Statement of Accountable for Health for the Oversight and Investigations Subcommittee Hearing “MACRA Checkup: Assessing Implementation and Challenges that Remain for Patients and Doctors.”
Accountable for Health is a nonpartisan national advocacy and policy analysis organization accelerating the adoption of effective accountable care. We aim to support policymakers to advance the movement in the health care system toward accountable care that achieves better outcomes, improved care experiences, increased access and lower costs.
Too often, individuals experience care that is fragmented, duplicative, wasteful and confusing. Accountable care aims to improve the health care experience for people by encouraging care coordination, creating care teams that communicate with one another, and supporting individuals in their care journey with services that address their medical and non-medical needs.
As Congress contemplates future legislative approaches to clinician payments in traditional Medicare, legislation should include clear and strong incentives and opportunities for all clinicians to participate in accountable care.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) passed on a broad bi-partisan basis in 2015. The law repealed the sustainable growth rate (SGR) formula and established a new approach to updating payments to clinicians. Conceptually, clinicians in traditional Medicare would have the option to select one of two paths: the Merit-based Incentive Payment System (MIPS) or an advanced alternative payment model (A-APM). The overall goal was to link more of traditional Medicare payments to value – better quality, lower cost, and improved outcomes for individuals.
SGR Repeal. The SGR formula attempted to constrain Medicare Part B physician spending. However, beginning in 2003, Congress consistently took action to “fix” the cuts to physician pay that would have resulted from application of the SGR formula. Over time, the proposed cuts resulting from the SGR formula became increasingly significant – in 2015, the cut to physician pay would have been 21.2%.
Updates in the Physician Fee Schedule Mandated by the Sustainable Growth Rate (SGR) Formula and Legislated by Congress 2003-20151
At the same time, before MACRA, physicians in Part B were subject to three disparate reporting programs, the Physician Quality Report System (PQRS); the Value-based Payment Modifier (VBPM); and Meaningful Use, all of which contributed to additional burden and fragmentation in performance measurement.
MIPS. The MIPS pathway adjusts fee-for-service reimbursement up or down depending on clinician performance across four categories: quality, cost, improvement activities, and promoting interoperability. Clinicians are scored on their performance across these categories, and are assigned a total score, compared against other clinician performance and assigned a bonus or penalty amount. That amount would apply to their Part B payments two years after the performance year. For example, a clinician who earned a 1% positive update under MACRA in 2017 would be paid 101% of their Part B claims in 2019. This system of positive adjustments to reward good performers and negative adjustments to penalize poor performers (pay-for-performance) was built on a long history of similar predecessor programs, pre-dating MACRA by over a decade.
One important feature of MIPS is that it is generally budget neutral. Positive adjustments to clinicians are funded from negative adjustments to other clinicians in MIPS. Therefore, while on paper in MACRA, bonuses in MIPS could have been substantial, ranging from +/-9% and as much as 27% in some instances, the reality has been that the bonus payments are generally below 2%.
A-APMs. The A-APM pathway establishes a limited duration 5% lump sum bonus paid to clinicians for participating in qualifying advanced alternative payment models (A-APMs). The incentive payment was intended to encourage more participation in models where clinicians are accountable for the cost and quality of care provided. The 5% bonus applies to the Part B claims for qualifying participants and is paid in a lump sum amount two years after the performance year. A clinician who participates in a qualifying APM in 2017 receives his or her lump sum payment in 2019.
MACRA differentiated between APMS and advanced APMs. APMs are delivery models in which the APM entity (e.g., ACO) is taking upside only risk – the entity is eligible to share in savings created against a pre-established benchmark but is not required to repay losses if the entity overspends against the benchmark. Advanced APMs are those that require repayment of losses and allow eligibility to share in savings, or two-sided risk. The MACRA statute limited the types of APMs that a clinician may participate in to receive the bonus to advanced APMs. Other APMs are still required to participate in MIPS.
In the advanced APM pathway, clinicians may receive both shared savings distributions from their APM and the 5% bonus payment. In 2022, the bonus was extended for the 2023 performance year only (2025 payment year) and reduced from 5% to 3.5%.
