The Medicare Access and Chip Reauthorization Act (MACRA) is the product of four years of work that included input from multiple stakeholders and was signed into law on April 16, 2015, following broad bipartisan support in Congress. Implementation of MACRA began on January 1, 2017. The legislation, as originally conceived, had three fundamental goals. The first goal was to repeal the Sustainable Growth Rate (SGR) physician payment formula, a major cause of uncertainty and instability for more than a decade. The legislation did that. The second goal was to stabilize physician payments to give providers relief from the annual, and at times more frequent, threats of substantial cuts to their reimbursement. The legislation technically stabilized payments, although due to the modesty of payment updates, physicians are likely to see their inflation-adjusted income drop substantially over the next several years.

The third and much more difficult goal was to move to a better, more stable payment system that wouldn’t have policy makers back at the table in a few years discussing the same issues. For most analysts, this means transitioning away from traditional fee-for-service (FFS) into what has become a catch-all term, “alternative payment models” (APMs). Fundamentally, MACRA attempts to achieve this transformation by making FFS increasing unattractive, while simultaneously developing and implementing APMs for providers to transition into.

The fundamental infrastructure for the future Medicare physician payment system, according to MACRA’s Quality Payment Program, includes two payment options. The Merit-Based Incentive Payment System (MIPS) is a complex pay-for-performance system based on traditional FFS. The other option, participation in an Advanced APM, is in reality not currently an option for the majority of providers.

Therefore, the main issue currently confronting providers in MACRA is that, despite considerable flexibility for 2017, when full implementation arrives, MIPS will make FFS untenable at a much faster pace than the development and implementation of viable APMs. This means that, unless something changes, a large number of providers will be pushed out of FFS and over the cliff before they have a safe place to land.

There are essentially two ways to address this problem. One is to make MIPS less onerous. The other is to greatly accelerate the development and implementation of viable APMs. Policy makers should consider doing both.

MIPS And The Burden Of Performance Measurement

Physician practices face an enormous administrative and financial burden just to report on health care performance measures. This burden predates MACRA, and the legislation actually streamlines some of the reporting burden by combining three previously separate reporting requirements (Physician Quality Reporting System, Value-Based Payment Modifier, and Meaningful Use) into MIPS. However, physicians and their staff currently spend, on average, 785.2 hours ($40,069 per physician) annually simply tracking and reporting quality measures for Medicare, Medicaid, and private health insurers.

In spite of the substantial time diverted from patient care and the money ($15.4 billion—roughly the amount of government spending each year on graduate medical education) that could be used for other purposes, most physicians feel that the current measures do not help them improve the care they provide. According to an October 2016 analysis of the current misalignment of health quality measures, the Government Accountability Office concluded that: “Although hundreds of quality measures have been developed, relatively few are measures that payers, providers, and other stakeholders agree to adopt, because few are viewed as leading to meaningful improvements in quality.”

Making this huge investment in measure reporting with very little return in quality improvement is wholly inconsistent with the goal of value-based health care. Furthermore, while MIPS is essentially a complex pay-for-performance system that will reward or penalize physicians based on their performance on a range of measures, analyses of pay-for-performance payments systems have shown that they have had little effect on improving the quality of care over the past decade. Recognizing that most physicians, especially those in smaller, independent practices were not ready for MIPS and would likely be penalized, the Centers for Medicare and Medicaid Services (CMS) correctly provided for maximum flexibility for 2017, as noted above. However, when full implementation takes effect, success in MIPS is more likely to reflect the size and resources of the physician’s practice than the value of the care provided. Furthermore, public reporting of an individual physician’s MIPS performance will have not only a financial impact but may affect professional reputation and employability as well.

Prospects For Innovative Payment Reform Models

As MIPS makes fee-for-service unattractive and even untenable for many providers, they will need somewhere else to go. According to a recent announcement from CMS, participation in its APMs continues to grow. However, the vast majority of that growth is in accountable care organizations (ACOs). So far, in spite of considerable investment, the early results from CMS’s ACO initiatives have shown that, while quality has improved or remained unchanged, savings have been concentrated in a few organizations, most often those with a higher benchmark. Even without accounting for the cost of running the program, the overall financial impact has so far been a net loss to taxpayers. Whether the Next Generation ACO model will solve some of the problems encountered by earlier models remains to be seen.

