as “surprise medical bills,” balance billing can occur in medical emergencies, when insured patients are not necessarily able to choose an in-network hospital or provider as well as in non-emergencies when patients inadvertently receive care from an out-of-network provider at an in-network facility. In these cases, patients can be liable for the balance bill from the provider plus any cost sharing under their health plan. As of 2022, many of these types of balance bills are now prohibited under the No Surprises Act. The No Surprises Act generally protects patients with individual and employer-sponsored insurance by:

• Requiring private health plans to cover these out-of-network claims and apply in-network cost sharing for certain covered benefits.
• Prohibiting out-of-network providers, facilities, and providers of air ambulance services from billing patients more than in-network cost sharing for certain out-of-network care.
• Requiring providers and facilities to provide patients with written notice explaining surprise billing protections, who to contact for concerns about potential violations, and how they can waive billing protections if they choose to do so.

Looking Forward

Consumer understanding of their coverage costs can play a significant role in seeking needed health care. One study found that lower health literacy scores were associated with consumers delaying or forgoing preventive care due to perceived health care costs. While better consumer education and outreach can help, the inherently complicated and profit-driven insurance and health care system includes few incentives to provide consumers with individualized and impartial assistance. However, several existing consumer protections, if implemented and enforced, as well as a broader health policy focus on how to improve the consumer experience, could make a difference.

Focus on price transparency: Despite a deregulatory agenda and recent cuts to agency staff, the Trump administration has directed the agencies to better enforce price transparency regulations. However, these machine-readable files with lists of prices and procedure codes currently have limited value to help consumers directly without an impartial analysis of the data and user-friendly vehicles to describe the information. Price estimators, also required as part of the Transparency in Coverage rule, have the potential to have more value to patients. However, while consumers may want an estimate of their expected out-of-pocket costs for a covered benefit, their awareness of the existence of these estimator tools and the likelihood of using them will influence how effective the regulation is at achieving its aims. Research conducted before and after its implementation showed mixed results on the consumer experience using these tools and their effectiveness in lowering out-of-pocket costs and health care costs overall. There is also concern that consumers will conflate high-cost with high-value care when price estimator tools do not incorporate quality metrics, potentially leading to higher health care spending. In an era of rapid developments in digital technology and artificial intelligence, ways to improve, consumer test, and standardize these tools and encourage their use may be one area of future focus.

Spotlight on cost-sharing protections: Getting renewed attention in the coming months and years are standardized cost-sharing designs that have or have the potential to provide more transparency and predictability about out-of-pocket costs for consumers. The U.S. Supreme Court will decide a case that could end free coverage of certain preventive care services recommended by the U.S. Preventive Services Task Force. A decision in that case is expected later this year. Consumers also await implementation of the Advanced Explanation of Benefits, as a key tool for patients to get cost information upfront. The coordination between plans and providers required for this initiative could go a long way to help patients often caught in the middle between plans and providers not working with each other in the best interest of consumers.

Finally, look for more attention to prescription drug costs and a cost-sharing protection that has been in place across all private insurance for over a decade, the maximum out-of-pocket limit, or cost-sharing limit. Many people who take certain high-cost medications receive financial assistance from drug manufacturers to offset their out-of-pocket costs. In recent years, private plans (excluding those offered to federal workers) have increasingly applied copay accumulators and copay maximizers when an enrollee receives this manufacturer assistance. Under these types of adjustment programs, the amount of financial assistance an enrollee receives does not count toward an enrollee’s out-of-pocket obligations, including the maximum out-of-pocket limit. Research has found that there is little transparency in how these programs operate and research has demonstrated that consumers are not always aware that their health plan contains these features. After a court challenge and a recent change in essential health benefit regulations, the federal government might be poised to confirm and clarify that cost sharing includes amounts received from pharmacy financial assistance programs and that plans must count those amounts toward the maximum out-of-pocket limit.

Continuing state-level initiatives to improve cost transparency: State-level initiatives that aim to improve cost transparency and help prevent medical debt could play a larger role if federal enforcement and regulations concerning consumer protections are stalled. New York, for example, enacted a bill in 2024 that bans a common provider practice, requiring patients to agree to cover the costs of a bill that their insurer does not cover before services are rendered (referred to as a “consent-to-bill” form) and requiring providers have a discussion with their patients about costs of services before signing this form. Although the state has indefinitely delayed full implementation of this law, the requirement for providers to discuss costs with the patient before asking them to sign the consent-to-bill form would still apply.

States continue wide-ranging activity to address high prescription drug costs in private insurance as public concern about high prescription drug costs continues to mount. For example, pharmacy benefit manager (PBM) practices have been criticized for driving up prices and for being shrouded in secrecy. In response, many states have passed laws that aim to improve PBM transparency and reporting requirements, prohibit PBM policies that prevent pharmacists from telling patients when a lower-cost option might be available, and prohibit PBMs from steering enrollees to PBM-owned pharmacies, among others. Whether these laws apply to all private insurance, including self-insured private employer plans, is an open question.

March 10^th, CMS issued a proposed rule that seeks to change how plans sold on and off the Affordable Care Act’s (ACA) Marketplaces (plans for individuals and small businesses), would cover gender affirming care services, which the rule calls “coverage for sex-trait modification.” The rule proposes, beginning plan year 2026, to prohibit insurers from covering gender affirming care as an essential health benefit (EHB), which could lead insurers to drop coverage or shift costs to individuals and states.

While the policy aim of the proposed rule aligns with the administration’s Executive Orders on gender and limiting access to gender affirming care, certain provisions of these orders are currently subject to preliminary injunctions and the agency states that the proposal “does not rely on the enjoined sections of the executive orders in making this proposal.” Instead, CMS writes that they are proposing the prohibition “because coverage of sex-trait modification is not typically included in employer-sponsored plans, and EHB must be equal in scope to a typical employer plan…” CMS does not provide support for this assertion, instead stating that they find that “0.11 percent of enrollees in non-grandfathered individual and small group coverage market plans utilized sex-trait modification during PYs 2022 and 2023.” Utilization of gender affirming care services is expectedly low in the population overall because only a small share of the population is transgender and not all transgender people seek gender affirming medical care. Further, utilization of a service may be a poor proxy for how commonly it is covered. There are other cases where a small share of the population uses a service that is generally covered by insurance. For example, there were fewer than 5,000 heart transplants in the US in 2023 (equaling one ten thousandth of a percent of the population) but public and commercial insurance typically covers this service.

Coverage of gender affirming care services in employer plans is fairly common. KFF’s 2024 Employer Health Benefit Survey found that about one-quarter (24%) of large employers (200 or more workers) stated they covered gender-affirming hormone therapy, a plurality of respondents did not know if they covered these services (45%), and less than one-third (31%) did not offer coverage.  The largest firms in the country (5,000 or more workers) employ 43% of people with job-based coverage and were significantly more likely to report covering hormone therapy in their largest plan (50% offered coverage, 18% did not know). In 2023, KFF’s Employer Health Benefit Survey found a similar trend relating to gender-affirming surgery. Among large employers (200 or more workers) offering health benefits, 23% provide coverage for gender-affirming surgery in their largest health plan, with 40% indicating they did not know.  More than 60% of the largest firms provide coverage for gender-affirming surgery (and 12% did not know). While for both services, there was uncertainty among employers over the details of coverage, many large employers provided coverage. 2022 data from Mercer and 2025 data on fortune 500 company coverage from HRC found, as KFF did, that coverage rates are particularly high among the largest employers (where most US workers are covered).

