The 2026 Medicare physician conversion factor is $33.40, up 3.3% from $32.35 in 2025. NCCI’s August 13, 2026 analysis of Medicare Fee Schedules and Workers Compensation in 2026 confirms this is the first physician rate increase after five consecutive annual declines. The driver is a one-year statutory 2.5% payment mandate from Congress, not a permanent reset of the Medicare formula.
For WC reserve actuaries who have spent five years embedding near-zero physician cost trend as a baseline, the directional shift demands attention even though the net reserve implication is not a straight 3.3% increase.
The RVU offset changes the math for WC
CMS simultaneously rebalanced Relative Value Units: evaluation and management services gained reimbursement share while surgical services lost. The average Medicare patient skews toward office visits and follow-up care. WC claims are more surgical-intensive, with injured workers more likely to require orthopedic, neurological, and pain-management procedures than a typical Medicare beneficiary.
The result is a split effect by state. NCCI estimates that states importing both the Medicare conversion factor and the Medicare RVU schedule will see average WC physician payments fall approximately 1.2%, because the surgical RVU headwind exceeds the conversion factor benefit. States that set their own conversion factor but adopt Medicare RVU values absorb the RVU headwind without any offsetting conversion factor gain.
NCCI concludes the combined 2026 changes are “not expected to be a significant source of upward pressure on overall WC medical costs.” Facility base rates received a 2.6% update (a 3.3% inflationary increase offset by a 0.7% productivity adjustment), and DMEPOS updated 2.0%.
Who it affects
Self-insured employers, captive managers, and public-entity risk officers whose WC programs carry open medical claims in Medicare-indexed fee schedule states. The effect is most pronounced for programs with surgical-heavy claim inventories, including construction, manufacturing, and public safety exposures.
Reserve mechanism
Physician services account for approximately 40% of countrywide WC medical expenditure. Five consecutive years of flat or declining conversion factors allowed actuaries to anchor physician trend assumptions near zero without much controversy. The 2026 reversal, even with a net reduction in states using both conversion factor and RVU inputs, is the kind of structural change a reserve opinion should address explicitly rather than absorb silently into a trend interpolation.
Two complications matter for long-tail programs. First, the 3.3% conversion factor increase is a one-year statutory fix. The proposed 2027 physician fee rule already points toward a reversal, with the conversion factor projected to drop back toward $32.84 if Congress does not extend the boost. Open physician bills on WC claims with long medical tails extend across both years, so a trend selection that embeds the 2026 increase as a permanent step-up will overstate expected physician costs once 2027 takes effect.
Second, NCCI’s net estimate applies only to states using both the conversion factor and the RVU mix. Programs spanning multiple states should verify, at the claim level, whether each state fee schedule imports the conversion factor, the RVU schedule, or both. The reserve implication differs meaningfully across those three configurations, and differs again from the baseline in non-fee-schedule states where neither input constrains physician charges. WCRI’s Medical Price Index found WC physician prices 41% to 188% higher in non-fee-schedule states than in fee-schedule states, a structural gap that dwarfs any single-year conversion factor swing and should anchor the comparison for multi-state programs.
What this means for your next review
Ask your actuary whether the WC medical trend selection for physician services explicitly addresses the 2026 conversion factor change and the state-by-state fee schedule mechanics that determine the net effect. A reserve opinion carrying a near-zero physician trend selected during five years of declining conversion factors needs to document why that assumption still holds, or update it. Ask specifically whether open claims with expected physician bills extending into 2027 reflect the risk that the conversion factor reverts when the statutory boost expires.
For a broader discussion of how physician fee schedule mechanics flow through WC reserve assumptions, see Workers Compensation IBNR for Self-Insured Employers.