2026 Medicare Payment Changes: A Win and Ongoing Challenges

For the first time in six years, Medicare physician payment is going up rather than down. Following five consecutive years of rate cuts, CMS authorized a 3.85% increase in physician reimbursement rates for CY 2026. On paper, this reads as a significant win. In practice, it is a partial correction surrounded by structural changes that cut in the opposite direction — and for behavioral health providers and independent practices in particular, the 2026 fee schedule is a study in what happens when a regulatory framework gives with one hand and quietly takes with the other.

The Headline Number and What It Actually Means

Starting in CY 2026, as required by MACRA, there are separate conversion factors for physicians who qualify as Advanced Alternative Payment Model (APM) participants and those who do not. The CY 2026 qualifying APM conversion factor is $33.57, a 3.77% increase from the current conversion factor of $32.35. For non-APM participants, the increase is 3.26%, landing at $33.40. Both numbers represent movement in the right direction after years of cuts that eroded purchasing power and pushed practices toward consolidation.

The conversion factor increases reflect a temporary 2.5% pay increase that Congress passed as part of the One Big Beautiful Bill Act, plus small permanent updates to the baseline that the Medicare Access and CHIP Reauthorization Act of 2025 includes. The word “temporary” deserves emphasis here. The 2.5% OBBBA bump applies to 2026 only. Without further legislative action, practices will face renewed downward pressure in 2027 — the same cycle that has made long-term financial planning nearly impossible for physician groups over the past decade.

The AMA described the situation with careful precision: “That physicians are not facing a reduction in reimbursements — as we have in the past — is a significant positive for 2026 and a win for patients’ access to care. Yet, this one-time correction does not keep up with increasing costs, and private practices across the country are expressing concern this rule would further put them at a disadvantage.”

The Efficiency Adjustment: A New Cut Built into the Framework

Alongside the headline rate increase, CMS introduced a structural change that will reshape payments for years to come. CMS finalized the efficiency adjustment aimed at improving the accuracy of work RVUs and intraservice physician time estimates for non-time-based services. Specifically, CMS will apply an efficiency adjustment of –2.5% to the work RVUs and intraservice time for nearly all services on the MPFS including procedures, radiology services, and diagnostic tests.

To calculate the adjustment, CMS finalized its proposal to add the last five years of the Medicare Economic Index productivity adjustment, resulting in a 2.5 percent reduction. CMS modified the list of codes to which the efficiency adjustment will apply — with these changes, the efficiency adjustment will apply to approximately 7,700 codes. CMS acknowledged that using more recent Bureau of Labor Statistics data would have produced a 3.6% reduction rather than 2.5%, and chose the lower figure as a more measured approach — which means future recalculations in 2029 could be steeper.

The specialty-level impacts are uneven and in some cases severe. Physician payment for services performed in a facility will drop overall by 7%. This adjustment could overlook administrative costs for physicians in facility settings, threaten physician private practices and cut competition by encouraging consolidation. Among the impacts: 81% of infectious disease physicians face cuts of 5% or more.

Importantly, behavioral health services are explicitly exempted from the efficiency adjustment. The adjustment periodically applies to all codes except time-based codes, such as evaluation and management (E/M) services, care management services, behavioral health services, services on the Medicare telehealth list, and maternity codes. This is a meaningful protection for mental health providers — but it does not insulate them from the facility-based payment cuts or the practice expense methodology changes that hit specific testing codes directly.

The Testing Code Problem: Where Behavioral Health Actually Takes a Cut

The exemption of behavioral health from the efficiency adjustment might suggest that mental health providers emerge from 2026 unscathed on the payment side. That is not entirely accurate. Four codes in particular — 96132, 96112, 96170, and 96171 — will receive a decrease in reimbursement because of Practice Expense (PE) methodology changes implemented for this year. CMS modified indirect PE costs to better reflect clinical practices in facility-based settings.

These are not minor codes. CPT 96132 covers neuropsychological testing evaluation by a physician or psychologist. CPT 96112 covers developmental testing. CPT 96170 and 96171 cover health and behavior assessment and intervention in a group format. For practices that rely heavily on psychological and neuropsychological testing — a bread-and-butter service category for clinical psychologists and neuropsychologists — this cut arrives as a direct hit to revenue despite the broader rate increase. The irony is notable: behavioral health services are shielded from the efficiency adjustment, but still face cuts through the back door of practice expense recalculation.

Telehealth: The Genuine Win

If the 2026 fee schedule has an unambiguous bright spot for behavioral health, it is the permanent codification of telehealth flexibility for mental health services. Permanent telehealth changes that the AMA long advocated for are in the 2026 Medicare physician payment schedule. As of January 1, there will no longer be frequency limits on telehealth services for patients in hospitals and skilled nursing facilities. The rules will also permanently allow virtual direct supervision for most services that require supervision.