If implemented, the proposal would likely have an impact on access and costs for individuals and states. Some plans might drop coverage and while plans could cover gender-affirming services outside of their EHB package, consumers would not be assured the same cost-sharing and benefit design protections as for services included in the EHB package. Costs accrued for gender affirming care would not be required to count towards deductibles or out-of-pocket maximums, and would not be protected from lifetime limits, increasing out-of-pocket liability. Given that transgender people are more likely to be living on lower-incomes than cisgender people, higher costs could pose a particular challenge. Increases in out-of-pocket costs would likely deter enrollees from accessing gender-affirming care services, which are medically necessary and recommended by practically every major US medical association.

States, including about half that prohibit transgender care related exclusions, could also be faced with defraying the cost of covering these services under certain scenarios. The proposal states “if any State separately mandates coverage for sex-trait modification outside of its EHB-benchmark plan, the State would be required to defray the cost of that State mandated benefit as it would be considered in addition to EHB….However, if any such State does not separately mandate coverage of sex-trait modification outside of its EHB-benchmark plan, there would be no defrayal obligation..”

The proposal also raises questions about whether the policy would violate the ACA’s major sex nondiscrimination protections (under Section 1557).  Sec. 1557 protects against sex (and other) discrimination in health care and while the Trump Administration has suggested that it will view these protections based on biological sex assigned at birth only, courts can and have said that those protections extend to sexual orientation and gender identity. This interpretation also differs from the opinion issued by the Supreme Court in the Bostock case which found employment sex-based nondiscrimination protections extend to sexual orientation and gender identity.

More than 67 million people—20% of the U.S. population—receive their health insurance coverage through the federal Medicare program. Among the most commonly used services that Medicare covers are physician services and other outpatient services covered under Medicare Part B. In 2021, 9 out of 10 beneficiaries in traditional Medicare used physician and other Part B medical services. Nearly half of the $1 trillion in gross Medicare benefit spending in 2023 (49% or $493 billion) was spent on Part B services. Medicare Part B spending accounts for 25% of all national spending for physician and clinical services.

Each year, the Centers for Medicare & Medicaid Services (CMS) updates Medicare payments for physician services and other Part B services through rulemaking, based on parameters established under law. In November 2024, CMS finalized a 2.83% decrease in the physician fee schedule conversion factor, a key aspect of physician payment rates under the Medicare program. This resulted in an average payment cut of 2.93% to physicians and other clinicians, which took effect on January 1, 2025 and remains in effect today. Congress considered but did not enact legislation to reverse the cut in Medicare physician payments in the year-end spending bill and in the 2025 continuing resolution that funds the government through the end of the fiscal year (Figure 1). Some policymakers continue to push for a fix, which is reportedly under consideration for inclusion in an upcoming budget reconciliation bill.

Efforts by lawmakers to address the Medicare physician payment cut for 2025 are the latest in a series of legislative actions to provide short-term increases to physician payment rates under Medicare to avoid similar reductions in fees. The payment cut finalized for 2025 follows the expiration of temporary funds under the Consolidated Appropriations Act of 2024, which provided a 2.93% increase to physician payments for a portion of 2024 to stave off scheduled cuts.

Over the years, physician groups and some policymakers have called for broader reforms to stabilize Medicare payments to physicians and other clinicians, and have expressed concerns that instability and loss of revenue could push physicians to opt out of the Medicare program, creating potential access problems for Medicare beneficiaries. Physicians are not required to take Medicare patients, but most do; virtually all (98%) of non-pediatric physicians accept Medicare’s standard payment rate for all Medicare covered services, and just 1% opted out of the program in 2024.

MedPAC and others have raised additional concerns about issues such as the long-standing gap in compensation between primary care and specialty care clinicians, the efficacy of quality-based payment incentives through the Quality Payment Program (QPP), and the influence of medical specialty groups and interests through the American Medical Association/Specialty Society Relative Value Scale (RVS) Update Committee, otherwise known as the RUC. The RUC issues annual recommendations to CMS on physician payment rates, and CMS has historically adopted most of these recommendations each year. These issues have drawn the attention of policymakers in recent years, including Robert Kennedy Jr., the Trump administration’s new Secretary of the Department of Health and Human Services (HHS), who has voiced interest in aspects of Medicare physician payment reform, such as increasing incentives for primary and preventive care, as well as bringing greater transparency to the operations of the RUC and potentially reducing the AMA’s influence over payment rates.

This issue brief answers key questions about how Medicare pays physicians and other clinicians, and reviews policy options under discussion to reform this payment system. The brief is focused primarily on the physician payment system used in traditional Medicare. Medicare Advantage plans have flexibility to pay providers differently and currently there is no systematic publicly-available information on how much Medicare Advantage plans pay providers. (See Appendix for a glossary of relevant programs, legislation, and terms.)

1. What is the Medicare physician fee schedule?

Medicare reimburses physicians and other clinicians based on the physician fee schedule, which assigns payment rates for more than 10,000 health care services, such as office visits, diagnostic procedures, or surgical procedures. For services provided to traditional Medicare beneficiaries, Medicare typically pays the provider 80% of the fee schedule amount, while the beneficiary is responsible for a coinsurance of 20%. Physicians who participate in Medicare agree to accept this arrangement as payment in full (known as accepting “assignment”) for all Medicare covered services. Non-participating physicians receive 5% lower Medicare payments, but may accept “assignment” on a claim-by-claim basis and may choose to bill beneficiaries for larger amounts by charging additional coinsurance, up to 15% more than the Medicare-approved amount for the cost of a covered service. A third group of physicians opt out of the Medicare program altogether, and instead enter into private contracts with their Medicare patients, are not limited to charging fee schedule amounts, and do not receive any reimbursement from Medicare. Just one percent of all non-pediatric physicians opted out of the Medicare program in 2024.

Physician fee schedule rates for a given service are based on a weighted sum of three components: (1) clinician work, (2) practice expenses, and (3) professional liability insurance (also known as medical malpractice insurance). These three components are measured in terms of “relative value units” (RVUs). Together these three components represent the overall cost and effort associated with a given service, with more costly or time-intensive services receiving a higher weighted sum. Each component is adjusted to account for geographic differences in input costs, and the result is multiplied by the fee schedule conversion factor (an annually adjusted scaling factor that converts numerical RVUs into payment amounts in dollars). Fee schedule services are each associated with a unique service code, which allows clinicians to seek reimbursement for the care they provide on a service-by-service basis.

Payment rates specified under the physician fee schedule establish a baseline amount that Medicare will pay for a given service, but payments may be adjusted based on other factors, such as the site of service, the type of clinician providing the service, and whether the service was provided in a designated health professional shortage area. Physicians can also receive quality-based payment adjustments under the Quality Payment Program (QPP) (see question 7).

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2. How does Medicare update physician payment rates?

Annual updates to the physician fee schedule include statutorily-required updates to the conversion factor under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (see question 6), as well as other adjustments to reflect the addition of new services, changes in input costs for existing services, and other factors. Included in these adjustments are periodic changes to the RVUs assigned to fee schedule service codes, based in part on the recommendations of a multispecialty committee of physicians and other professionals, known as the AMA/Specialty Society RVS Update Committee (RUC) (see question 3).

