My only daughter turned 21 this past Thursday, and the family celebrated over the weekend. Needless to say, I had a fantastic few days. Unfortunately, coming back to Monday morning, news is not always as enjoyable. Wasn’t it Garfield who famously said, “I hate Mondays?”
One of the first headlines I saw this morning reported that Apple was raising prices on products due to increased storage and supply-chain costs. Of course they are.
But it got me thinking: if consumer products, rent, insurance premiums, wages, and virtually every other aspect of our economy rise with inflation, why don’t Medicare and Medicaid reimbursement rates automatically increase every year, based on the cost of living?
Inflation in the United States has averaged approximately 2-3 percent annually in recent years, with the Social Security Administration announcing a 2.8-percent cost-of-living adjustment (COLA) for 2026. The purpose of the COLA is straightforward: to preserve purchasing power as prices increase.
In fact, many government programs and economic benchmarks automatically adjust every year. Social Security benefits are subject to annual COLAs. Federal tax brackets are indexed for inflation. Social Security’s taxable wage base increases almost every year. Many commercial leases contain inflation escalators. Labor contracts frequently include annual cost-of-living adjustments. Even hospital reimbursement systems under Medicare often receive annual “market basket” updates specifically designed to account for increasing costs of labor, supplies, and services.
So why are physicians, therapists, and many other healthcare providers constantly fighting reimbursement cuts?
The answer lies in how Medicare payment systems are structured.
Contrary to popular belief, Medicare does not have a universal inflation adjustment. Different provider types are treated differently. Hospitals operating under the Inpatient Prospective Payment System (IPPS) receive annual market basket updates that are specifically intended to reflect inflationary changes in hospital costs. For the 2026 fiscal year (FY), the Centers for Medicare & Medicaid Services (CMS) finalized a hospital payment update that incorporates those market basket increases.
Physicians, however, operate under an entirely different framework: the Medicare Physician Fee Schedule. Historically, physician payments have been subject to budget neutrality requirements, conversion factor adjustments, and congressional interventions that often offset inflationary increases. While hospitals generally receive annual inflation-based updates, physician reimbursement has frequently failed to keep pace with rising practice expenses, staffing costs, technology investments, and regulatory burdens. Recent Physician Fee Schedule updates have produced only modest increases, despite years of significant inflation.
The irony is difficult to miss.
The federal government acknowledges that seniors need annual COLAs because inflation erodes purchasing power. It recognizes that hospitals face increasing operating expenses, and therefore provides market basket updates. Yet physician practices, which employ nurses, medical assistants, billers, coders, compliance staff, and technology infrastructure, are often expected to absorb those same inflationary pressures without equivalent reimbursement adjustments.
Anyone running a medical practice today knows the reality. Salaries are higher. Benefits cost more. Rent is higher. Cybersecurity expenses have increased. Electronic health records (EHR) systems cost more. Liability insurance costs more. Virtually every expense associated with delivering healthcare has increased.
The question policymakers should be asking is simple: if inflation adjustments are appropriate for Social Security beneficiaries, federal tax provisions, and hospital payment systems, why should physician practices be treated differently?
As providers continue to face staffing shortages, rising overhead, and increasing administrative requirements, the absence of a meaningful inflation-based update mechanism becomes more than a reimbursement issue. It becomes an access-to-care issue.
Perhaps that is the conversation we should be having this Monday morning.
And unlike Apple’s latest price increase, this one actually affects patient care.
