H.R. 8163, Provider Reimbursement Stability Act

Bill Summary

H.R. 8163 would require the Centers for Medicare & Medicaid Services (CMS) to correct Medicare’s budget neutrality adjustments to the physician fee schedule (PFS) when actual spending for new or revised services differs from earlier projections. The bill also would raise the dollar threshold for budget neutrality adjustments, require periodic updates to certain data used to calculate payments under the PFS, and make other changes to PFS calculations.

Estimated Federal Cost

The estimated budgetary effects of H.R. 8163 are shown in Table 1. The costs of the legislation fall within budget function 570 (Medicare).

Basis of Estimate

For this estimate, CBO assumes that the bill will be enacted during the first quarter of fiscal year 2027 and that budgetary effects will begin in calendar year 2031. CBO reviewed Medicare regulations, historical claims data for services that have been subject to adjustments for budget neutrality, and information from CMS.

Direct Spending

CBO estimates that enacting H.R. 8163 would increase net direct spending by $5 billion over the 2026-2036 period.

CMS sets payment amounts in the PFS for medical services provided by physicians and certain other clinicians. Each service is assigned relative value units (RVUs), which, after adjustments for geographic variations in costs, are multiplied by a conversion factor to determine payment amounts. The conversion factor, similar to a base payment rate, is a dollar amount updated annually according to a formula in the law. The underlying statute requires budget neutrality adjustments to be applied to spending under the PFS. Budget neutrality requires that total spending not increase or decrease by more than a specified amount when RVUs are revised or new services are added. As a result, significant increases in RVUs for some services reduce payments for others. CMS adjusts the conversion factor on the basis of projected spending for new or revised services. Under current law, the agency makes no further adjustments to account for actual spending for those services.

H.R. 8163 would require CMS to revise budget neutrality adjustments once data on actual spending become available.

Between 2015 and 2025, CBO identified two instances in which CMS’s projections exceeded actual spending for a new billing code that would have qualified under the tests established by the bill. Over the same period, CBO found no qualifying services for which actual spending exceeded CMS’s projections by more than the bill’s threshold; CBO therefore did not incorporate any downward corrections into this estimate.

In 2015, on the basis of spending projections for a new chronic care management code, CMS applied a negative budget neutrality adjustment of about 0.25 percent to the conversion factor. Data on actual spending later indicated that a smaller adjustment, of about 0.05 percent, would have been more accurate, thus leaving a gap in the conversion factor of about 0.20 percentage points.

In the second instance, in 2024, CMS applied a negative budget neutrality adjustment of about 2.0 percent to the conversion factor because of a new add-on code for evaluation and management complexity. Data on actual spending later indicated that an adjustment of about 0.4 percent would have been more accurate, leaving a gap of about 1.6 percentage points. Together, those episodes account for a gap in the conversion factor of about 1.8 percentage points. If provisions in H.R. 8163 were applied, the gap would be restored, and the conversion factor would increase by 1.8 percent.

On that basis, CBO projects a 1-in-10 likelihood that each of those corrections would occur in any given year of a 10-year budget window, which together imply an expected correction of 0.18 percentage points per year. Because CBO views the 2024 add-on code as an outlier, only half of that effect was included, which reduced the annual correction from 0.18 percentage points to 0.10 percentage points. For this estimate, that adjustment was applied to CBO’s projection of the annual rate of growth in the conversion factor.

The correction process required by H.R. 8163 would begin in 2029, and each correction would occur in the second year after the year to which it applies. As a result, CBO expects that corrections would begin to affect spending in 2031 and that those effects would accumulate through the end of the 2026-2036 period. The first 0.10 percent annual increase in the conversion factor would apply to the $83 billion in PFS spending projected for 2031 in CBO’s February 2026 baseline; a compounded increase of 0.60 percent would apply to the $98 billion projected for 2036.

Because higher payment rates tend to encourage providers to supply more services, CBO expects that an increase in volume would follow an increase in payment rates. CBO estimates that increases in the conversion factor, together with the resulting supply response, would increase outlays for Medicare fee-for-service (FFS) by $2.5 billion over the 2026-2036 period.

The estimated increase in FFS spending would also increase payments to Medicare Advantage plans and collections of Part B premiums. Under current law, CMS sets benchmark rates for payments to Medicare Advantage plans using estimated per capita spending for FFS Medicare. CBO estimates that the increase in Medicare Advantage spending would be 1.5 to 1.7 times the annual FFS increase. Part B premiums fund roughly one-quarter of both FFS and Medicare Advantage costs. As a result, CBO estimates that additional premium collections would offset about one-quarter of the increase in FFS and Medicare Advantage spending. After accounting for those interactions, CBO estimates that enacting H.R. 8163 would increase net direct spending by $5 billion over the 2026-2036 period.

H.R. 8163 also would raise the dollar threshold for budget neutrality adjustments, require the data used to calculate practice expense RVUs to be updated at least once every five years, and limit the annual budget neutrality adjustment to the conversion factor to no more than 2.5 percent in either direction. CBO estimates that enacting those provisions would affect direct spending by less than $500,000 over the 2026-2036 period.

Spending Subject to Appropriation

Using information about similar activities, CBO estimates that issuing regulations under H.R. 8163 would cost CMS less than $500,000 over the 2026-2031 period. Any related spending would be subject to the availability of appropriated funds.

Uncertainty

CBO’s estimate for H.R. 8163 is subject to considerable uncertainty, particularly related to the estimated 0.10 percent annual adjustment to the conversion factor. Differences in the frequency, magnitude, and direction of correctable errors could result in budgetary effects that are larger or smaller than CBO estimates.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays that are subject to those pay-as-you-go procedures are shown in Table 2.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting H.R. 8163 would increase net direct spending by more than $2.5 billion in any of the four consecutive 10-year periods beginning in 2037.

CBO estimates that enacting H.R. 8163 would increase on‑budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2037.

Mandates

The bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

Estimate Prepared By

Federal Costs: Hudson Osgood

Mandates: Andrew Laughlin

Estimate Reviewed By

Sarah Sajewski
Chief, Health Systems and Medicare Cost Estimates Unit

Kathleen FitzGerald
Chief, Public and Private Mandates Unit

Chad Chirico 
Director of Budget Analysis

Estimate Approved By