PTAC. MACRA also created the Physician Focused Payment Model Technical Advisory Committee (PTAC). This committee was created to make recommendations to the Secretary of HHS on stakeholder-submitted physician-focused payment models and related topics. The PTAC was intended to help create a funnel of ideas from the physician community into HHS and ultimately be adopted into models. While the PTAC has incorporated elements of models suggested by the PTAC, no PTAC model in its entirety has been accepted and implemented.
MACRA Performance. In the years since MACRA passed, observers have pointed to key reasons why the law has not delivered on the goals of accelerated payment transformation. Many of MACRA’s incentives are still tied to underlying fee-for-service payment incentives. In addition, the law has been administratively costly for clinicians to implement. While there has been an increase in clinician participation in APMs, the ease with which clinicians can qualify for MIPS bonuses or exemptions has likely lowered enthusiasm for A-APM participation.2
Bipartisan Commitment to Accountable Care Goals
Beginning in 2015, Administrations of both political parties have articulated goals to accelerate the movement to accountable care because that care is better for populations and lowers costs. Working with the Health Care Payment Learning and Action Network (LAN), the Centers for Medicare and Medicaid Services along with the broader stakeholder community have embraced goals of transforming the way care is delivered across payers, including Medicare:
- 2015: aiming to have 50% of Medicare payments through an APM by the end of 2018. At the time about 20% of Medicare payments to providers were through alternative payment models.
- 2020: aiming to have 100% of traditional Medicare payments in advanced APMs by 2025;
- 2022: aiming to have 100% of people in Medicare in an accountable care relationship by 2030.
In 2021, in traditional Medicare, about 24% of payments are through advanced APMs. Another 16% are in APMS and about 60% are still either in pay-for-performance or have no tie to value.3 In Medicare Advantage, there is greater adoption of alternative payment model contracting between providers and payers, with about 35% of payments flowing through an advanced APM; 21.6% through an APM; and 43% not in an APM.
Weaknesses of a Fee-for-Service System – the Continued Need for Payment Reform
The United States spends more on health care than any other country. The most recent report from the actuaries at the Centers for Medicare & Medicaid Services projects that US national healthcare spending will reach $7.2 trillion by 2031 and consume 19.6% of GDP. Studies estimate that nearly 30% of this spending may be considered waste. These studies have examined the sources of waste, grouping sources into six domains:4
- Failure of care delivery – “waste that comes with poor execution or lack of widespread adoption of known best care processes, including, for example patient safety systems and preventive care practices that have been show to be effective. The results are patient injuries and worse clinical outcomes.” Estimated $102.4 billion to $165.7 billion.
- Failure of care coordination – “waste that comes when patients fall through the slats of fragmented care. The results are complications, hospital readmissions, declines in functional status, and increased dependency, especially for the chronically ill, for whom care coordination is essential for health and function.” Estimated $27.2 billion to $78.2 billion.
- Overtreatment or low-value care – “waste that comes from subjecting patients to care that according to sound science and the patients’ own preferences cannot possibly help them – care rooted in outmoded habits, supply-driven behaviors and ignoring science. Examples include excessive use of antibiotics, use of surgery when watchful waiting is better, and unwanted intensive care at the end of life for patients who prefer hospice and home care. Estimated cost $75.7 billion to $101.2 billion.
- Pricing failure – waste that comes as prices migrate far from those expected in well-functioning markets, that is, the actual costs of production plus a fair profit. For example, because of the absence of effective transparency and competitive markets, US prices for diagnostic procedures such as MRI and CT scans are several times more than identical procedures in other countries. Estimated cost $230 billion to $240.5 billion.
- Fraud and abuse – waste that comes as fraudsters issue fake bills and run scams, and also from blunt procedures of inspection and regulation that everyone faces because of the misbehaviors of a very few. Estimated cost $58.5 billion to $83.9 billion.
