Medicare’s 2026 Fee Schedule Shifts Signal Modest but Uneven Pressure on Workers’ Comp Costs

The Centers for Medicare and Medicaid Services’ 2026 fee schedule updates — including a 3.3% jump in the physician conversion factor and a 2.6% facility payment increase — are unlikely to significantly drive up overall workers’ compensation medical costs, though effects will vary by state, according to analysis by the National Council on Compensation Insurance.

After five consecutive years of declines, the 2026 physician conversion factor rose 3.3% from 2025, a shift NCCI attributes largely to a temporary 2.5% payment increase required by statute. Physician costs represent roughly 40% of countrywide workers’ compensation medical expenditures, making this reversal notable for an industry accustomed to shrinking reimbursement rates in this category.

Beyond the conversion factor, CMS also rebalanced physician Relative Value Units for 2026, raising payment rates for Evaluation and Management services while cutting rates for Surgical services. This redistribution reflects CMS’s ongoing effort to recalibrate how physician work is valued, and it means the impact on payers will depend heavily on the mix of services their claims involve.

Facility costs, which also account for about 40% of countrywide workers’ compensation medical expenditures, saw a more modest and predictable shift. The final market basket update came in at 2.6%, composed of a 3.3% inflationary increase offset by a 0.7% productivity adjustment. NCCI noted that these increases were “in line with the changes seen in prior years,” suggesting continuity rather than disruption in this cost category.

Meanwhile, the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule saw a 2.0% update factor increase, which matches last year’s adjustment. DMEPOS costs represent a smaller but variable share of workers’ compensation medical spending, ranging from 4% to 13% depending on the state, and NCCI notes that most DMEPOS payments in workers compensation involve codes not subject to CMS’s Competitive Bidding Program.

Challenges and Opportunities: A Patchwork of State-Level Impacts

For employers and insurers, the real complexity lies not in the national averages but in how these federal changes translate at the state level. NCCI emphasizes that the impact of CMS’s updates on workers’ compensation medical costs “varies by state” depending on three factors: which medical service categories are covered by each state’s fee schedule, how closely each fee schedule mirrors CMS rules and rates, and how medical costs are distributed within that state.

This creates both a challenge and an opportunity for industry stakeholders. States that closely tie their fee schedules to CMS rates for physician and facility services may feel the rebound in physician reimbursement more acutely, while states with different fee schedule structures may see minimal change. Understanding these state-specific nuances allows insurers and employers to better anticipate cost exposure rather than relying on national trends alone, NCCI said.

Implications: Limited Upward Pressure, But Vigilance Remains Key

Despite the physician conversion factor’s rebound and steady facility increases, NCCI concludes that the 2026 CMS updates are not expected to be a significant source of upward pressure on overall workers’ compensation medical costs, consistent with the assessment for 2025. This offers a measure of reassurance for an industry closely watching medical cost trends.

Still, the RVU rebalancing between Evaluation and Management and Surgical services, along with the one-year statutory boost to the physician conversion factor, introduces variables worth monitoring going forward. NCCI says it will continue tracking CMS reimbursement rules and rates to assess their evolving impact on workers’ compensation medical costs, underscoring that even modest federal adjustments can ripple differently across state lines.

Obtain the report here. &