Under current law, the projected cost of all changes to the physician fee schedule must be budget neutral. That is, the changes may not raise total Medicare spending by more than $20 million in a given year. This requirement was established by the Omnibus Budget Reconciliation Act of 1989 to address concerns that constraints on physician fees for specific services would lead to increases in service volume and growth in Medicare spending for physician services over time. The law requires CMS to adjust fee schedule spending when projected costs exceed the $20 million threshold, typically by decreasing the conversion factor relative to the statutory update called for by MACRA.

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3. What is the role of the RUC in determining physician payment rates?

The AMA/Specialty Society RVS Update Committee (RUC) is a volunteer committee of physicians and other professionals, formed by the American Medical Association (AMA) in 1991 to advise CMS on the relative weighting of service codes under the physician fee schedule, the primary mechanism used by CMS to set relative payments for physician and clinical services. The RUC is an independent body and its operations are not directly overseen by Congress or CMS. Further, because the RUC is not an official federal advisory committee, it is not bound by federal standards around transparency, membership balance, and other operating requirements applied to many similar committees. The RUC includes representatives from the AMA and other professional organizations, as well as members appointed by a range of national medical specialty societies.

Each year, CMS identifies potentially misvalued services for RUC review based on statutory criteria and public nomination. Potentially misvalued services may also be identified by the RUC itself, while new or recently revised service codes are identified by a separate AMA panel, known as the Current Procedural Terminology (CPT) Editorial Panel. The RUC then consults with various medical specialty societies, who decide which services they wish to review and develop recommendations on the clinician work, practice expenses, and other factors associated with payment for each service. A final list of recommendations for reviewed services is compiled by the RUC based on a committee vote and referred to CMS.

CMS is not required to adopt recommendations issued by the RUC, but it does so in a majority of cases. The AMA reports an average annual acceptance rate of 90% from 1993 to 2025. Over the years, MedPAC and others have raised concerns about the influence of the RUC, which is largely composed of specialty physicians with a financial stake in the recommendations they are producing, and noted several methodological issues with the data used to develop RUC recommendations (see question 8). MedPAC has called for CMS to develop internal processes to validate RUC recommendations by independent means. More recently, HHS Secretary Kennedy has raised concerns about the lack of transparency and relative lack of oversight of RUC operations by CMS, as well as the influence of the AMA in setting payment rates for physicians, which has brought renewed attention to the issue (see question 9).

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4. How have physician payment rates changed in 2025?

CMS recently finalized payment changes for 2025, which include a 2.83% decrease to the physician fee schedule conversion factor relative to 2024. This decrease reflects the following adjustments: (1) the expiration of temporary funds approved by Congress under the Consolidated Appropriations Act of 2024, which increased payments by 2.93% for all fee schedule services furnished between March 9, 2024 and December 31, 2024, (2) a 0% statutory increase for 2025 under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), and (3) a modest 0.02% budget neutrality adjustment. The combined impact of these adjustments is a 2.93% decrease in average payments to physicians and other clinicians, which went into effect on January 1, 2025.

As of March 2025, Congress has not passed legislation to address this payment cut. A provision to reduce (though not fully eliminate) the cut was included in an early version of the year-end Continuing Resolution (CR) filed in December 2024, similar to the temporary payment adjustments instituted by Congress in prior years, but was removed from the version signed into law. Congress also considered, but did not include, legislation in the subsequent CR enacted in March 2025, but some policymakers continue to push for a fix, which is reportedly under consideration for inclusion in an upcoming budget reconciliation bill.

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5. How did the 2025 payment rule address issues related to primary care, telehealth, and other health care priorities?

Recent changes to the physician fee schedule also include several measures designed to improve health care access and increase support for preventive services, behavioral health, and management of chronic disease. These measures are part of an ongoing effort by CMS and the Department of Health and Human Services (HHS) to strengthen primary and preventive care and address long-standing concerns about the gap in compensation between primary and specialty care physicians (see question 8). The final payment rule for 2025 introduces the following key changes:

• CMS has added new billing codes to the physician fee schedule intended to streamline payment for advanced primary care management. This change bundles several existing services related to care management, interprofessional consultation, and other care components into single codes, stratified by patient medical and social complexity, which may be billed on a monthly basis.
• CMS has added new billing codes related to caregiver training for direct care services and supports, allowing clinicians to bill for time spent training caregivers on specific clinical skills such as techniques to prevent ulcer formation, wound dressing changes, and infection control, and has expanded existing billing options for trainings dedicated to caregiver behavior management and modification.
• CMS has finalized several provisions aimed at improving beneficiary access to telehealth, such as broader coverage of audio-only services and increased flexibility in the use of telehealth for treatment of opioid use disorder (OUD). Safety planning interventions and PrEP counseling have been added to the Medicare Telehealth Services list on a permanent basis, and caregiver training services have been added on a provisional basis.
• Absent further action from Congress, many of the other telehealth restrictions that were in place prior to the COVID-19 pandemic will come back into effect on April 1, 2025. These include restrictions limiting telehealth coverage to beneficiaries in rural areas, and requiring beneficiaries to travel to an approved site, such a clinic or doctor’s office, when receiving telehealth services. However, CMS has extended certain limited flexibilities under its authority through December 2025, such as provisions that allow Rural Health Centers (RHCs) and Federally Qualified Health Centers (FQHCs) to serve as distant site providers for all covered telehealth services, and allow providers to use their currently enrolled practice location in place of their home address when providing telehealth services from home.
• CMS has also added new billing codes for a range of other primary and behavioral health services, such as cardiovascular risk assessment and care management, use of digital mental health treatment devices, and safety planning interventions for patients at risk of suicide or overdose, among others.
• CMS has finalized several updates to the Quality Payment Program (QPP) to improve the accuracy of quality reporting and reduce administrative burden for providers participating in the Merit-based Incentive Payment System (MIPS). (For a more detailed description of the QPP and MIPS, see question 7).

The new rules also include updates to the Medicare Shared Savings Program (MSSP), a permanent accountable care organization (ACO) program in traditional Medicare that offers financial incentives to providers for meeting savings targets and quality goals, as well as other changes related to payment for preventive vaccine administration, opioid treatment programs, evaluation and management of infectious diseases in hospital inpatient or observation settings, and a variety of other health services.

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6. How have Medicare payments to physicians changed since the implementation of MACRA?

Medicare has revised its system of payment for physician services numerous times over the years (Figure 1). The current payment system was established under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and includes two primary components: (1) a schedule for annual, statutorily-defined updates to the conversion factor, a key determinant of payment rates under the physician fee schedule, and (2) a new system of bonus payments and quality-based payment adjustments under Quality Payment Program (QPP) (see question 7).

The physician payment system established by MACRA was intended to stabilize fluctuations in payment caused by the prior system under the Medicare Sustainable Growth Rate (SGR) formula, which set annual targets for Medicare physician spending based on growth in the gross domestic product (GDP). Under the SGR, if physician spending exceeded its target in a given year, payment rates would be cut the following year, while spending that was below the target led to increased rates. As with the current system, rates were subject to further adjustment for budget neutrality if the projected cost of all fee schedule spending was projected to increase by more than $20 million for the year.

