Medicare Access and CHIP Reauthorization Act (MACRA) Reforms to Accelerate the Adoption of Accountable Care

The Medicare Access and CHIP Reauthorization Act (MACRA) was enacted in 2015 with broad bi-partisan support. That law included incentives to accelerate the adoption of and participation in accountable care. In the years since MACRA passed, participation in alternative payment models (APMs) has increased, but more can be done to accelerate the transformation from a fee-for-service system to a system that encourages better quality at a lower cost.

Key Points: Congress Should Adopt Incentives to Accelerate the Adoption of Advanced Alternative Payment Models (Accountable Care)
  • Health policy should transition rapidly away from fee-for-service as a dominant payment model for US healthcare services because fee-for-service reimbursement leads to waste, poor care coordination and worse health outcomes.
  • A solid body of evidence has demonstrated that accountable care (including advanced APMs) lower costs and improve care.
  • MACRA included incentives to increase adoption of accountable care and as a result, adoption has increased but more can be done to accelerate transformation.
  • MACRA’s “u-shaped” incentives for advanced APM participation, which begin at 5% then drop to 0% and ramp back up over time, were intended to be revisited and a MACRA 2.0 effort presents that opportunity.
  • MACRA’s incentives should be restructured to build on the successes to date and accelerate the movement to advanced APMs.

Advanced APMs have Reduced Costs and Improved Quality

Waste, poor coordination, bad outcomes, and high costs are the results of a system that ties reimbursement to the volume of services delivered, not the promotion of overall health. Seventy-six percent of physicians believe fee-for-service contributes to overtreatment, and research shows that approximately 25% of U.S. health care spending is wasteful. People cared for in fee-for-service systems routinely experience complications, preventable emergency department admissions, declines in functional status, and increased dependency on the medical system.

In contrast, advanced APMs have demonstrated that they can save money, expand access and improve health outcomes and experiences for Medicare beneficiaries.

Model or ProgramCost SavingsBenefits to Beneficiaries
Medicare Shared Savings ProgramSaved money for six consecutive years—more than $1.8 billion in 2022.Participants have outperformed similarly situated practices on a range of quality measures related to diabetes and blood pressure control, cancer screening, and depression screening and follow-up.
Pioneer ACOSaved $1.29 billion from 2012-2015; then incorporated in MSSP.Reduced unnecessary inpatient admissions, avoidable readmissions, and emergency room visits.
Vermont All-Payer ACO ModelReduced net Medicare spending in the state by 9.7%.Reduced acute care stays, increased access to primary care.

MACRA’s Incentives Worked, But Restructuring them Can Accelerate Transformation

MACRA included “u-shaped” incentives for advanced APM participation, including a 5% bonus through the 2022 performance year/2024 payment year, dropping to 0% for 2023 through 2025, and then transitioning to a more favorable conversion factor update for participants in advanced APMs beginning in 2026 when providers in advanced APMs would receive a 0.75% increase to the conversion factor as compared to providers not in advanced APMs who receive a 0.25% increase (a .5% differential), which compounds over time.

Eligibility for the 5% incentive for advanced APMs was set to expire at the end of the 2022 performance year, but Congress extended the bonus at 3.5% for a single year. The one-year 3.5% bonus extension expired at the end of the 2023 performance year. Congress again extended the bonus at 1.88% for the 2024 performance year. While the advanced APM bonus decreases, the maximum bonus under the Merit-based Incentive Payment System (MIPS), a fee-for-service payment option, remains at 9%, creating a potentially more attractive option for providers to move back to or stay in fee-for-service relationships.

During the existence of the 5% bonus, MACRA showed success in transitioning providers to accountable care. In 2021, 271,231 clinicians qualified for the 5% MACRA bonus for participating in a qualifying APM.1 While the total number of clinicians qualifying for the bonus has continued to grow over time, and the number of MIPS-eligible clinicians has gone down, there is still substantial opportunity to move more fee-for-service providers to advanced APMs. In 2021, there were 698,859 participating in the MIPS program.

Chart showing the growth of APM bonus eligible clinicians.

Importantly, these APM incentives have transformed care. The availability of the incentive payments has expanded participation in these models, supported investments in new staff and expanded approaches to population health management. Broader participation has added benefits to patient populations in terms of better health outcomes, better care coordination, and care teams that meet people’s total health needs. More on the importance of these incentives to invest in the infrastructure for accountable care is available in BRG’s Transitioning to Value-Based Care: Financial Implications for Providers and Policymakers.

Although MACRA has been successful in driving early adopters to enter accountable care models, new tools are needed to encourage late adopters to move into these models. Unfortunately, at the time we need more tools to attract those who have not yet joined a model, the existing bonus structure works against the goal of getting providers to pursue delivery system transformation. Several challenges persist:

  • The maximum MIPS fee-for-service bonus remains at 9% as the advanced APM bonus decreases in the short term and then ramps back up over time.
  • The MACRA advanced APM bonus is based on volume – the 5% applies to claims billed for medical services, creating an incentive for more volume, the opposite of the intent of the movement to accountable care.
  • Once an advanced APM entity crosses participation thresholds, the bonus applies to all of the clinician’s Part B revenue. An individual may have a very small percentage of their patients in an accountable care relationship, but would still receive the 5% bonus on 100% of their Part B claims. One way to make the bonuses more powerful would be to ensure bonuses are paid for accountable care work.
  • A wide array of models qualify for the advanced APM bonus, but it can be difficult for providers to distinguish between those that qualify and those that do not.
  • The bonus is paid to clinicians two years after APM performance. For example, performance in 2023 results in a bonus paid in 2025.

Restructuring MACRA Incentives for Advanced APMs can Achieve Greater Cost Savings and Care Improvements

Efforts to reform MACRA should retain a “wedge” or positive payment differential for advanced APM participation with lower payment for remaining in fee-for-service. This can be done in a way that is more targeted and clear to drive participation in advanced APMs that save money and improve care:

  • Transition to incentives that are value-based not volume-based. For example, Congress could create a per-aligned beneficiary incentive rather than an incentive based on claims.
  • Ensure strong and clear incentives for models that lower costs and improve care, including at least one global risk model.
  • Make clear that advanced APM participation is preferred to fee-for-service MIPS participation by ensuring the MIPS bonus cannot be larger than the advanced APM incentive.
  • The time between performance and payment should be shortened to the greatest extent possible to ensure incentives are meaningful.
  • Disentangle APMs from complex MIPS requirements to the greatest degree possible.
1 Qualifying APMs hold providers accountable for quality and cost and generally require that providers who overspend against pre-sent targets repay the government (two-sided risk).

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