The
Clawback

Budget neutrality, in one breath

Medicare doesn't have a budget for the physician fee schedule. It has a spending lock.

By law, if CMS projects that this year's coding changes will raise total fee-schedule spending by more than a set threshold, it must offset that increase somewhere else — usually by trimming the conversion factor, the single dollar multiplier applied to every RVU, for every physician, in every specialty.

Translation: when one service is revalued upward, everyone's per-RVU pay edges down to pay for it. The pie is fixed. Reslicing it for one specialty means thinner slices for all.

That is the engine behind nearly every "Medicare cut" headline you've seen. Not a policy choice each year — a statutory reflex.

A 1992 number, run in 2026 dollars

The budget-neutrality mechanism itself dates to the Omnibus Budget Reconciliation Act of 1989 — but the trigger threshold, the dollar amount of net spending change that forces an across-the-board adjustment, was set at $20 million in 1992. It has never been indexed for inflation since.

There's a second, quieter defect. To apply budget neutrality, CMS has to guess how often a newly valued code will be billed. When it guesses too high, it cuts the conversion factor preemptively — and when the real claims come in lower, the cut is never reversed.

The result isn't budget neutrality. It's a one-way ratchet: estimate high, cut now, keep the cut forever.

Four screws, loosened

The bill — sponsored by Rep. Greg Murphy, MD (R-NC), with Rep. Tom Suozzi (D-NY) among its bipartisan cosponsors — doesn't touch what any service is worth. It rewrites the mechanics underneath:

1. Raise the trigger from $20M to $54.3MIndexed to the Medicare Economic Index every five years, so it ages with inflation instead of freezing in place. Fewer routine coding updates trip the offset.
2. Add a targeted utilization lookbackFor specified services that clear the bill's spending threshold and were bundled the prior year before being paid separately or as add-ons, CMS must compare estimated use with actual use in the second year after the adjustment and reconcile material misses through the conversion factor. This is the provision aimed at the one-way ratchet.
3. Update practice-expense inputs on a clockThe direct costs behind practice-expense RVUs — clinical wages, supply prices, equipment — must be refreshed at least every five years, instead of drifting for a decade until a single jarring "correction."
4. Cap budget-neutrality-driven conversion-factor swingsBeginning in 2027, CMS could not apply a budget-neutrality adjustment that makes the conversion factor vary by more than 2.5% from the prior year, apart from other statutory updates or adjustments.

The mechanism advocates point to most often is #2. The threshold bump is the headline; the targeted lookback is the repair.

You just got a raise. Meet the rule that resents it.

Podiatry is a small specialty with an outsized Medicare footprint — an older, diabetic, vascular patient base means a large share of the work runs through the fee schedule. When the conversion factor moves, podiatry feels it with less cushion than larger specialties.

And 2026 is precisely the year to understand this. Podiatry entered 2026 with a meaningful reimbursement gain already locked in — the CY2026 fee schedule finalized work-RVU increases on common first-ray arthrodesis codes (28750: 8.57→8.75, 28755: 4.88→7.50). Those are real, finalized wins.

But under current law, every one of those RVU gains is a candidate for the offset. Revalue the fusion codes upward, push projected spending past a threshold that hasn't moved since 1992, and the conversion factor gets trimmed to pay for it — handing back with one hand what the revaluation gave with the other.

H.R. 8163 doesn't guarantee podiatry keeps more. It makes it less likely the gains evaporate into the machinery before they reach your encounter.

Don't oversell the threshold

Worth holding both truths: it's a genuine, overdue fix to broken plumbing — and it is not the inflation update the AMA has chased for years. By the AMA's own figure, inflation-adjusted Medicare physician pay has fallen roughly 33% from 2001 to 2026. This bill slows the bleed. It doesn't reverse it.

Out of committee, far from law

H.R. 8163 was introduced on March 30, 2026, referred to the House Energy and Commerce and Ways and Means Committees, and cosponsored across both parties. On May 21, 2026, Ways and Means marked it up and voted it out favorably, 44–0, as amended by an Amendment in the Nature of a Substitute.

Committee passage is not enactment. It still needs Energy and Commerce action, a floor vote, a Senate path, and a President's signature — and budget-neutrality reform has been introduced, in various forms, for years without crossing the finish line. That's the case for acting now, not later.