The SGR was established by the Balanced Budget Act of 1997 to slow the growth in Medicare spending for physician services, but the formula garnered criticism, as growth in service volume and rising costs led to several years of spending on physician services that exceeded the growth target, necessitating payment cuts from 2002 onward. Between 2002 and 2015, Congress enacted 17 short-term interventions (so-called “doc-fixes”) to delay the cuts and provide temporary increases to physician payments, but did so without repealing the SGR, which resulted in accumulated deficits over time.

MACRA permanently eliminated the SGR formula, preventing a 21.2% cut in physician fees slated for 2015 and replacing it with 0% statutory increases to the conversion factor through 2025 (later raised to 0.5% from 2016-2019), followed by modest annual increases from 2026 onward. These updates are set by MACRA and do not vary based on underlying economic conditions. However, subsequent adjustments to preserve budget neutrality and supplemental payments provided by Congress may result in conversion factor updates that are higher or lower than the statutorily-required update in a given year.

Although MACRA has stabilized payments under the physician fee schedule to some degree relative to the years leading up to its enactment, rates have continued to fluctuate over the last decade. Due to strict budget neutrality requirements, CMS has limited flexibility to adjust payment rates for new or undervalued services without offsetting the costs elsewhere in the fee schedule. This often takes the form of budget neutrality adjustments to the conversion factor, such as a -10.20% adjustment in 2021 and a -2.18% adjustment in 2024. Since 2021, Congress has provided several short-term increases to fee schedule rates to boost payment during the COVID-19 pandemic and to offset budget-neutrality cuts, raising concerns that the cycle of “doc-fixes” under the SGR formula has not been wholly avoided under MACRA.

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7. How does the Quality Payment Program (QPP) factor into physician payments?

The Quality Payment Program (QPP), which launched in 2017, was established by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) to create financial incentives for health care providers to control costs and improve care quality. The QPP includes two distinct pathways for participation: (1) incentive payments for participants in qualified advanced alternative payment models (A-APMs) and (2) performance based payment adjustments under the Merit-based Incentive Payment System (MIPS).

A-APM Incentive Payments: Physicians and other clinicians who participate in qualified A-APMs, such as select accountable care organizations (ACOs) and others, are eligible for bonus payments if they meet certain participation thresholds. A-APMs are a type of value-based care model in which the provider bears some financial risk for the costs of care in a defined setting, such as treatment of a specific condition or primary care services for a group of beneficiaries, typically by sharing in a portion of financial savings and losses relative to a benchmark. Incentive payments to increase participation in A-APMs are part of a broader goal by CMS to have all traditional Medicare beneficiaries in some type of accountable care relationship by 2030.

Each year, A-APM clinicians qualify for bonus payments based on their participation during the Qualifying APM Participant Performance Period (January 1 – August 31) two years prior. Under MACRA, qualifying A-APM clinicians received a 5% bonus in payment years 2019 through 2024 (performance periods 2017 – 2022). Congress subsequently extended these bonus payments to include a 3.5% bonus in 2025 and a 1.88% bonus in 2026. A-APM bonus payments are scheduled to be phased out in favor of annual 0.75% increases to the conversion factor for qualifying A-APM clinicians (relative to smaller 0.25% increases for all other clinicians). These conversion factor updates will begin in 2026, and A-APM bonus payments will be fully retired in 2027.

Roughly 386,000 clinicians qualified for A-APM bonuses in 2024, based on the 2022 performance period, a nearly fourfold increase from 99,000 in 2019, the first year A-APM bonuses were available. At the same time, A-APMs are not evenly distributed throughout the country, and participation among non-physician providers and certain physician specialties remains relatively low, suggesting that additional strategies may be needed to encourage wider adoption of these models. Further, MedPAC and others have noted that the scheduled conversion factor updates for qualifying A-APM clinicians will be relatively small in the first few years after A-APM bonuses are retired, though their effects will compound over time, and have cautioned that additional incentives may be needed to prevent attrition in A-APM participation during this transition.

Merit-based Incentive Payment System (MIPS): Clinicians who do not participate in A-APMs, or do not meet the participation criteria for A-APM bonus payments, are subject to additional reporting requirements under MIPS, which adjusts payments up or down depending on a clinician’s performance on certain quality metrics. As with A-APM bonuses, payment adjustments under MIPS are based on performance two years prior. Clinicians are required to participate in MIPS if they are eligible, but many are exempt, such as those in certain specialties (e.g., podiatrists), those in their first year of Medicare participation, and those who serve a low volume of Medicare patients.

Payment adjustments under MIPS are required to be budget neutral. Adjustments are capped each year (between +9% and -9% in 2025), and savings generated from clinicians who incur negative adjustments are used to fund positive adjustments for those who qualify. Because a relatively small share of clinicians have incurred negative adjustments each year since MIPS was implemented, positive adjustments have generally been much lower than the annual cap. In 2023 for instance, roughly 600,000 clinicians received positive adjustments up to +2.34%, based on the 2021 performance year, while just 23,000 clinicians received negative adjustments down to -9%. MedPAC estimates that another 460,000 clinicians were ineligible for either an A-APM bonus or MIPS adjustment due to low Medicare patient volume or other exemption criteria.

Clinicians who participate in MIPS have traditionally selected from a large set of quality measures and other clinical metrics to report on each year. While this structure was intended to give clinicians flexibility to choose the metrics best suited to their practice, it has also been criticized by physician groups and experts for increasing the reporting burden on participants, and for making comparisons between participants less clinically meaningful and more difficult to assess. In an effort to address these concerns, CMS has introduced several more streamlined reporting options. The newest of these allows clinicians to choose from smaller, bundled subsets of reporting metrics tailored to particular specialties or medical conditions, known as MIPS Value Pathways (MVPs).

MVPs were introduced in 2023 as an optional alternative to reporting under traditional MIPS, and included a preliminary set of reporting pathways aimed at specific clinical contexts, such as primary care, treatment of heart disease, and supportive care for neurodegenerative conditions. CMS has added new MVPs each year since the option was introduced, including 6 in 2025, with the eventual goal of replacing all reporting under traditional MIPS with MVPs in future years. The purpose of this shift is to reduce administrative burden by offering providers smaller, more targeted sets of reporting metrics to choose from, as well as to allow for more clinically meaningful assessments by comparing outcomes among similar clinicians who choose to report under the same MVP.

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8. What concerns have been raised about the physician fee schedule?

Criticism of the physician fee schedule has focused on four primary concerns about the way in which Medicare pays physicians and other clinicians. These include: (1) the overall adequacy of Medicare payments to cover medical practice costs and incentivize participation in the Medicare program, (2) the gap in compensation between primary and specialty care clinicians, (3) the influence of the AMA/RVS Update Committee (RUC) and medical specialty groups in determining relative payment rates for fee schedule services, and (4) the success of the Quality Payment Program (QPP) in achieving its goal of incentivizing quality improvements and cost-efficient spending.

Payment Adequacy: Over the years, physician groups and some policymakers have expressed concern that payment rates under the physician fee schedule have not kept pace with inflation in medical practice costs. Practice expenses are one component of the relative-value calculation used to determine payment rates for fee schedule services, but the requirement to preserve budget neutrality makes it difficult for CMS to increase payment for some services without also decreasing payment in other areas, such as by lowering the fee schedule conversion factor (see question 6). Statutory increases to the conversion factor under MACRA are not scheduled to begin until 2026, and do not vary based on underlying economic conditions, which may make it more challenging for some physicians to adapt to changing financial demands.

