Medicare’s latest 2.5% payment increase for dermatologists in 2026 is already being called too little, too late.
Jane M. Grant-Kels, professor and vice chair of dermatology at UConn Health, said the bump barely offsets last year’s 2.83% cut. After accounting for inflation and rising practice costs, reimbursement is still lower than it was two years ago.
Rural clinics feel the squeeze first
About 94% to 95% of dermatologists accept Medicare, so most can’t opt out. The exception is big-city practices and concierge clinics, which can afford to drop Medicare entirely. That leaves rural communities with fewer options.
Grant-Kels said the steady decline in income is making it harder to keep doors open in areas where patient volume is already low. Some practices are turning to private equity for capital, but that often comes with pressure to prioritize high-margin procedures over general care.
New graduates face a similar calculus. High medical school debt and unpredictable reimbursement are pushing them toward surgical and cosmetic dermatology, where pay is steadier. Pediatric and general dermatology, already scarce in rural areas, are becoming even harder to staff.
“It will take generations to reverse this trend unless Medicare stops these cuts and fixes the issue permanently,” Grant-Kels said.
Insurers steer patients toward cheaper drugs first
The financial strain isn’t just about where dermatologists choose to work. It’s also changing how they treat patients.
When reimbursement falls below the cost of delivering care, practices spend more time on prior authorization—forms that insurers require before covering certain medications. The process is expensive for offices to manage and often leads to step therapy, where patients must try cheaper drugs before getting the one their doctor originally prescribed.
Grant-Kels said the result is that prescriptions become suggestions rather than clinical decisions. Patients end up cycling through treatments that don’t work, while offices bear the administrative cost of repeated denials.
“It’s the patients who pay the burden because they’re not getting the medications they need,” she said. “And the offices are paying the burden because of the expense of filling out prior auths and dealing with all the rejections.”
For a specialty already stretched thin, the added paperwork can be the difference between staying open and closing down.
The American Academy of Dermatology Association reported the 2026 payment increase on July 3, 2025, but noted that Congress has yet to address the underlying issue of recurring cuts. Without a permanent fix, the cycle of erosion and uncertainty is likely to continue.
