Breaking down the Medicare physician payment changes for doctors under MACRA

Federal officials have unveiled their roadmap to a revamped Medicare physician payment system designed to reward doctors and other clinicians for the quality of care delivered, rather than the quantity.

The proposed regulation would replace a patchwork of programs that now govern physician payments in Medicaid. It would allow doctors to choose from a new menu of measures and activities that officials said would be tailored to the type of care clinicians provide in Medicare's traditional fee-for-service program.

[Also: HHS proposes streamlined rules for how Medicare pays physicians, formally replaces meaningful use]

"By proposing a flexible, rather than a one-size-fits-all program, we are attempting to reflect how doctors and other clinicians deliver care and give them the opportunity to participate in a way that is best for them, their practice and their patients," said Patrick Conway, acting principal deputy administrator and chief medical officer at the Centers for Medicare & Medicaid Services (CMS), the federal agency that is implementing the new physician payment program.

Currently doctors are paid for things like tests, treatments and other procedures, but not necessarily for spending time with patients to learn more about their health or develop a treatment plan. Officials say the new payment program will change that.

With wide bipartisan support, Congress last year voted to scrap the existing Medicare physician payment formula and transition to a new system focused on quality, value and accountability. Here are some questions and answers about the newest phase of this effort.

Q: What is the government offering?

A: The proposed regulation would create two new payment systems. One, called the "merit-based incentive payment system," or MIPS for short, would evaluate the value and quality of care on four performance categories: cost, quality, how doctors use electronic health record technology in their daily practice and share that information with other providers, and activities that improve care, such as care coordination or how much beneficiaries are engaged in their care. That composite score is used to determine a positive, negative or no adjustment to a provider's Medicare Part B payment for a medical service.

[Also: Physicians to ask for streamlined performance reporting at Tuesday MACRA hearing]

The second system for doctors sets payments through "advanced alternative payment models" or advanced APMs. Under these models, clinicians accept more risk -- and could also make more money -- for providing coordinated, high-quality care, according to CMS. Examples include efforts to create a centralized "medical home" in which a team of health professionals provide coordinated care to improve patients' health, and newer models of accountable care organizations in which doctors, hospitals and other health care providers form networks that work together to help improve the quality and reduce the spending for patient care.

CMS officials expect that most Medicare clinicians will initially participate in the MIPS program but over time will move more toward the alternative payment models.

Q: Who will get paid this way?

A: Most doctors that treat patients in the traditional Medicare program, as well as other clinicians, such as physicians assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists, that also provide care to Medicare beneficiaries, will be paid under either the MIPS or advanced APMs system. Clinicians can be exempted from MIPS if they are new to Medicare, have less than $10,000 in Medicare charges or see 100 or fewer Medicare patients or are "significantly participating" in an advanced APM.

Q: Why is this happening now?

A: As part of legislation Congress passed last year to overhaul the Medicare physician payment system, CMS had to publish a plan by May 1 that detailed how it would measure physician quality under the new system. Doctors and other interest groups can now comment on the proposal until June 26, and CMS is expected to issue a final rule this fall.

Q: What happens next?

A: Under the law setting up the changes in payment, physicians will receive a fee increase of 0.5 percent per year between 2016 and 2019 as the new system is developed and put into place. In 2017, Medicare will begin measuring performance for doctors and other clinicians for the MIPS program, with payments based on those measures beginning in 2019. Under that system, payments generally won't increase or drop by more than 4 percent, rising gradually to 9 percent from 2022 and beyond. Doctors can earn additional bonuses for exceptional performance.

Practitioners who pursue APMs would qualify for a 5 percent Medicare Part B incentive payment for the years 2019 through 2024.

Q: Does this mean that Medicare beneficiaries will pay more to see their doctors?

A: No. Medicare Part B premiums, which cover visits to a physician and other outpatient services, are set by law and adjusted yearly. Once the Part B deductible is met, beneficiaries usually cover 20 percent of the amount Medicare pays, or purchase a supplemental policy that can pick up much of that cost.

Q. How did the doctor payment formula become an issue?

A: The prior physician payment system, which was called the sustainable growth rate or SGR, was created in a 1997 deficit reduction law, a broader legislative effort to control federal spending. For the first few years, Medicare expenditures did not exceed the target in that law and doctors received modest pay increases. But in 2002, doctors were furious when their payments were reduced by 4.8 percent. Every year since, Congress has staved off the scheduled cuts. But each deferral just increased the size of the fix needed the next time. Last year, lawmakers finally agreed to cut a deal for repeal and move on.

Q: What's been the reaction to the new physician payment proposal?

A: Doctor and physician groups appear to be on board so far and a few lawmakers in both parties also have expressed support. All pledge to continue to monitor the process.

In a statement, the president of the American Medical Association, Dr. Steven J. Stack, said the group's "initial review suggests that CMS has been listening to physicians' concerns" in particular by modifying federal rules concerning physicians and electronic health records and reducing burdens on quality reporting. The new system, Stack said, "needs to be relevant to the real-world practice of medicine and establish meaningful links between payments and the quality of patient care, while reducing red tape."

Robert Berenson, a fellow at the Urban Institute, said a key question for the law is "have they set it up so small practices can actually stay in business and report so they don't have to throw in the towel and get hired by somebody because the reporting burden is too great?" Berenson, who has been critical of the new Medicare physician payment law, is a member of a technical advisory committee created in the law to evaluate its implementation.

Paul B. Ginsburg, who serves as director of the Center for Health Policy at the Brookings Institution and is also director of public policy at the Schaeffer Center at the University of Southern California, said the proposed rule gives physicians a lot of flexibility in choosing how they are rated under the MIPS program but is more restrictive on what qualifies as an APM.

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Payment increases under either system may not be generous enough to keep up with other costs, such as increases in practice expenses. "This is better than a 20 percent cut (under the old system) but in a sense it means that the very severe constraint on physician payment is going to continue for some time," he said.

Q: Where can I read more about this new plan?

A: CMS has published a web page, a fact sheet and a video to explain the proposal.

Kaiser Health News is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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