Core to these concerns is the possibility that loss of revenues could lead some physicians to opt out of the Medicare program, which could create access issues for Medicare beneficiaries. National surveys and other analyses have generally found that beneficiaries report access to physician services that is equal to, or better than, that of privately-insured individuals, with similar or smaller shares reporting delays in needed care or difficulty finding a physician who takes their insurance. A recent KFF analysis found that just 1% of all non-pediatric physicians had opted out of Medicare in 2024, suggesting that the current fee structure has not substantially discouraged participation. Moreover, MedPAC estimates that virtually all Medicare claims (99.7% in 2023) are accepted on “assignment” and paid at the standard rate (see question 1), with beneficiaries in traditional Medicare facing no more than the standard 20% coinsurance rate. At the same time, analyses by KFF and others have found that physicians in some specialties, such as psychiatry, opt out of Medicare at higher rates, which may impact access to these services over time.

Loss of revenue may also lead some physician practices to merge with (or be acquired by) larger health systems or hospitals, a process known as “vertical consolidation.” Vertical consolidation may offer certain benefits to physicians, such as greater economy of scale for practice expenses, lower administrative burden, and access to costly resources such as medical imaging equipment, and may be attractive to physicians who are otherwise struggling to meet their practice costs. While consolidation may be associated with some benefits to patients as well, such as improvements in care integration and coordination between providers, it may also lead to higher out-of-pocket costs and lower care quality by reducing market competition. Further, Medicare generally pays more for a given service provided in a hospital outpatient department than it does for the same service provided in a freestanding physician office, which can lead to increased costs for beneficiaries and higher program spending over time. Policymakers are currently exploring options to align Medicare reimbursement rates between these settings, known as “site-neutral payment reforms.”

Primary Care Compensation: A second concern with the current payment system is that Medicare does not adequately pay for primary care services, as reflected by the gap in Medicare payments between primary and specialty care clinicians. Payments under the physician fee schedule are generally higher for clinical procedures, such as surgeries and diagnostic tests, than for non-procedural services, such as preventive care provided during an office visit. While many clinicians provide a mixture of procedural and non-procedural services, primary care clinicians often dedicate a larger share of their time to non-procedural care. Further, MedPAC has expressed concern that this imbalance encourages clinicians of all specialties to increase their use of more costly and profitable services, such as unnecessary imaging, screenings, and diagnostic tests, at the expense of high-value, but less profitable, services, such as patient education, preventive care, and coordination across care teams, which can impact the quality of patient care and lead to higher physician spending over time.

MedPAC notes that clinical procedures often see gains in efficiency due to technological improvements and other factors, which reduce the time and effort needed to provide them. If fee schedule rates are not adjusted to reflect these improvements, these services may become overvalued over time. By contrast, non-procedural services often involve more fixed time constraints, such as time spent communicating with patients or coordinating with other providers, and are unlikely to see similar gains, contributing to the gap in compensation between these service types.

Due to budget neutrality requirements, efforts to directly increase payment for non-procedural services under the physician fee schedule in order to boost payments for primary care have often necessitated across-the-board payment cuts in the form of decreases to the fee schedule conversion factor (see question 6). Further, physicians may offset any expected reductions in revenue by increasing service volume over time, or by increasing their use of higher intensity, and more highly compensated, service codes, leaving the gap in payment rates relatively constant. These constraints make it difficult for CMS to meaningfully address differences in payment between primary and specialty care, and have led some policymakers to voice concerns that the current budget neutrality requirements are too rigid.

Role of the RUC: The American Medical Association (AMA) and the RUC play a substantial role in annual decision-making around the relative weighting of service codes under the physician fee schedule, the primary mechanism used by CMS to set relative payment rates for physician and clinical services (see question 3). While CMS is not required to adopt recommendations issued by the RUC, it does so in a majority of cases. MedPAC has raised several methodological concerns with the data used by the RUC to develop its annual reports, which are largely based on recommendations from medical specialty societies. These include a lack of transparency, as well as low response rates and total responses on the various member surveys that inform medical specialty society recommendations, which make it difficult for CMS to validate RUC recommendations by other means.

Other concerns raised about the RUC include the overrepresentation of specialty physicians on the committee, and the potential for conflicts of interest when RUC members recommend changes to relative payments for primary and specialty care services. In contrast to federal advisory committees, which are typically formed by Congress, the office of the President, or executive branch agencies, the RUC is an independent committee overseen by the AMA. For this reason, it is not held to the same operating requirements as many other similar committees, which adhere to certain criteria around transparency and membership balance.

To ensure that fee schedule services are not overvalued, MedPAC has recommended that CMS develop internal processes for validating RUC recommendations, such as by collecting data from clinical practices on the number of clinician hours dedicated to commonly-billed services. Pilot studies commissioned by CMS and the Department of Health and Human Services (HHS) have attempted to validate the clinician time component of small subsets of fee schedule services using methods such as analysis of electronic health records, direct observation of clinical procedures, and independently-collected physician surveys. These projects may serve as a blueprint for future work, though implementing these and similar methods on a large scale would likely require significant time and staff investment.

Role of the QPP: QPP programs such as the Merit-based Incentive Payment System (MIPS) and bonus payments for Advanced Alternative Payment Model (A-APM) clinicians are designed to create incentives for quality improvement, care coordination, and the provision of high-value services (see question 7). While the share of clinicians who qualify for A-APM bonuses has more than tripled since the QPP began (from roughly 99,000 to 386,000 in the 2017 and 2022 performance periods, respectively), some policymakers have argued that greater incentives are needed to encourage providers to take on the financial risks and high startup costs associated with these models, particularly as A-APM bonus payments are phased out in favor of relatively smaller conversion factor adjustments in the coming years.

Additionally, MedPAC has voiced concern that MIPS, the quality-based payment program for clinicians who do not participate in A-APMs, imposes too large of a reporting burden on those who participate, while at the same time offering relatively weak incentives to improve quality and control costs. As noted earlier, a large share of clinicians are exempt from the program, and because few participants receive negative adjustments, positive adjustments are relatively modest. The administrative burdens associated with MIPS may be partially addressed by the shift towards MIPS Value Pathways (MVPs) in place of traditional quality reporting, and further assessment of this option will likely take shape as the program is phased in.

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9. What policy proposals have been put forward to address concerns with Medicare’s current physician payment system?

In addition to bipartisan legislation that directly addresses the 2025 payment cuts that took effect January 1, 2025, policymakers and others have put forward a number of strategies to revise the current Medicare physician payment system. These include measures to stabilize physician fee schedule payments from year to year, provide additional support to primary care and safety-net providers, and create stronger incentives for efficient spending, care coordination, and participation in Advanced Alternative Payment Models (A-APMs).

In 2025, MedPAC recommended a one-time inflation-based increase to physician payment rates in 2026 (equal to the projected increase in the Medicare Economic Index minus one percentage point), similar to recommendations from past years. While MedPAC has weighed the possibility of recommending annual updates for inflation, it has not done so to date, focusing instead on targeted strategies to bolster payments to primary care clinicians and safety-net providers. For instance, in light of findings that clinicians often receive lower revenue for treating low-income Medicare beneficiaries, MedPAC has recommended raising payment in these instances by 15% for claims billed by primary care clinicians and 5% for claims billed by non-primary care clinicians, to encourage clinicians to treat these populations.