CMS approved the addition of two new codes to the Medicare Telehealth Services list: multiple-family group psychotherapy (code 90849) and group behavioral counseling for obesity (code G0473), a common form of intensive behavioral therapy for treatment of obesity. CMS also permanently adopted a definition of direct supervision that allows the supervising practitioner to be available via real-time audio-video rather than physically present — a change with major implications for training programs, rural practices, and multi-site organizations.

Telehealth parity is now effectively universal for behavioral health: Medicare’s telehealth flexibilities are permanent, and most commercial plans have aligned in-person and telehealth reimbursement rates. No geographic restrictions apply to behavioral health telehealth, unlike some medical specialties. For mental health practices that built their service model around virtual care during the pandemic years, the ground beneath them is finally stable. This matters enormously — not just operationally, but for patient access. Rural and underserved communities that depend on telehealth to see behavioral health providers are no longer at the mercy of annual congressional extensions.

Expanding the Workforce: LMFT and LMHC Now Fully in the System

One of the most consequential longer-term changes for behavioral health access continues to play out in 2026 with the full integration of Licensed Marriage and Family Therapists (LMFTs) and Licensed Mental Health Counselors (LMHCs) into Medicare billing. Effective January 1, 2024, MFTs and MHCs can bill Medicare independently for their services furnished for the diagnosis and treatment of mental illnesses. Medicare Part B pays MFTs and MHCs for these services at 75% of what a clinical psychologist is paid under the Medicare Physician Fee Schedule.

This major workforce expansion took effect in 2024 and continues through 2026 as more providers complete credentialing. The 75% rate differential is a legitimate concern — it creates a two-tier reimbursement structure within the same profession, and critics argue it undervalues master’s-level clinicians who provide the majority of outpatient therapy in the United States. But the access implications are real: tens of thousands of therapists who were previously excluded from Medicare are now eligible to serve the Medicare population, at a time when the behavioral health workforce shortage is acute and patient demand has never been higher.

Integration, Digital Tools, and the Direction of Travel

CMS has used the 2026 rule to reinforce its structural preference for integrated, whole-person care over siloed specialty practice. For CY 2026, CMS finalized the creation of optional add-on codes for Advanced Primary Care Management (APCM) services that would facilitate providing complementary behavioral health integration (BHI) or psychiatric Collaborative Care Model (CoCM) services, establishing three new G-codes to be billed as add-on services when the APCM base code is reported by the same practitioner in the same month.

CMS finalized its proposal to expand its payment policies for three HCPCS G-codes for Digital Mental Health Treatment (DMHT) services to include payment for devices used to treat attention deficit hyperactivity disorder (ADHD), stating that expanding coding and payment policies to include these devices is important “to more fully reflect the range of behavioral health disorders treated by FDA-authorized products.” The digital mental health treatment space is still early — CMS declined to establish national pricing for DMHT tools, deferring that question to future rulemaking — but the directional signal is clear. Digital therapeutics are being treated as a legitimate adjunct to clinical care, not a fringe category.

The Bigger Picture: Independent Practices Under Structural Pressure

Across all of these changes, a consistent pattern emerges. The 2026 fee schedule rewards office-based care over facility-based care, time-based services over procedural ones, integrated care models over standalone specialty practice, and APM participants over traditional fee-for-service participants. Each of these preferences, taken individually, has a defensible rationale. Taken together, they create a payment landscape that disproportionately advantages large, integrated health systems capable of investing in value-based care infrastructure — and disadvantages small independent practices, solo practitioners, and community mental health providers operating on thin margins.

The AMA expressed concern that at a time of increasing consolidation in health care, this rule will make it harder for independent practices to remain viable. For behavioral health specifically, the sustainability question is not abstract. The AMA noted that the pay gains Congress passed will be blunted or even reversed for some physicians thanks to finalized practice expense and efficiency adjustment cuts, which could result in lower-quality care, worse health outcomes and a less sustainable Medicare system.

The verdict on 2026 is nuanced but honest: better than 2025, meaningfully so on telehealth, and cautiously positive on workforce expansion. But the structural pressures on independent practice have not been resolved — they have been rearranged. The efficiency adjustment will recur. The temporary OBBBA boost expires. The testing code cuts are real. And the patients most dependent on independent behavioral health providers — those in rural areas, those on Medicare, those with limited access to large integrated systems — will feel the consequences first if the payment environment continues to erode the viability of the practices that serve them.

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