Medicare updates its fee schedules every January 1st, though the amounts doctors and hospitals receive don't always go up

The Centers for Medicare & Medicaid Services (CMS) releases new Medicare fee schedules each year on January 1st. These schedules set how much Medicare pays for nearly every service — office visits, lab tests, surgery, imaging, therapy. The payment rates change annually because of a formula Congress set up that accounts for inflation, changes in medical practice costs, and adjustments to how services are valued relative to each other.

The new rates take effect on the same day every year. Your doctor's office and hospital billing departments receive the updated schedules before the end of the prior year, so they know what Medicare will pay starting January 1st. If you have a service on January 1st or later, the new fee schedule applies.

The amount Medicare pays for a specific service can stay the same, increase, or decrease year to year. A service that paid $100 in 2023 might pay $103 in 2024 and $101 in 2025. The direction depends on the formula, not on a decision to raise or lower payments across the board.

Key Takeaways

  • CMS publishes new Medicare fee schedules every year, effective January 1st, setting payment rates for doctor visits, tests, procedures, and hospital care.
  • The payment amounts are determined by a statutory formula that includes inflation adjustments and changes to how services are valued, not by annual decisions to increase or decrease pay.
  • Doctors and hospitals receive the updated schedules before the year ends so they can prepare billing systems and staffing for the new rates.
  • The same service can be paid more one year and less the next, depending on the formula and changes in how that service is categorized or valued.
  • You can view the current year's fee schedule on the CMS website, though the document is technical and meant for billing staff rather than patients.

How the annual update formula works

Congress created a formula called the Sustainable Growth Rate (SGR) in 1997 to control how much Medicare spending grows each year. The formula was supposed to adjust payment rates up or down based on whether total Medicare spending was growing faster or slower than the economy. In practice, Congress repeatedly blocked the formula from cutting payments deeply, passing temporary fixes instead.

In 2015, Congress replaced the SGR with the Merit-based Incentive Payment System (MIPS) and the Advanced Alternative Payment Models (APMs). Under this newer system, most doctors still receive an annual update to their fee schedules, but the size of the update depends partly on their performance on quality measures and cost measures. Doctors in certain APMs — like accountable care organizations — may have different payment structures altogether.

The formula itself is set in law, so CMS does not choose the percentage each year. CMS calculates it, publishes the result, and applies it to the fee schedule. The percentage can be positive (a raise) or negative (a cut), and it varies by specialty and type of service.

When the schedules are published and how to find them

CMS publishes the final fee schedules in late November or early December for the January 1st effective date. The schedules appear on the CMS website under "Physician Fee Schedule" and "Hospital Outpatient Prospective Payment System (OPPS)" — the two main payment systems for doctor offices and hospital outpatient departments.

The documents are large and technical. They list thousands of procedure codes, the payment amount for each code, and adjustments by geographic region. A doctor's office in rural Montana may receive a different payment for the same procedure than a doctor's office in New York City, based on local cost-of-living adjustments.

If you want to know what Medicare pays for a specific service, you can search the CMS fee schedule database online, but you will need the procedure code. Your doctor's billing office can tell you the code and often can tell you the Medicare payment amount as well. Many patients find it easier to call their doctor's office and ask directly rather than searching the CMS website.

What changes between January 1st updates

Between annual updates, CMS makes smaller changes throughout the year. New procedure codes are added when new treatments or technologies become standard. Codes for outdated procedures are retired. The descriptions of what a code covers are clarified or revised. These mid-year changes are published in the Federal Register and on the CMS website, but they are less visible than the January 1st update.

CMS also publishes Local Coverage Determinations (LCDs) and National Coverage Determinations (NCDs) throughout the year. These documents say whether Medicare will pay for a particular service at all — separate from what it will pay if it does cover it. A new drug or device might get an NCD that says Medicare covers it, or does not cover it, or covers it only in certain situations. These decisions can happen any time and do not wait for January 1st.

How fee schedule changes affect what you pay

When Medicare's payment to a doctor or hospital changes, it does not directly change what you pay out of pocket. Your copay or coinsurance is usually a percentage of what Medicare pays, so if Medicare's payment goes up, your share may go up slightly. If Medicare's payment goes down, your share may go down.

However, doctors and hospitals can also change their own billing practices in response to fee schedule changes. A doctor whose Medicare payment for a service decreased might see fewer Medicare patients for that service, or might bundle it with another service to increase total payment. These business decisions are separate from the fee schedule itself.

If you have a Medigap or Medicare Advantage plan, the fee schedule changes may affect your plan's costs and therefore your premiums or out-of-pocket limits in the following year. Your plan documents or your plan's customer service line can explain how the changes affect you specifically.

Differences between Medicare Part A, Part B, and Part D schedules

Part A covers hospital inpatient care, skilled nursing, hospice, and home health. Part A payments use a system called Diagnosis-Related Groups (DRGs), where hospitals receive a set amount based on the patient's diagnosis, not on individual services. The DRG payment rates update annually on October 1st, not January 1st.

Part B covers doctor office visits, outpatient tests, and procedures. Part B uses the physician fee schedule, which updates January 1st. Part D covers prescription drugs and does not use a fee schedule in the same way — instead, drug prices are negotiated between insurers and pharmacies, and those prices change throughout the year.

Hospital outpatient departments (for same-day surgery or imaging) use the Hospital Outpatient Prospective Payment System (OPPS), which also updates January 1st. The OPPS payment rates are different from the physician fee schedule rates, even for the same procedure, because hospitals have different cost structures than doctor offices.

What to ask your doctor or hospital about fee schedule changes

If you are scheduled for a procedure that spans December 31st and January 1st, ask whether the timing affects your out-of-pocket cost. A procedure done on December 31st will be billed under the old fee schedule; one done on January 1st will be billed under the new one. Your copay or coinsurance might differ.

If you are considering a procedure and want to know what it will cost you, ask your doctor's billing office for an estimate based on the current fee schedule. They can tell you what Medicare will pay and what your share will be, based on your plan type and deductible status. Ask whether the estimate is based on the current schedule or the upcoming one if you are scheduling for early January.

If you notice a significant change in your out-of-pocket costs for a service you receive regularly, you can ask your doctor's office whether a fee schedule change is the reason. They may also be able to tell you whether your plan's costs have changed in response to the Medicare update.

Frequently Asked Questions

Does Medicare always pay more each January 1st?

No. The payment for a specific service can increase, stay the same, or decrease. The direction depends on the statutory formula and how that particular service is valued. Some services receive raises while others receive cuts in the same year.

Can my doctor refuse to accept the new Medicare fee schedule?

Doctors who accept Medicare must accept the Medicare fee schedule rates. They cannot bill Medicare more than the schedule allows. They can choose not to accept Medicare patients at all, but if they do accept Medicare, they must use the current fee schedule.

How do I find out what Medicare pays for my specific procedure?

Call your doctor's billing office and give them the procedure code or description. They can tell you the Medicare payment amount and what you will owe. You can also search the CMS fee schedule database online if you have the procedure code, though the database is technical.

When does the hospital fee schedule update?

Hospital inpatient payments (Part A) update October 1st each year. Hospital outpatient payments update January 1st, the same day as the physician fee schedule. Ask your hospital which date applies to your procedure.

Will my Medicare Advantage premium go up because of fee schedule changes?

Possibly. Your plan's costs may change based on what Medicare pays providers, and those changes can affect your premium or out-of-pocket limits. Your plan will notify you of any premium changes before the new year begins.