CMS Proposes 2.4% Medicare Inpatient Payment Increase
The Centers for Medicare & Medicaid Services (CMS) has proposed a 2.4% increase in Medicare payments for inpatient hospital services in fiscal year 2026, the lowest update since 2019. According to an article by Healthcare Dive, the proposed rate reflects a 3.2% market basket increase offset by a 0.8 percentage point productivity adjustment. CMS estimates the rule would increase hospital payments by $4 billion.
Both for-profit and nonprofit hospitals are expected to see an average 2.3% increase under the rule. However, hospital groups argue that the update falls short of what is needed in a high-cost environment marked by inflation and financial strain, particularly in rural and underserved areas.
“Many hospitals across the country, especially those in rural and underserved communities, already operate under unsustainable financial situations, including negative margins. We urge CMS to reconsider its policy in the final rule,” said Ashley Thompson, senior vice president of public policy analysis and development at the American Hospital Association (AHA).
Long-term care hospitals may be further impacted by the proposed increase in the threshold required to qualify for high-cost outlier payments. Although the base rate would rise 2.6%, the AHA warns that higher thresholds would leave providers absorbing even greater losses before additional Medicare payments apply. “CMS’ proposal this year to increase this threshold even more ... would make it increasingly difficult for [long-term care hospitals] to care for these patients,” Thompson added.
CMS also proposed payment increases for other settings: 2.8% for skilled nursing facilities, 2.6% for inpatient rehabilitation, and 2.4% for psychiatric facilities and hospice providers.
Additionally, CMS solicited feedback on regulatory streamlining and digital quality measures, while eliminating several existing metrics, including those tied to health equity and staff COVID-19 vaccination rates. These changes reflect broader shifts in agency priorities under new leadership.
Reference
Pifer R. Medicare proposes 2.4% pay hike for inpatient hospitals next year. Healthcare Dive. Published April 14, 2025. Accessed April 21, 2025.
