When Medicare adjusted its DMEPOS (Durable Medical Equipment, Prosthetics, Orthotics, and Supplies) fee schedule on January 1, 2026, the reimbursement bump ranged from as low as 1.35% to as high as 2.8%, depending on what you supply and where your patients live.
And it may have thrown a curveball at any budget projections for 2026.
Why This Matters to Your Business
Medicare reimbursement is the revenue engine for most DME suppliers. When CMS reset the fee schedule, it essentially changed what you get paid for every item you deliver. While a 2.8% increase sounds like good news, it’s less exciting if your bread-and-butter supplies like urological and ostomy products only went up 2%, and your rural claims went up barely over 1%.
For providers operating on tight margins, understanding exactly where the increases landed (by product and by geography) is the difference between a profitable year and a cash flow problem.
Three Tiers, Three Different Increases
CMS didn’t apply a flat adjustment. Instead, the 2026 updates broke into three tiers based on product type and patient location.
- The highest increase: 2.8% went to items that were part of Medicare’s Competitive Bidding Program in areas where those contracts ended. Think CPAP devices, oxygen equipment, standard and power wheelchairs, and wound care (NPWT). If a significant portion of your business is in these product lines and geographies, this is the tier that moves the needle most.
- The middle ground: 2.7% covers competitive bidding items in non-rural areas that weren’t part of a bidding zone, plus certain orthotic and prosthetic labor codes (L4205 and L7520). This reflects the consumer price index increase without any additional reduction.
- The smallest bump: 2.0% applies to everything that was never part of competitive bidding: your urological supplies, ostomy products, and similar items. CMS took the 2.7% inflation index and subtracted what they call a “productivity adjustment“—essentially their assumption that you’re finding ways to operate more efficiently each year. That knocked 0.7% off the increase regardless of location.
If You Serve Rural Patients, This Section is for You
Rural reimbursement is where the math could create pressure on budgets. For competitive bidding items in rural areas, Medicare uses a blended formula: half your payment is based on updated regional rates (which got the 2.7% bump) and half is locked to a fee schedule from 2015 (which didn’t budge).
The practical impact: your effective increase on rural claims is roughly 1.35%, not 2.7%.
For example: If you received $1,000 for a wheelchair in a rural area in 2025, in 2026, the updated half went from $500 to $513.50. The frozen half stayed at $500. Your new payment is $1,013.50. That’s a $13.50 gain on a $1,000 item. It’s meaningful when multiplied across volume, but far less than the headline number suggests.
If rural patients make up a large share of your business, this blended rate is one of the biggest factors in your 2026 financial picture.
What You Should Be Doing Now
Know your product mix. Which of your items fall under competitive bidding and which don’t? The increase you’re entitled to depends entirely on this classification.
Know your geography. Pull your claims data and look at where your patients are. Rural, non-rural, former bidding area, each carries a different rate, and your revenue forecast needs to reflect that mix.
Make sure your fee schedules are current. If you haven’t already loaded the updated rates, do it now and build in time for testing and validation so every claim going out the door reflects the correct 2026 amounts.
Model the real numbers. Take your 2025 revenue by product category and geography, apply the correct tier percentage, then subtract sequestration. That’s your actual 2026 baseline.