MACRA: How We Got Here

Learn the ins-and-outs of value-based care.iStock 57127560 SMALL

Take home points:
1. Even agreed-upon legislative reforms take time and political pressure to bring about.
2. The SGR created incentives to “patch” the ill-conceived legislation rather than pay for its repeal.
3. MACRA represents a shift from an old mechanism of payment adjustments to a new value-based paradigm.

In the coming days, the Centers for Medicare and Medicaid Services (CMS) will release the first in a series of regulations to implement the key provisions of the Medicare Access and CHIP Reauthorization Act (MACRA). Passage of MACRA enabled Congress to achieve two elusive goals, specifically the elimination of the flawed Sustainable Growth Rate (SGR) formula and the enactment of policies which move physicians away from the traditional fee-for-service system and into risk-based reimbursement models which pay physicians for the value of the care they provide to patients.

As a result, physicians and national medical specialty societies, including the ACR, are eagerly awaiting the details of how CMS plans to implement the key aspects of this legislation, specifically the Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs).

Breaking Down the SGR

Although paying physicians based on value rather than the volume of services delivered to an individual has been debated for decades, what prompted Congress to finally implement such a radically different system of reimbursement? What negative aspects of the SGR encouraged lawmakers to use MACRA to create the MIPS and APMs?

At its core, the SGR was a policy designed to ensure that Medicare expenditures did not drastically exceed the nation’s Gross Domestic Product (GDP). Under the SGR, if Medicare spending outpaced GDP, payments made under the Medicare Physician Fee Schedule (MPFS) would be cut. And if the reverse were true, physicians would see positive reimbursement updates. The SGR, however, lacked any mechanism for adjusting payments based on the value of care. As a result, there was no risk for poorer performers and no reward for those providing the highest quality care to patients. The SGR simply lumped all physicians together into a single provider population.

Congress Makes Patches

For the first five years of the SGR, the GDP rose and with it went Medicare payments. Then in 2002, the GDP began to fall while health care expenditures started to grow at a precipitous rate. After the imposition of the first statutorily mandated cut, the ACR (along with practically all of organized medicine) became heavily involved in efforts to repeal the SGR. Legislators quickly fell into agreement that the SGR was severely flawed and Congress began its yearly ritual of developing different policies to repeal this policy.

Because agreement on a system to permanently replace the SGR always proved elusive, Congress routinely defaulted to annual legislative “patches.” The corresponding deficits stemming for the yearly “doc fixes” were continually lumped into an ever increasing cumulative cut. By 2015, this financial cliff had grown dramatically and, absent legislative intervention, physicians faced a 21 percent decrease in Medicare reimbursements.

While these temporary “doc fixes” each cost tens of billions of dollars, permanent repeal represented a politically impossible $300¬–500 billion price tag. Yet, thanks in part to the Great Recession and payment reforms enacted through the Affordable Care Act, the Congressional Budget Office (CBO) lowered its estimate of permanent repeal in 2013 to only $150 billion over ten years. The House Energy and Commerce Committee seized this new opportunity and in July 2013 passed a three-pronged plan (H.R. 2810) that fully repealed the SGR, created the Quality Update Incentive Program (QUIP) which was a modified fee-for-service program with payment bumps for providers meeting a series of quality measures, and outlined a new non-fee-for-service payment option (called alternate payment models, or APMs).

Deficits Arise

One of the issues that plagued the House Energy and Commerce proposal, as well as numerous other preceding SGR repeal bills, was the absence of a plan to pay for the ballooning deficits brought about by the flawed policy. The Senate Finance and Ways and Means Committee released its own framework to repeal the SGR in the winter of 2013. While these measures had much in common with the plan from the House Energy and Commerce Committee (all advocated the repeal of the SGR, modified fee-for-service payments tied to quality, and the introduction of APMs), neither plan included a way to cover the cost of eliminating the cumulative SGR deficit.

Early 2014 saw weeks of negotiation between the Senate Finance Committee, as well as the House Ways and Means and Energy and Commerce Committees. The result was a final SGR bill that melded the previously separate bills into one proposal. This unified bill (H.R. 4015 in the House and S. 2000 in the Senate) contained a Medicare payment increase of 0.5 percent per year between 2014 and 2018. It also introduced the concept of the Merit-based Incentive Payment System which would begin adjusting physician payments based on the reporting of individual quality measures beginning in 2018.

Partisan Issues Come About

The political goodwill of the winter soon ended when House Republicans chose to pay for the joint bills with a five-year delay of the Affordable Care Act’s individual mandate, which was viewed by Senate Democrats as a backhanded effort at repealing President Obama’s signature domestic legislative achievement. When Democrats responded with a new bill (S.2110) containing identical language to its predecessor but lacking any financial offsets, Republicans were incensed.

After Senate Republicans introduced their own bill that paid for the SGR repeal through the elimination of the Affordable Care Act, it became clear that no common ground would be found and both parties stepped away from negotiations. The mid-term elections of 2014 eliminated the prospect of reaching a bi-partisan compromise on paying for the repeal of the SGR and Congress ultimately decided to pass another 12-month fix (HR 2043, the Protecting Access to Medicare Act of 2014).

Congress Cooperates

After the mid-term elections, bipartisan cooperation was once again possible and both parties finally agreed to a bill that permanently repealed the SGR and offset some of its accumulated costs. In the spring of 2015, Congress passed H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA). MACRA not only permanently repeals the SGR but sets up a two-track payment system to encourage physicians to enter risk-based payment models.

From early on in the process, there was a general consensus regarding the need to repeal the SGR and to shift some of the financial risk and potential reward associated with the imposition of a value-based care system towards the physician population. Going forward, all upward and downward payment adjustments will be tied not to the broad brush of the GDP but to the ability of individual physicians and practices to quantify and provide quality care to their patients. Although it created havoc for physicians for more than 20 years, the notorious SGR laid the ground work for the many value-based payment concepts Congress ultimately included in MACRA.

To gain a more in-depth understanding of how the Medicare Access and CHIP Reauthorization Act came into existence after 20 years of Sustainable Growth Rate patches, view this webinar by Chris Sherin, Director, Congressional Affairs at ACR.

By Dominick Parris, ACR economics and health policy analyst

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