Category Archives: Medicare

Physician payment reform reform: Replacing SGR with QPP, MIPS, and APMs—all part of MACRA

The Medicare Access and CHIP Reauthorization Act (MACRA) replaced the infamous Sustainable Growth Rate (SGR, see posting in September 2016) with a new Quality Payment Program (QPP).  The new QPP itself has two component payment models, a Merit-based Incentive Payment System (MIPS) or an Alternative Payment Model (APM).

Recall that the SGR formula was the method used by the Center for Medicare and Medicaid Services (CMS) to control the rate of Medicare spending for physician services.  The SGR was part of the Balanced Budget Act enacted by Congress in 1997.  This SGR formula was flawed from the outset.  It did not consider adequately the volume of services provided, the quality of patient care, nor the efficiency of health care delivery.  In April 2015, the Congress passed comprehensive legislation with bipartisan support to repeal the SGR formula and adopt a new value-based reimbursement system focused on patients and the quality of care—this is the Medicare Access and Children’s Health Insurance Program Reauthorization Act (MACRA, H.R. 2).  Congress wrote the law with general guidance, tasking the Executive branch with implementation, as is often customary.  CMS is the executive branch entity of the Department of Health and Human Services responsible for translating the general guidance in the enacted Congressional law into the rule making and regulatory apparatus that informs and regulates physicians and other health care provider groups and organizations.   CMS completed their task faithfully this year and produced 962 pages of new regulations for you to comply with in order to be reimbursed for services you provide to Medicare beneficiaries.  Are you delighted that I reminded you about all of this?

So, what is the new Quality Payment Program? Physician and other provider entities now have two payment system options to choose from—MIPS and APMs.

MIPS—this new merit-based payment system combines parts of the patient quality reporting system (PQRS), the value modifier (value-based payment modifier), and the Medicare Electronic Health Records (EHR) incentive program into a single program.  The success measures are clearly in quality of care, resource use, clinical practice improvement, and meaningful use of certified EHRs.  In this payment system, physicians will continue to be reimbursed by fee-for-service, but they will receive modest annual increases of 0.25% beginning in 2019.  Theoretically, these physicians could earn “bonus payments” also, but only if the federal government determines that their performance on quality metrics merits a “bonus”.

APM—with this payment model, the government shifts regulatory control away from reimbursing individual physician to reimbursing organizations who manage patient care (such as Accountable Care Organizations, Patient Centered Medical Homes, or bundled payment models).  A stated goal of this payment model is to increase transparency of physician-focused reimbursement models.  Physicians who work for, or in, such health care management systems are eligible for annual payment increases of 0.75% plus bonuses distributed only if the organizations hit the government’s spending targets.

Regulatory environment—Physicians may worry that they are now facing a Catch-22 situation, culminating in reduced reimbursements for their services while coping simultaneously with an increasingly powerful and cumbersome government bureaucracy.  Patients too are facing problematic choices. Health care insurance premiums are rising rapidly.  For example, in Florida, insurers are requesting average premium increases of 17.7% for individual policies and 9.6% for small-group plans.  Virginia’s largest insurer is seeking a 15.8% premium increase.  In Iowa, Wellmark Blue Cross and Blue Shield has contacted customers warning them of potential premium increases of as much as 38-43% next year.  In addition, rising premiums will be exacerbated further as health insurers leave the Affordable Care Act (ACA) marketplace, leaving behind fewer health insurance options.  Recently, the largest healthcare insurer in the US, United Health, has left the ACA marketplace in 27 states.  Unfortunately, physicians and their patients will continue to encounter a burgeoning government health care bureaucracy.

For additional information see:

The Timely Demise of the Medicare Sustainable Growth Rate (SGR)

What was the Medicare Sustainable Growth Rate Formula? (the “Doc Fix”)

The SGR formula was the method used by CMS (Center for Medicare and Medicaid Services) to control the rate of Medicare spending for physician services. The SGR was part of the Balanced Budget Act enacted by Congress in 1997. This flawed formula was not influenced by the volume of services provided, by the quality of patient care, nor the efficiency of health care delivery. Every year since 2001, the formula led to the threat of cuts in Medicare fee schedule payments to physicians. Congress voted annually to defer action on the SGR-mandated cuts, the recurring “Doc-Fix” crisis. However, by 2015, the cumulative SGR-mandated reductions in physician fees paid by Medicare reached an estimated 21%. (Were you ever prepared to take a 21% reduction in Medicare reimbursement for your services?)

Why did Congress not repeal the SGR and fix the problem?

In policy and politics, money matters, and BIG money really matters! In past years, the Congressional Budget Office (CBO) estimated the cost to repeal the SGR formula at about $320 billion! That is, if Congress failed to implement the SGR-mandated cuts, Medicare costs would supposedly increase by about $320 billion. However, this year the CBO estimated that repeal of the SGR would only result in increased Medicare costs of about $130 billion. Technically, if Congress voted to repeal the SGR, it needed to identify the source for revenues to offset eliminating the SGR-mandated cuts. This year, however, Congress finally repealed the SGR – hooray! While Congress did repeal the SGR, it did not identify other revenues to cover the increased Medicare spending (known as deficit spending). The level of bipartisan cooperation was remarkable given the level of acrimony often on display in Congress. In the House of Representatives, the vote to repeal the SGR was 392 to 37, and in the Senate, it was 92 to 8.

How will this new legislation work?

In April 2015, the Congress passed comprehensive legislation to repeal the SGR formula and adopt a new value-based reimbursement system focused on patients and the quality of care – this is the Medicare Access and CHIP (Children’s Health Insurance Program) Reauthorization ACT (H.R. 2). The President promptly signed this new law. Therefore, no physician will face the threatened 21% reduction in Medicare fees scheduled for this year! With the permanent elimination of the SGR formula, physicians will experience stable payments during a transition period to the new payment system. The legislation specifies annual physician fee increases of 0.5%/year through 2019. After 2019, physicians will be incentivized (bonuses or penalties) according to their performance, as assessed by the federal government. A new “merit-based” incentive payment system (MIPS) will be constructed to reward (or penalize) performance in four areas: quality of care, clinical practice improvement efforts, resource use, and performance on meaningful use of the electronic medical record. Exactly how this incentive payment system will work is not yet determined. The new law includes several other important elements. For example, Congress extended the CHIP program with no cuts for another 2 years. The legislation extended funding also to support community health centers for the next 2 years ($7 billion).

For additional information, see HJ Aaron. Three Cheers for Logrolling – The Demise of the SGR. N Eng J Med 2015; 372: 1977-79.

Coming Next: Optimism for increased science funding – the 21st Century Cures Bill