Medicare Physician Payment Reform: Protecting Dermatology Practices & Patient Access

The Arizona Dermatology Society (AzDS) is closely following federal efforts to address Medicare physician payment and the significant reimbursement challenges facing dermatologists.

On July 15, bipartisan legislation was introduced in the U.S. House of Representatives aimed at creating greater stability in the Medicare physician payment system.

H.R. 9693, the Patients First Act, would:

Establish a permanent, inflation-based annual Medicare physician payment update tied to the Medicare Economic Index (MEI) minus 1%.
Reform Medicare's current budget neutrality requirements.

Improve the Merit-based Incentive Payment System (MIPS) by reducing administrative burdens and giving physicians greater input into quality measures.

The American Academy of Dermatology Association (AADA) has identified Medicare physician payment reform as its top federal legislative priority. While the legislation does not address every concern facing dermatologists, its proposed changes represent meaningful progress toward creating a more sustainable Medicare payment system and protecting the viability of physician practices.

The bipartisan legislation was introduced by physician members of Congress, including AADA member Rep. John Joyce, MD, FAAD (R-PA), along with Reps. Kim Schrier, MD (D-WA), Greg Murphy, MD (R-NC), and other bipartisan congressional supporters.

2027 Medicare Physician Fee Schedule: Significant Concerns for Dermatology

At the same time Congress is considering payment reform, the proposed 2027 Medicare Physician Fee Schedule (MPFS) includes policies that could have a substantial negative impact on dermatology.

The AADA estimates that the combined proposed changes could result in an approximately 9% reduction in Medicare payments to dermatologists in 2027.

Key Concerns for Dermatologists

Conversion Factor

Most dermatologists could see a 1.68% reduction in the conversion factor in 2027, largely due to the expiration of the temporary 2.5% payment increase Congress provided for 2026.

Practice Expense Adjustments

CMS has proposed changes to the methodology used to calculate practice expenses. The AADA estimates these changes could reduce dermatology payments by approximately 6% overall in 2027.

Modifier 25 Payment Cuts

CMS is also proposing a significant change affecting physicians who provide a separately identifiable Evaluation and Management (E/M) service and a procedure during the same patient visit. Under the proposal, the highest-paid service would be reimbursed at 100%, while other qualifying same-day services would be reimbursed at only 50%.