FAQ on Medicare Payment Reform

1. How does the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) impact Medicare payments to physicians?

This law repeals the flawed Medicare sustainable growth rate (SGR) formula that calculates payment rates to physicians. It also establishes an alternative set of annual payment updates to replace the SGR:

  • January 2015 to June 2015: Medicare physician payments remain at the pre-April 1, 2015 level
  • July 2015 to December 2015: Medicare physician payments increase by 0.5 percent
  • 2016 through 2019: Medicare physician payments increase 0.5 percent each year
  • 2020 through 2025: Medicare physician fee-for-service payments remain at 2019 levels

The law also establishes two payment tracks that offer bonuses beginning in 2019 and differing payment updates starting in 2026– one for physicians who participate in an alternative payment model such as the patient-centered medical home and another for those who stay in fee-for-service and participate in the Merit-Based Incentive Payment System.

2. What is an “alternative payment model,” and how will I be paid under this option?

Physicians choosing to participate in an alternative payment model (APM) will receive a five percent bonus on their Medicare billings for years 2019 to 2024. Starting in 2026, physicians participating in an APM qualify for a 0.75 percent annual update. The bill defines APM to mean any of the following:

  • Patient-centered medical home
  • Any model under the Center for Medicaid and Medicare Innovation (other than a health care innovation award)
  • A Medicare shared savings program accountable care organization (ACO)
  • Selected Medicare demonstrations, or other demonstration required by federal law

3. What is the Merit-Based Incentive Payment System?

The Merit-Based Incentive Payment System (MIPS) is a new addition to the Medicare fee-for-service payment system that offers performance improvement incentive payments from 4 to 9 percent beginning in 2019. Starting in 2026, physicians participating in the MIPS will be eligible for a 0.25-percent annual update in their payments. The MIPS consolidates several existing programs, including Medicare and Medicaid EHR Incentive Programs, Physician Quality Reporting System (PQRS), and the Value-Based Payment Modifier into a single, more simplified program. The MIPS program will assess physician performance under four performance categories to determine whether an individual qualifies for an incentive payment:

  • Quality
  • Resource use
  • Clinical practice improvement activities
  • Meaningful use of certified EHR technology

The MIPS program presents the first real opportunity for high-performing physicians to earn substantial bonuses, and for all physicians to avoid penalties if they meet prospectively established quality thresholds.  

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