A Tale of Medicare Payment Models: From Volume to Value

Yes, it costs a lot of money to become a doctor. And yes, you will likely get paid a lot of money once you are a doctor. So it was surprising that a recent survey of internal medicine providers found that nearly two-thirds of respondents lacked familiarity with MACRA, the Medicare Access and CHIP Reauthorization Act of 2015, which fundamentally alters how doctors are paid for caring for Medicare beneficiaries.

In 2017, Medicare spending accounted for 15 percent of all federal spending and is projected to increase to 18 percent by 2028. Medicare benefits payments cost $702 billion in 2017 (up from $425 billion in 2007). Add in our aging population (by 2035, there will be more Americans older than 65 than kids under 18) and costly medical advancements that can sustain and prolong life, and we’re looking at a serious problem. [The solvency of the Medicare trust fund is a hot issue on the Hill.]In one attempt to rein in Medicare spending, MACRA shifts a growing percentage of physician payment from a volume-based model to a value-based model. MACRA has four main provisions: (1) repeal of the sustainable growth rate (SGR), which determined Medicare Part B reimbursement rates; (2) change how Medicare rewards providers for value over volume; (3) streamline various quality programs under the Merit-based incentive program (MIPS); and (4) give bonus payments for participation in eligible alternative payment models (APM).

Under MACRA, participating doctors will be paid based on the quality and effectiveness of care provided, rather than on the number of services provided (volume → value). Measures of quality and efficiency will help determine what is considered “high value care” and providers will earn more or less money from Medicare based on their performance against these measures.

Linking payment with job performance can be looked at like the argument that when individuals pay more for their own health care (i.e. higher deductible), they “have more skin in the game” and make better (read: cheaper) health care decisions. The law gives physicians the option of participating in two different models. The first option are advanced alternative payment models (APMs) which offer new financial incentives for participating in accountable care organizations (ACO) and other risk-based programs, meeting quality standards, and achieving patient outcome targets. The second option is the merit-based incentive program (MIPS) which does not require a redesign in how provider care for patients but offers more modest financial incentives (or penalties) for quality and patient outcome goals. As MIPS does not require physicians to redesign their practice, most providers participating in the new payment models have chosen this option.

The 2019 Medicare Physicians Fee Schedule and Quality Payment Program has proposed a number of changes to the MIPS program, including efforts to streamline quality measures to ease provider participation. It’s hard to know for sure how the changes made by MACRA and the 2019 proposed rule will impact patient outcomes in the long-term and if doctors will make the move to “better” instead of “more” treatment. But hopefully more future and current doctors start to take advantage of resources to learn how MACRA affects them and their patients.

Image from Urban Institute (Feodora Chiosea/Getty Images).

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