In July 2026, the Centers for Medicare and Medicaid Services (CMS) issued the calendar-year 2027 Medicare Physician Fee Schedule (MPFS) proposed rule. Among its provisions, the rule would reduce payment when a separately identifiable office or other outpatient evaluation and management (E/M) service is reported with “modifier 25,” defined as significant, separately identifiable E/M services by the same physician or other qualified healthcare professional on the same day of the procedure or other service. Under the proposal, the highest‑valued eligible service on that day would be paid at 100% of the MPFS allowed amount, and payment for the other eligible services would be reduced by 50%.
Milliman was commissioned by the American Academy of Dermatology Association to estimate the potential impact of this proposal on Medicare fee‑for‑service (FFS) payments for same-day professional services. Using CY 2024 Medicare FFS claims from CMS’s 5% Limited Data Set, extrapolated to a national FFS basis, Milliman modeled the payment reduction on same-day professional services that would result from the proposed 50% reduction using CY 2024 utilization, adjudicated allowed amounts, and payment rules otherwise in effect during CY 2024, by practitioner specialty. We developed a dermatology‑specific view of the procedure combinations most frequently affected.
Our paper found the following results.
- Overall impact: The proposed modifier 25 policy would reduce Medicare FFS allowed amounts for billing-group days by approximately $969 million in 2024 terms, or approximately 0.6% of total physician/supplier Medicare Part B allowed and 1.0% of total MPFS allowed.
- Most impacted specialty: Dermatology has the largest estimated allowed reduction in absolute dollars, accounting for approximately $291 million of the estimated allowed reduction, or approximately 30% of all specialty reductions.
- Impact relative to spending: The proposed modifier 25 policy would reduce total physician/supplier Part B allowed for dermatology by approximately 6.1% and total MPFS allowed by approximately 7%, across roughly 6.4 million billing-group days—among the largest modeled reductions as a percentage of total allowed amounts of any specialty.
- Concentration in dermatology services: A small number of common services provided by dermatology practitioners drive a large share of the estimated dermatology impact.
This report was commissioned by the American Academy of Dermatology Association.