Why It Matters

Doctors who bill Medicare will be paid at lower conversion factors, and drugmakers and noncitizen patients face new requirements after Health and Human Services issued its 2027 physician fee schedule policies. ​

The policies take effect Jan. 1, 2027, so the payment cuts, the new claims reporting for 340B covered entities and the narrower Medicare eligibility all start with the new year.

The Big Picture

For physicians, the Centers for Medicare and Medicaid Services (CMS) says the conversion factor for clinicians in qualifying alternative payment models falls $0.62 (1.83%) from the current $33.5675.

  • The nonqualifying conversion factor falls $0.77 (2.31%) from the current $33.4009.
  • CMS says its revised indirect practice expense method corrects an "unintended advantage" for services with separate professional and technical components.
  • In 2027, half of the Indirect Practice Cost Index still applies. CMS says the index is eliminated in 2028.

For the Part B and Part D rebate programs, CMS sets procedures for when the consumer price index data it needs are unavailable. It also says certain skin substitutes are not excluded from the definition of a Part B rebatable drug.

Today, 42 C.F.R. § 406.5 lists age, disability benefits or end-stage renal disease as the conditions for premium-free hospital insurance. The new text adds a requirement that, effective July 4, 2025, the individual be a U.S. citizen or national or an "eligible noncitizen."

A new section, 42 C.F.R. 406.14, says individuals who no longer meet those requirements "will lose entitlement to hospital insurance benefits without premiums." CMS says a pending application for immigration status is insufficient, and that it lacks authority to grandfather people already enrolled.

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The rule also adds a way for accountable care organizations to enter Part B cost sharing support arrangements. Under it, participants reduce or eliminate deductible and coinsurance amounts for eligible beneficiaries identified by the organization, per § 425.304.

CMS says it received about 43,100 timely pieces of correspondence on the proposal, published July 14, 2026.

  • On coverage limits, commenters raised concern about affected noncitizens, asked for outreach and public reporting, and asked CMS to keep the earlier lawful-presence standard. CMS answered that eligibility categories are set by statute and that it plans an outreach effort "accessible, multimodal, and broad in reach," coordinated with the Social Security Administration (SSA).
  • On utilization data, commenters asked CMS to restore modifier-specific data. CMS pointed to a new file layout and added allowed services to the final rule file. It also corrected a technical error in a proposed-rule table.

The Bottom Line

The rule gives SSA one year from July 4, 2025, to complete its review of people enrolled as of that date, according to CMS. CMS says SSA will send termination notices toward the end of December 2026.

For people enrolled as of July 4, 2025, who do not meet the new criteria, CMS says coverage ends at the end of the calendar month that is 18 months after July 4, 2025, which CMS gives as the end of January 2027.

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