- Administrative complexity – waste that comes when government accreditation agencies, payers and others create inefficient or misguided rules. For example, payers may fail to standardize forms, thereby consuming limited physician time in needlessly complex billing procedures. $265.6 billion.
Strengths of Accountable Care and the Opportunity for a System that Meets People’s Health Care Needs
Existing accountable care efforts have shown that models that hold clinicians responsible for total cost of care and patient outcomes address some of the costliest sources of waste in our system.
- Accountable care incentivizes care coordination by holding providers responsible for patient outcomes and creating cash flow through up-front or lump sum payments that providers can invest in tailored care management programs, including for the chronically ill. Accountable care strategies including care coordination, care transitions programs (smoothing the transition from hospital to home for example) and care management for medically complex patients improve people’s care experiences and reduce wasteful spending in the system.5
- Accountable care reduces waste, duplication and low-value care by delivering the right care at the right time in the right setting and reducing duplicative or unnecessary services. In contrast to fee-for-service models that reward more utilization, accountable care models hold providers accountable for the cost of care and people’s health outcomes. This means that there are incentives to reduce unneeded care, focus on preventing the progression or development of disease, and preventing avoidable hospital admissions.6
- Accountable care can reduce wasteful spending by eliminating burdensome requirements and providing more flexibility to collaborate, innovate, and redesign care to better serve people.7
Accountable care has shown progress toward the goals of better outcomes and lower costs. However, clearly additional work is necessary to drive change to the way care is delivered in Medicare and for other payers. MACRA reform efforts create that opportunity.
Accelerating the Transformation to Accountable Care
While APMs (accountable care) have made progress toward the goals of a better health care system, clearly additional transformation is necessary. MACRA has played an important role in this work, creating a framework to change payment from fee-for-service to alternative payment models, and encouraging broader clinician participation through incentives. As Congress considers the next iteration of MACRA and future improvements, Accountable for Health recommends:
- Creating strong and clear incentives for advanced alternative payment models (reduce confusion caused by large “on paper” MIPS adjustments that haven’t materialized);
- Reducing complexity for participants in all alternative payment models by streamlining requirements and incentives;
- Ensuring there are adequate participation options for all clinicians who want to participate, including those in urban and rural areas.
Please do not hesitate to contact us with additional questions.
1 Solving the Sustainable Growth Rate Formula Conundrum Continues Steps toward Cost Savings and Care Improvements, Reschovsky, J; Converse, L; and Rich E; Health Affairs (2015) available at https://www-healthaffairs-org.proxygw.wrlc.org/doi/pdf/10.1377%2Fhlthaff.2014.1429.
2 Review of the Expert and Academic Literature Assessing Impact of Medicare Access and CHIP Reauthorization Act of 2015, Cooper, Z; Jurinka, E; Pare, T; Stern, D, Yale Tobin Center for Economic Policy (2023) available at https://tobin.yale.edu/sites/default/files/2023-06/20230413_MACRA%20Literature%20Review_0.pdf.
3 HCP LAN Measurement Report: https://hcp-lan.org/apm-measurement-effort/2022-apm/2022-infographic/
4 Waste in the US Health Care System: Estimated Costs and Potential for Savings, Shrank, W; Rogstad, T; Parekh, N, JAMA (2019).
5 The Impact of the Payment and Delivery Systems Reforms of the Affordable Care Act, Lewis C; Abrams M; Seervai S. et al, The Commonwealth Fund (2022) available at https://www.commonwealthfund.org/publications/2022/apr/impact-payment-and-delivery-system-reforms-affordable-care-act.
6 The Case for ACOs: Why Payment Reform Remains Necessary, Chernew, M and McWilliams M; Health Affairs 2022, available at https://www.healthaffairs.org/content/forefront/case-acos-why-payment-reform-remains-necessary.
7 Improving Waivers and Program Flexibilities for Advanced Payment Models, Duke Margolis Center for Health Policy (2021) available at https://healthpolicy.duke.edu/sites/default/files/2021-06/Improving%20Waivers%20and%20Program%20Flexibilities.pdf.