MedPAC Flags Outdated Cost Data Behind Medicare Physician and Lab Payment Rates

Medicare's congressional advisory body presented new analysis at its October 8 and 9, 2026 public meeting examining how accurately the Physician Fee Schedule and the Clinical Laboratory Fee Schedule reflect the actual costs of delivering care today.

The Physician Fee Schedule sets Medicare's payment rates for visits, procedures, and other services furnished by doctors and other clinicians. Rates are calculated using three components: the physician's time and skill, practice expenses such as staff and equipment, and malpractice insurance costs. Each component is weighted using a set of relative value units, or RVUs, and then converted to a dollar amount using a single conversion factor.

MedPAC noted that the practice expense data underlying the RVU weights were last comprehensively collected in 2006. Because costs have changed since then, some services may be paid at rates that no longer reflect what it actually costs to provide them, potentially leading to overpayment for certain procedures and underpayment for others. The commission has noted previously that cognitive services and primary care may be among those undervalued under the current system.

The analysis also covered the Clinical Laboratory Fee Schedule, which sets Medicare rates for diagnostic tests. A 2014 law revised how those rates are calculated, and MedPAC continues to examine whether the current approach produces accurate results.

MedPAC is an independent body created by Congress to advise on Medicare payment policy. Its analyses inform legislation, but its recommendations are not binding on the Centers for Medicare and Medicaid Services. The commission's October meeting findings will feed into its cycle of formal recommendations to Congress.