Beyond the doc fix: What to make of MACRA

Commentary: In mid-April, President Obama signed into law the much anticipated Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. MACRA – nicknamed “the doc fix” – repeals Medicare’s current physician payment formula and replaces it with a new one that focuses on quality and value. But while the doc fix grabbed all the headlines, MACRA is worthy of a closer look.

Since Medicare was signed into law in 1965, there have been 116 bills passed that have added to or amended Medicare. Some of the bills have been narrow in scope; some have been sweeping.

The broadest law changing Medicare was the Medicare Modernization Act of 2003, which added 27 new sections and amended 55 others. Second broadest was the Patient Protection and Affordable Care Act of 2010, which created 12 new sections and amended 48.

Ironically, the third broadest was the Balanced Budget Act of 1997, which created the flawed payment system that MACRA kills.

Also see: Value-based insurance design gains momentum

MACRA touches on 29 different sections of Medicare law, making it the 15th broadest law passed since Medicare was created. Here are just a few examples of significant MACRA provisions that might have escaped the attention of the casual reader, distracted by the doc fix:

Helping plan sponsors promote quality care. Health plan sponsors– insurers and employers – would like to reward providers that offer higher quality. Unfortunately, the data to measure providers often resides in silos. Medicare contains the most data on providers, but until now it’s been the hardest for sponsors to access. MACRA allows quality measurement organizations to develop quality measures using Medicare data and share it with employers and insurers for the purposes of designing their health plans. This will make it easier for all payers to align providers’ incentives to offer high quality care.

Doctor report cards – with a kicker. As part of implementing the new payment system authorized by MACRA, called the Merit-based Incentive Payment System (MIPS), starting in 2019, Medicare will grade doctors, physician assistants, nurse practitioners, and other similar providers on measures related to quality, resource use, clinical practice improvement, and use of electronic health records. Based on these report cards, higher performers will be rewarded with up to a 27% increase in their Medicare payments and low performers will be penalized by up to 9% of what they otherwise would be paid. Along with MIPS, these report cards put teeth into the push toward value-based payments rather than a fee-for-service model, which critics argue encourages practitioners to focus on treatment provided over outcomes.

Rewards for doctors caring for the chronically ill. Three quarters of Medicare spending can be attributed to the 33% of Medicare beneficiaries who have four or more chronic conditions. Historically, Medicare’s fee-for-service payment systems have done a poor job rewarding providers who are successful at managing their patients with chronic conditions. MACRA creates a billing code for chronic care management services, and offers incentive payments to providers who enter into alternative payment models based on successful management of chronic conditions – another important step away from fees for services towards quality.

Also see: The cost question

Asking those with more to pay more. Since 2007, Medicare beneficiaries who earn over $80,000 for individuals and $160,000 for families have been asked to pay higher Part B and Part D premiums. Starting in 2018, MACRA will require beneficiaries earning between $133,500 and $200,000 for individuals and $267,000 and $400,000 for families to pay a higher premium than they were paying before. The Congressional Budget Office estimates that these higher premium payments will total about $15 billion between 2018 and 2015.

Funding for CHIP extended. Signed into law in 1997, CHIP provides health coverage for more than 8 million children in families with incomes too high to qualify for Medicaid yet too low to afford private health coverage – providing an important safety net for this vulnerable population. Funding for the Children’s Health Insurance Program was to expire at the end of this year. MACRA extends funding of CHIP for two more years.

Bottom line, in addition to enacting important reforms in how Medicare pays medical services providers – accelerating a long-awaited away from fee-for-services payments to payment based on quality – MACRA encourages more coordinated care of individuals with chronic illnesses and extends protections for children from low-income families.

So while the media has essentially reduced MACRA to a sound bite, to put it mildly, it’s a whole lot more than that.

John Barkett is director of health policy affairs for exchange solutions at Towers Watson.