MedPAC has voiced support for the goals behind the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Quality Payment Program (QPP), including the financial incentives offered to A-APM participants under current law (see question 7), while also recommending changes to the design of the QPP, including the elimination of the Merit-based Incentive Payment System (MIPS). MedPAC has noted that the ongoing shift from traditional MIPS to MIPS Value Pathways (MVPs) addresses some concerns related to administrative complexity and participant comparisons, but a large share of clinicians remain exempt from MIPS reporting and incentive payments have generally remained relatively small (see question 8). In place of MIPS, MedPAC has recommended establishing a voluntary program designed to mimic the structure of A-APMs and other alternative payment models, allowing clinicians to transition into these models more gradually.

Several bills introduced in the last Congress indicate interest in strategies such raising or modifying the budget neutrality threshold, or offering separate conversion factor updates for primary and specialty care services, which would allow CMS greater flexibility to adjust payment rates to reflect evolving policy priorities without necessitating a mandatory payment cut. The Senate Finance Committee has held several hearings on physician fee schedule reform, and released a whitepaper in 2024 outlining a range of options to stabilize conversion factor updates from year to year, extend access to telehealth, and incentivize continued participation in A-APMs, among other reforms.

More recently, House Republicans included adjustments to the physician fee schedule in a menu of potential policy actions circulated in January 2025. The Secretary of the Department of Health and Human Services (HHS), Robert F. Kennedy Jr., has expressed a particular interest in Medicare physician payment reform, and has called for bringing greater transparency to the operations of the AMA/RVS Update Committee (RUC) (see question 3), as well as exploring options for reducing the role the RUC plays in annual decision-making around physician payments.

A decade after the passage of MACRA, Congress’s last major overhaul of how Medicare pays physicians, interest in broader reforms to Medicare’s physician payment system, beyond addressing the physician fee cuts finalized for 2025, is gaining steam. Designing payment approaches that address concerns raised by interested parties to compensate physicians adequately while restraining spending growth represents a challenge for policymakers.

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Appendix

A proposed federal rule issued this week would, if finalized, bring wide-ranging changes for the Affordable Care Act’s health insurance Marketplace, including a shorter open enrollment period in all states.

The Centers for Medicare & Medicaid Services (CMS) issued the proposed rule on March 10. A final rule would modify numerous regulations affecting consumers’ access to Marketplace coverage and financial assistance.

CMS projects that the proposed rule changes will result in between 750,000 and 2 million fewer Marketplace enrollees in 2026, compared to enrollment projections under existing Marketplace rules. ^{This is separate from the reduced enrollment that was already expected in 2026 due to the expiration of the American Rescue Plan’s subsidy enhancements at the end of 2025.}

Let’s take a look at some of the rule changes that could affect consumers’ costs and access to Marketplace coverage.

Open enrollment period would be shortened in all states

CMS has proposed that open enrollment should run from Nov. 1 through Dec. 15. in all states. The dates of open enrollment have varied over the years, but have most recently been set at Nov. 1 through Jan. 15 in most states.

In the past, HHS has given state-run exchanges the option to offer longer open enrollment periods. But the new proposal calls for the December 15 end date to apply to all exchanges.

As is already the case, the open enrollment period would apply both on-exchange and off-exchange.

In the 31 states that use HealthCare.gov, more than 17.1 million people enrolled in Marketplace coverage during the open enrollment period for 2025 coverage. ^{Of those, 16.6 million had completed their enrollments by Dec. 15. So the majority of enrollees do sign up by mid-December, in time to get full-year coverage for the coming year. Only about 529,000 people enrolled via HealthCare.gov between Dec. 16, 2024 and Jan. 15, 2025, accounting for about 3% of total enrollment.}

But if open enrollment ends on Dec. 15, absent a special enrollment period, an applicant or enrollee will no longer have an opportunity to pick a different plan after the start of the calendar year. This will make it particularly important for enrollees to pay close attention to communications they get from their plan and the Marketplace before and during open enrollment, to ensure that there are no unwelcome surprises regarding their coverage or premiums in January.

Rule would eliminate the low-income special enrollment period

For the last few years, there has been a year-round enrollment opportunity in most states in the form of a special enrollment period for people who are subsidy-eligible and have a household income that isn’t more than 150% of the federal poverty level (FPL). For a single adult in the continental United States, that’s an income of $22,590 in 2025.

The proposed rule would end this year-round enrollment opportunity. This change would apply nationwide, including in states that run their own exchanges.

Many other provisions of the proposed rule are slated to take effect for the 2026 or 2027 plan year. But the proposed rule calls for the low-income SEP to end almost immediately, on the effective date of the final rule.

In justifying the proposed rule, CMS noted that the year-round SEP for low-income enrollees was “one of the primary mechanisms” that contributed to the unauthorized enrollments that made headlines in 2024.

Rule would eliminate enrollees’ ability to auto-renew $0-premium coverage

Under current rules, if a Marketplace enrollee lets their plan auto-renew and is eligible for a subsidy that covers their entire premium, their after-subsidy premium can continue to be $0 in the coming year. (This isn’t always the case, as it also depends on how subsidy amounts change based on the cost of the second-lowest-cost Silver plan.)

Under the proposed rules, the Marketplace would have to reduce the person’s subsidy amount by $5/month, resulting in a $5/month after-subsidy premium for the enrollee. This premium would be imposed until the enrollee updates their information with the Marketplace so that an updated eligibility determination can be made.

This proposed rule would apply starting with the 2026 plan year in states that use HealthCare.gov, and starting with the 2027 plan year in states that run their own Marketplace platforms.

As a result of this proposed rule, people with fully subsidized plans who rely on auto-renewal and don’t update their Marketplace account by Dec. 15 would continue to have coverage as of January, but with an after-subsidy premium of $5/month.

(If and when the enrollee updates their eligibility with the Marketplace, they would qualify for the full amount of the subsidy based on their updated information. And if they would have qualified for a full subsidy, the $5/month could be recouped when they reconcile their premium tax credit on their tax return – as is always the case when an enrollee is owed additional premium tax credits).

CMS is also soliciting comments on whether the amount should be higher than $5, as well as whether auto-renewal should even continue to be possible for fully subsidized enrollees.

Previous analyses have found that when net premiums increase from zero to even a dollar or two per month, the result is a drop in enrollment.

Maximum out-of-pocket limits would increase for 2026 plans

Under current rules, 2026 Marketplace health plans would have maximum out-of-pocket (MOOP) limits as high as $10,150 for a single individual, and $20,300 for a family. Under the proposed rule, those limits would increase to $10,600 and $21,200, respectively.

This would also result in higher MOOPs for Silver plans with integrated cost-sharing reductions, as those values are based on reducing the standard MOOP by a set percentage.

The change would stem from a new methodology for indexing these amounts, reverting to a methodology that was briefly used under the first Trump administration.

If finalized, the MOOP for a single individual will rise from $9,200 in 2025 to $10,600 in 2026 – a 15% increase.

Rule would require additional documentation for enrollment and subsidy eligibility

HHS has proposed several rule changes that would require more documentation and verification to enroll in Marketplace coverage and qualify for financial assistance. They include:

Verification of SEP eligibility

Since 2023, the federally run Marketplace has only required pre-enrollment proof of SEP eligibility if the qualifying life event is the loss of other coverage. ^{The proposed rule would remove that limitation and allow pre-enrollment eligibility verification for any SEP.}

Further, it calls for all exchanges – including HealthCare.gov and state-run exchanges – to verify eligibility for at least 75% of new enrollees utilizing SEPs. The proposed rule notes that most exchanges would only need to require eligibility verification for their two most-used SEPs to meet this target.

