MACRA: The New Medicare Pay Reform Law

In April this year, President Obama signed into law H.R. 2, the “Medicare Access and CHIP Reauthorization Act of 2015” (MACRA) that reforms Medicare payment policy for physician services, and implement a series of policy changes for providers and suppliers. In addition, MACRA also extends certain expiring Medicare and other health policy provisions, including a two-year extension of the Children’s Health Insurance Program (CHIP).

MACRA permanently repeals the statutory Sustainable Growth Rate (SGR) formula, attaining an objective that has dodged Congress for years. This step overrides a 21.2 percent cut in Medicare physician payments that briefly took effect April 1, 2015, and brings to end a long cycle of MPFS cuts being triggered automatically. Instead, after a period of stable payment updates, MACRA will link physician payment updates to quality, value measurements, and participation in alternative payment models.

And to help finance these provisions, MACRA reduces market basket updates for post-acute care providers, revises inpatient hospital payment rate updates, restructures Medicaid disproportionate share hospital (DSH) reductions, imposes additional income-related adjustments for Medicare Part B and Part D premiums, and bars first-dollar Medigap coverage policies.

By this summer, MACRA would raise Medicare reimbursement by 0.5 percent, and this boost is expected consecutively for next five years. Moreover, starting in 2019 the Merit-Based Incentive Payment System (MIPS) will let providers earn bonuses based on performance categories.

Last year’s SGR legislation delayed ICD-10 implementation; and the same fate was speculated by the medical community this year. MACRA, however, makes no changes to ICD-10 October 1, 2015 deadline. Even though the SGR formula has been repealed it still consists of significant shifts in future Medicare payments to providers. Although, there is a sigh of relief among physicians that the annual SGR brouhaha is over, the new physician payment framework may lead to issues in coming years. For instance, the chief actuary warns that MIPS updates totaling $500 million per year and a 5 percent annual APM bonus are scheduled to expire in 2025; this will again trigger physician payment reductions.

Even though the current payment problems with the SGR formula are solved, Congress may still have to mend up the continued complex issues of Medicare physician reimbursement methodology in coming years.

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