Bipartisan Bill Increasing Budget Neutrality Threshold Introduced
Key elements of physician payment reform remain to be addressed.
On March 30, a bipartisan group of House members introduced H.R. 8163, the Provider Reimbursement Stability Act. The bill aims to enhance the annual stability of the Medicare Physician Fee Schedule (PFS) by adjusting the budget-neutrality threshold. Legally, budget neutrality is triggered when spending increases surpass $20 million. The additional spending must be offset, usually through negative adjustments to the physician conversion factor (CF), resulting in across-the-board cuts to the fee schedule.
Key Elements of H.R. 8163
Increase the budget neutrality threshold: It raises the trigger from $20 million to $54.3 million. This change could reduce the frequency of budget neutrality triggers. The threshold was established in 1989 and went into effect in 1992. It has never been revised. The legislation also mandates that, starting in 2032, the threshold be reviewed and updated at least every five years based on the Medicare Economic Index (MEI).
Utilization estimates: Spending projections for new codes that trigger budget neutrality are based on utilization forecasts for these services. Although these estimates can sometimes be inaccurate, they still activate budget neutrality and result in cuts to the CF. Historically, the Medicare agency has not reviewed or corrected these estimates. Legislation requires the Centers for Medicare & Medicaid Services (CMS) to refine budget-neutrality adjustments using actual claims data for certain newly unbundled codes, for which CMS must estimate utilization. This applies only in specific cases where utilization exceeds 0.1% of total estimated expenditures.
Regular updates to practice cost data: Directs CMS to update key inputs for practice expense RVUs (clinical wages, medical supplies, and equipment) at least every five years. Infrequent updates result in a large swing to PE RVU distribution and contribute to the year-to-year instability of the fee schedule.
Limits on annual payment fluctuations: Beginning in 2027, restricts annual increases or decreases to the fee schedule conversion factor at 2.5%.
Physician Payment Reform Big Picture
Stakeholders seeking comprehensive Medicare physician payment reform welcome this legislation, which is supported by groups such as the American Medical Association (AMA) and the Medical Group Management Association (MGMA). However, it remains just one part of broader reform efforts. There is a general agreement that other important elements include an annual inflation update tied to the MEI and reforms to physician quality and value-based programs.
Political Support
This bill was introduced by Representatives Greg Murphy, MD (R-NC), Tom Suozzi (D-NY), John Joyce, MD (R-PA), Brad Schneider (D-IL), Bob Onder, MD (R-MO), Jimmy Panetta (D-CA), Mariannette Miller-Meeks, MD (R-IA), Kim Schrier, MD (D-WA), and Robin Kelly (D-IL). As various physician groups hold Hill visits this spring, they will ask members of Congress to support the bill. Reforming the fee schedule will require funding. In the current environment, Republicans face significant pressure to increase defense spending and find savings in domestic health and welfare programs. This will inevitably create challenges in advancing this bill.
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For more information and questions, please contact:
Sheila Madhani
Madhani Healthcare Consulting
Email: smadhani@madhani-health.com
Tel: (202) 679-2977