Additional income verification

The new proposed rule would require more documentation to verify that some enrollees are eligible for Marketplace subsidies. If the Marketplace’s trusted data sources (IRS data, for example) indicate that an applicant’s household income is below the FPL but the person attests to an income of at least the FPL, the new proposed rule would require the Marketplace to generate a data matching inconsistency. These must be resolved ^{for the person to qualify for Marketplace subsidies.}

CMS has also proposed that if the Marketplace requests income data from the IRS and is told that it’s not available, the Marketplace cannot just rely on the applicant’s attested income. Instead, the Marketplace will need to use other trusted data sources to verify the applicant’s income, or the applicant will need to submit proof of income.

Shorter window to provide income documentation

The ACA provides applicants with a 90-day window to provide requested income verification documentation, and subsequent rules added an automatic 60-day extension, without the enrollee needing to request it. HHS has proposed removing that automatic extension.

• Allowing insurers to require people to pay past-due premiums before they can re-enroll in new coverage. This was previously required under rules that were finalized in 2017, ^{but a rule finalized in 2022 prohibited insurers from doing this.}
• Prohibiting DACA recipients from enrolling in Marketplace coverage nationwide, or receiving federal premium subsidies or cost-sharing reductions. (DACA recipients are already blocked from enrolling in Marketplace coverage in 19 states.)
• Cutting off an enrollee’s eligibility for advance premium tax credit (APTC) if they fail to reconcile the prior year’s APTC on their tax return. Current rules cut off APTC only after the person has failed to reconcile APTC for two consecutive years.
• Repealing the current auto-renewal protocol that allows the exchange to move an enrollee (who is eligible for cost-sharing reductions) from a Bronze plan to a Silver plan if one is available with the same provider network and product type, and with equal or lesser premiums after the premium subsidy is applied.
• Prohibiting individual and small group plans from covering “sex-trait modification” (gender-affirming care) as an essential health benefit (EHB). If a state mandates coverage of gender-affirming care, the state would have to defray the cost of that coverage. And if an insurer were to voluntarily cover gender-affirming care, it could not be as part of an EHB. This would ensure federal premium subsidies could not be used to offset the cost of that portion of the coverage.

Once the proposed rule is published in the Federal Register, there will be a 30-day window during which the public can submit comments, which will be taken into consideration before the rule is finalized.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.

In this JAMA Health Forum column, KFF Executive Vice President Larry Levitt recalls the mid-1990s’ public backlash against Health Maintenance Organizations (commonly known as HMOs) – all of which preceded the recent outpouring of health insurance concerns – as well as how consumer protections against coverage restrictions have evolved and fallen short.

Promoting price transparency in health care is a policy approach with bi-partisan support in Congress and the public at large, and the first Trump administration finalized regulations that require group health plans and insurers to make detailed data with all their in-network payment rates available with the objective that such transparency would increase price competition and ultimately drive down health care costs.

This report documents how the vast troves of data reported in pursuit of those goals include misleading and unlikely prices, inconsistencies, and other oddities that pose significant challenges for researchers, industry and others seeking to make sense of the data.

The transparency regulations set out in significant detail the methods that payers should follow in reporting their rates, generating huge amounts of publicly available data since reporting began in 2022. The analysis, which relies on the extensive collection of this data downloaded and maintained by Turquoise Health, includes examples about each of the challenges identified and how they complicate efforts to use the data for its intended purposes.

The analysis is available through the Peterson-KFF Health System Tracker, an information hub dedicated to monitoring and assessing the performance of the U.S. health system.

Data sources used for Key Facts About Hospitals are listed below. Some figures pull from other sources, including prior KFF analyses and KFF State Health Facts, which include additional information about the data and methodology. Numbers have been rounded.

American Hospital Association (AHA) Annual Survey. Data from an annual survey of all hospitals in the United States and its associated areas. Non-federal psychiatric hospitals were defined to include psychiatric hospitals as well as hospitals that identified their hospital type as “substance use disorder” or “intellectual disabilities.”

American Medical Association (AMA) Physician Practice Benchmark Survey. As described by the AMA, the Physician Practice Benchmark Survey is a nationally representative survey of “post-residency physicians who provide at least 20 hours of patient care per week, are not employed by the federal government, and practice in one of the 50 states or [DC].”

Census Bureau delineation files. The Census Bureau delineation files map counties and county equivalents to metropolitan areas, micropolitan areas, and other regions. These files were used to group hospitals into metropolitan, micropolitan, and other areas. A metropolitan area is a county or group of counties that contains at least one urban area with a population of 50,000 or more people. A micropolitan area is a county or group of counties that contains at least one urban area with a population of at least 10,000 but less than 50,000. Urban and rural regions were defined as metropolitan and nonmetropolitan areas, respectively.

Census Bureau population estimates. We relied on annual population estimates for the 50 states and DC as of July 1 of a given year from the Census Bureau’s Population Estimates Program.

Healthcare Cost and Utilization Project (HCUP) National Inpatient Sample (NIS). The NIS is a sample that includes about 20% of all inpatient discharges from U.S. community hospitals (aside from rehabilitation and long-term care hospitals). It is nationally representative of non-federal short-term hospitals in the U.S. and is sponsored by the Agency for Healthcare Research and Quality. Primary diagnoses are grouped into clinical categories based on Clinical Classifications Software Refined (CCSR). The categories used for rankings are mutually exclusive; when a diagnosis falls under multiple clinical categories, the stay is assigned to a single category based on hierarchical guidelines.

KFF Health Care Debt Survey. The KFF Health Care Debt Survey is a nationally representative survey of U.S. adults that was conducted from February 25 through March 20, 2022.

Medical Expenditures Panel Survey (MEPS). MEPS is a nationally representative survey of the U.S. civilian non-institutionalized population that includes information about health care expenditures and sources of payment, among other things. The analysis of out-of-pocket spending relied on the MEPS Household Component (HC).

National Health Expenditures. These data are published annually by the Centers for Medicare & Medicaid Services and provide estimates of national spending on health care, by payer and by type of service.

Producer Price Index (PPI). These data come from the Bureau of Labor Statistics (BLS). As BLS notes, PPI indices measure “the average change over time in selling prices received by domestic producers of goods and services.” The health care PPIs reflect the reimbursement that providers receive for health care services. The Medicare, Medicaid, and private and other patient PPIs are mutually exclusive. The Medicare and Medicaid PPIs take account of private Medicare and Medicaid plans. The PPI may exclude supplemental payments that are paid to hospitals as a lump sum.

Quarterly Census of Wages and Employment (QCEW). These data also come from BLS. As BLS notes, the QCEW data provide a “quarterly count of employment and wages reported by employers covering more than 95 percent of U.S. jobs.” The QCEW includes workers covered by state unemployment insurance laws as well as federal workers covered by the Unemployment Compensation for Federal Employees (UCFE) program. Analyses of hospital and other employment relied on the average annual employment numbers reported by BLS. Industry subsector rankings were based on 3-digit NAICS codes. Employment for a given industry subsector and employer type were not included in totals when not disclosed by BLS.  