Currently, the Center for Medicare and Medicaid Innovation (Innovation Center) is the pathway for testing and implementing APMs in Medicare. The Innovation Center is a product of the Affordable Care Act. MACRA established the Physician-Focused Payment Model Technical Advisory Committee (PTAC) to review and evaluate physician-focused payment models submitted by stakeholders and make comments and recommendations on them to the secretary of the Department of Health and Human Services (HHS). However, the HHS secretary is under no obligation to test any model, even if favorably recommended by PTAC.

Furthermore, if the HHS secretary agrees to test a model, it will likely be administered through the Innovation Center. According to estimates from the Congressional Budget Office, the current Innovation Center process is such that, on average, successful models will operate for four to seven years before HHS decides whether to expand them beyond the demonstration phase. Unless something changes, it will be a considerable amount of time before additional APMs become widely available.

Changes To MACRA Implementation

Reduce The Burden In MIPS

The expectation that health care providers should be accountable for the care that they provide is appropriate. In fact, many physicians support performance measurement, and some even report wanting to have their incomes more closely linked to the quality and efficiency of their care, provided that the measures are meaningful and the reporting process is reasonable. However, given the current paucity of meaningful health care performance measures, the reporting burden in MIPS should be substantially reduced. To begin with, CMS should extend beyond 2017 the current flexibility that allows providers to pick their own pace in MIPS without receiving penalties. CMS should also refrain from publicly reporting an individual provider’s MIPS composite performance score until there is evidence that the score bears some relation to the value of the provider’s care. Currently, that is not the case.

Greatly Expand Access To APMs

Clearly, there is a need for the timely development and implementation of more innovative APMs. Currently, physicians face the prospect of being subject to MIPS or participating in an Advanced APM that requires them to substantially change their delivery of care, make investments in the necessary infrastructure for APM participation, and take on “more than nominal” financial risk, often for things over which they have no control.

First of all, CMS should take full advantage of the considerable expertise of PTAC and implement models that are favorably recommended by the committee. To encourage true innovation and avoid forcing providers into a few government-compatible choices, if a model has a record of success in the private sector there is no reason to test the model in Medicare for an additional four to seven years, regardless of whether or not the model is scalable to the population at large.

The Case For Medicare Advantage

CMS could greatly expand access to APMs by leveraging current innovation in Medicare Advantage (MA) plans. At least one-third of Medicare beneficiaries are currently enrolled in a MA plan, and, whereas attribution in an ACO is invisible to the beneficiary, beneficiaries in Medicare Advantage are there by choice. In addition, there is evidence that in counties with a high penetration of Medicare Advantage, there is a spending reduction spillover effect to FFS Medicare.

According to the MACRA-mandated CMS report to Congress on the feasibility of integrating APMs into the MA payment system, unlike Medicare FFS APMs, models in Medicare Advantage could potentially use multiple alternative payment approaches concurrently or over time as the model evolves and participants need change; this would provide an on-ramp to more advanced models, something that is lacking in the current MACRA APM provisions. An analysis by the Health Care Payment Learning and Action Network suggests that a substantial percentage of MA health care dollars in 2016 were in more advanced categories 3 and 4 payment models. This suggests that Medicare Advantage could serve as a laboratory for truly innovative payment reform without additional risk to taxpayers. Policy makers should incentivize this innovation by allowing provider participation in Medicare Advantage to count toward the APM thresholds.

The Challenge Ahead

Nobody ever suggested that repealing the hopelessly flawed SGR formula would be easy or pretty. It took more than a decade to do it. MACRA has its own set of flaws. The main problem with MACRA implementation at this point is that the legislation assumed a health care infrastructure—in terms of meaningful performance measures, access to relevant data, and viable APMs—that does not yet exist.

As implementation proceeds, substantial changes are necessary to achieve meaningful payment reform and avoid presenting physicians and other providers with an untenable choice: Remain in FFS, subject to an increasingly burdensome MIPS, or participate in a limited number of government-approved APMs, even if they are professionally and financially unrewarding. Policy makers should make MIPS less onerous by extending the current reporting flexibility. At the same time, access to APMs should be accelerated by leveraging innovations in the private sector, especially those in Medicare Advantage.