Change to Medicare will shift physicians into value-based payment

President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015 into law on Thursday afternoon, in what experts say could be the most significant change in Medicare’s 50-year history.

The law, part of a bipartisan deal to eliminate the Sustainable Growth Rate (SGR) formula that Congress had used to set physician payment rates under Medicare, shifts the 50-year-old program away from a fee-for-service model and moves physicians into value-based payment.

Earlier this week the U.S. Senate passed the Medicare Access and CHIP Reauthorization Act of 2015 by a vote of 92 to 8. Last month, the House passed its version of the bill by 392-37.

The act kills the SGR, which often required steep cuts in pay for doctors treating Medicare patients – including a 21 percent cut in pay on April 1, as Sarah Kliff at Vox explained. Since 2002, Congress has had to find the money to keep those cuts from going into effect. In place of the SGR, Congress introduced a new problem: how to evaluate the value physicians deliver to patients, Kliff wrote.

There is widespread concern that Medicare is not good at evaluating how well doctors do their jobs, she wrote, adding, “Worse, the new bill doesn’t say much about how the government is meant to accomplish this task.”

In fact, few insurers have measures in place to analyze the value that physicians deliver to patients. Some measures exist for primary care physicians, but few measures are in place for specialists.

In The New York Times, Katie Thomas and Reed Abelson raised a similar point, explaining that health systems measure whether doctors have recorded each patient’s blood pressure and collected other basic data. But they have done little to evaluate the care of other physician specialists, such as radiologists and dermatologists.

Thomas and Abelson quoted Meredith Rosenthal, Ph.D., a health economist at Harvard University who has written extensively about health plans’ physician performance standards, saying, “Once we’re out of primary care, we’re in kind of a neverland of measurement.” Medicare has significant job ahead to develop new standards under the bill’s requirements, Thomas and Abelson wrote.

For Modern Healthcare, Paul Demko explained the basics of the new payment model. By 2019, physicians who have at least 25 percent of their patients in value-based payment models will be eligible for bonus payments of 5 percent through 2024. “After that they’ll receive annual payment bumps of 0.75%, three times the level of increase for physicians that remain on the fee-for-service track,” he wrote.

One glaring problem with the legislation, however, is that the annual payment increases in the bill will almost certainly fail to keep pace with inflation, which will lead physicians back to Congress to ask for more money, he added.

After 2015, the bill could cause payment for most doctors to drop unless Congress takes further action, wrote Robert Pear in The New York Times, adding that if they are displeased with their Medicare pay, physicians could drop out of the program. Pear quoted Paul Spitalnic, the chief actuary for CMS, saying, “If not addressed by subsequent legislation, we expect that access to and quality of physicians’ services would deteriorate over time for beneficiaries.”

In a 13-page memo (PDF), Spitalnic described the bill’s major provisions and summarized the short- and long-range effects of the legislation. Robert Lowes at Medscape covered the actuary’s report well, saying that under the bill, physicians’ practice costs would rise faster than Medicare payments.

The law raises fee-for-service rates by 0.5 percent for the second half of this year for each year through 2019 but freezes FFS rates through 2025, Lowes explained. Then in 2019, the bill introduces two pay-for-performance programs (P4P): the Alternative Payment Model (APM) and the Merit-Based Incentive Payment System (MIPS).

For physicians who do well under the P4P programs, MACRA will pay out tens of billions of dollars to physicians, Lowes added. “However, this money disappears in 2025,” he wrote, citing the actuary’s report. “In 2026, physicians in the APM and MIPS programs will begin to receive yearly FFS rate hikes of 0.75 percent and 0.25 percent, respectively. In contrast, physician practice expenses are expected to increase on average by 2.3 percent per year after 2025.”

At Vox, Kliff explained that under the APM, groups of doctors would join together to earn lump sums to care for certain groups of patients. “If they can provide the care for less – and hit certain quality metrics – they get to keep some of the leftover cash. The hope is that these models will force doctors to be vigilant against wasteful care, since doctors have a financial incentive to spend less than their lump sum amount,” she wrote.

The MIPS combines older incentive programs into one program that will give doctors a quality score. If their scores are high, reimbursement rates will rise, she added.

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at [email protected].