RAND Hospital Data. These data are a cleaned and processed version of annual cost reports that Medicare-certified hospitals are required to submit to the federal government. Cost reports include information about hospital characteristics, utilization, and finances. The RAND Hospital Data also crosswalk hospitals to health systems based on the Agency for Healthcare Research and Quality (AHRQ) Compendium of U.S. Health Systems.

For charity care analyses, missing charity care costs were recoded as $0 if the hospital reported total unreimbursed and uncompensated care costs. Hospitals were excluded if they had missing or negative operating expenses or charity care costs, outlier amounts of charity care as a percent of operating expenses (≥18.1%), or reporting periods less than or greater than one year. Cost report instructions indicate that hospitals should report amounts related to both charity care and uninsured discounts as part of their charity care costs. MedPAC has noted that current HCRIS calculations favor hospitals with higher markups, and it has recommended revisions that would put hospitals on more equal footing and reduce reported charity care costs on average.

RAND Price Transparency Study, Round 5.1. These data are based on commercial claims for employer-sponsored health insurance plan enrollees collected from participating self-insured employers and health plans as well as from all-payer claims databases (APCDs) from 12 states. Commercial-to-Medicare price ratios are based on the actual allowed amount from the claims and an estimate of the allowed amount had Medicare covered the same services. Ratios presented in key facts include facility claims for hospital inpatient and outpatient services but exclude associated professional claims (which are also available through the RAND study). Analyses of metropolitan areas exclude hospitals for which RAND did not disclose relevant data while state and national analyses include all hospitals in the RAND study.

Survey of Income and Program Participation (SIPP). SIPP is a nationally representative survey of the civilian noninstitutionalized population. Among other questions, SIPP asks individuals ages 15 and older about their medical debt. The analysis of medical debt further restricted the sample to adults ages 18 and older.

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Americans’ life expectancy is significantly lower than the average for people in other large, wealthy countries.

This analysis compares 2021 data about deaths in the U.S. and 11 other large, wealthy countries by age and cause to understand the primary drivers of the longevity gap between the U.S. and the comparable countries. It finds that the primary reasons for the gap in 2021 were chronic disease, COVID-19 and substance use disorders.

The analysis is available through the Peterson-KFF Health System Tracker, an information hub dedicated to monitoring and assessing the performance of the U.S. health system.

KFF’s January 2025 Prescription Drug Advertisements Poll looks at the public’s experiences with prescription drug advertisements. The poll measures the share of adults who report seeing such advertisements, as well as how these drug advertisements influence the care the public reports receiving from their doctor or health care provider.

Enhanced Affordable Care Act (ACA) subsidies were first made available as part of the American Rescue Plan Act in 2021 and were extended through the end of 2025 by the Inflation Reduction Act. The enhanced subsidies build on the ACA’s original tax credits by increasing the amount of premium assistance lower-income enrollees receive, and by making middle- and higher-income enrollees (with incomes over four times poverty) newly eligible for financial assistance to buy health insurance. These enhanced subsidies will expire at the end of this year unless Congress further extends them and President Trump signs it into law. In 2024, 56% of ACA Marketplace enrollees live Congressional Districts represented by Republicans and 76% of enrollees are in states won by President Trump in the 2024 election.

If the enhanced subsidies expire, monthly premium payments for the vast majority of Marketplace enrollees will increase sharply starting January 1, 2026. Among subsidized enrollees living in states that use Healthcare.gov (where data are available), premium payments would have been an average of 93% higher in 2024 without the enhanced tax credits. If these enhanced subsidies expire, the Congressional Budget Office (CBO) projects that there will be an average of 3.8 million more uninsured people each year. Unsubsidized premiums will also likely rise as healthier enrollees drop their coverage. While some state-based Marketplaces offer additional premium financial assistance for certain enrollees, the amount of and availability of these state subsidies would not be enough to fully replace the federal enhanced subsidies.

The interactive map below illustrates how much premium payments would rise without the enhanced subsidies, net of tax credits, at the congressional district level. The tool presents average net premium increases (for states that use Healthcare.gov, where data are available) and two hypothetical scenarios (in all states): one of an older couple who would lose subsidy eligibility due to their income exceeding four times poverty and another for a single individual with a $31,000 income (206% of poverty). A KFF calculator allows users to evaluate zip-code specific changes in premium payments with and without enhanced subsidies for other income and family scenarios.

Because enhanced tax credits decrease premium payments across the board for people receiving a tax credit, all subsidized Marketplace enrollees will experience increases in their monthly premium payments if the enhanced subsidies expire. However, how much each enrollee’s premium payment increases will vary widely and will depend on their family size, location, and income.

Average Increases in Premium Payments Among Subsidized ACA Enrollees

In some congressional districts, there is both a large share of the population enrolled in ACA Marketplace coverage and an expectation of very high average increases in premium payments without the enhanced tax credits. Among states that use Healthcare.gov (where average enhanced tax credit data are available), there are 39 congressional districts where at least 10% of the population is enrolled in the ACA Marketplaces and where 2024 average premium payments would have been double or more had it not been for the enhanced subsidies (Table 1). While these 39 districts are politically split (19 are represented by Democrats and 20 are represented by Republicans), these districts are mostly concentrated in a few red states. Twenty of these 39 districts are in Texas, 7 are in Florida, and 3 are in Georgia. These states are among those that have seen ACA Marketplace enrollment grow the most since the enhanced subsidies went into effect. Since 2020, ACA Marketplace enrollment has more than doubled in Florida and more than tripled in Texas and Georgia.

Increases in Premium Payments for An Older Couple on the “Subsidy Cliff”

The expiration of the enhanced premium tax credits would mean that people with incomes over four times the poverty level are no longer eligible for financial assistance. Prior to the availability of enhanced subsidies, ACA Marketplace premium assistance eligibility capped at 400% of poverty (which is $60,240 for a single person or $81,760 for a couple in 2025). If enhanced subsidies expire, Marketplace enrollees making just above 400% of poverty will encounter the “subsidy cliff” and would face the full price of a Marketplace plan. If the enhanced subsidies expire, a 60-year-old couple making $82,000 (401% of poverty) would see their premium payment for the benchmark silver plan, on average, at least double in the vast majority of congressional districts. The benchmark silver premium for a 60-year-old couple at this income would triple or more, on average, in 328 congressional districts.

Premium Increases for Lower-Income Enrollees

A 40-year-old Marketplace enrollee in the contiguous U.S. making $31,000 (206% of poverty) would see monthly premium payments in 2025 rise by $95 (a 165% increase) from $58 to $153. (Alaska and Hawaii have different poverty guidelines). Nationally, there are 75 congressional districts where at least 10% of the population is enrolled in the Marketplace. For a 40-year-old making $31,000, premium payments would at least double on average in all 75 districts. 62 of these districts are in Florida, Georgia and Texas. 38 of these 62 districts are represented by Republicans while 24 are represented by Democrats.

Under the enhanced phase out caps, Marketplace enrollees with incomes up to 150% of poverty currently pay zero (or near zero) dollars for a benchmark silver plan. Should the enhanced subsidies expire, enrollees in this income group will be on the hook for some of the cost of their premiums if they want to keep a silver plan. Before the enhanced subsidies went into effect, Marketplace enrollees at this income group paid about 2-4% of their income for a benchmark plan. A sizeable portion of the Marketplace population benefits from zero dollar premiums, with 42% of HealthCare.gov enrollees in 2024 paying nothing for Marketplace coverage (up from 14% of HealthCare.gov enrollees in 2021).