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Permanent SGR fix signed by the President

Medicare's move to value based models begins in earnest but the new law replaces SGR with a whole new set of acronyms to learn and understand:


H.R. 2, The Medicare Access and CHIP Reauthorization Act (MACRA) was signed into law by the President on Thursday, April 16, 2015.  The new law permanently ends the flawed “Sustainable Growth Rate” (“SGR”) physician payment formula and begins the process of transforming Medicare from fee-for-service into value based payment and delivery models, including direct primary care. Medicare's move to value based models begins in earnest but the new law replaces SGR with a whole new set of acronyms to learn and understand, like MIPS, APMs and the TAC. But much of the detail on when and how the changes will occur is still unfolding.  Exactly how and when Medicare will begin working with DPC providers to pay some form of membership fee is still unfolding, but it will depend on DPC providers' ability to share relevant data on cost, outcomes and patient satisfaction, and may be the subject of additional legislation.


SGR Repeal


The new law repeals SGR immediately and sets a 5 year stabilization period with an automatic annual 0.5 percent increase in provider reimbursement rates from 2015 through 2019. From 2019 on, payments to providers will be adjusted based on performance under a Merit-Based Incentive Payment System (“MIPS”) or physicians may be required to participate in alternative payment models (APMs) in which a significant share of revenues involve physician financial risk plus a quality measurement component.




H.R. 2 consolidates existing CMS incentive programs, including the Physician Quality Reporting System (PQRS), EHR incentives under the Meaningful Use (MU) program, and the Value Based Modifier (VBM) into a single Merit-based Incentive Payment System (MIPS) which assesses performance in 4 categories: quality; resource use; EHR Meaningful Use; and clinical practice improvement activities. Starting in 2019, MIPS mandates negative payment adjustments for providers who fall below certain performance thresholds. By 2022, some providers may see payments cut by up to nine percent. Specific quality metrics against which performance will be measured under MIPS have yet to be determined. The Act allocates funding for quality measure development due from CMS by May 2016.




Starting in years 2019-2024, physicians participating in alternative payment models (APMs), e.g.; accountable care organizations, medical homes, bundled payment models, etc. will receive an additional five percent bonus each year. The Act establishes a Technical Advisory Committee (TAC) of stakeholders to advise the HHS Secretary on which new APMs should be included for Medicare reimbursement. 


EHR Use and Interoperability


H.R. 2 requires every physician in Medicare to report quality measures to CMS using Health IT by 2019.  The Act also sets a statutory deadline of 2019 for all certified EHR systems to be deemed interoperable. 


CHIP, Medicare programs extended –


H.R. 2 includes two years of additional funding for the Children’s Health Insurance Program (CHIP), that provides insurance for children of low-income families who earn too much to qualify for Medicaid.   Additional Medicare “extenders” were also added including:


  • An additional $7.2 billion for community health centers subject to prevailing restrictions on the use of federal funds for abortions in certain circumstances;

  • A delay until 2018 for scheduled reductions in Medicaid Disproportionate Share Hospital payments with an additional year of cuts in 2025, and;

  • A six-month delay until September 30, 2015 of the “two-midnight rule.”


Budgetary Offsets


According to CBO, the 10-year cost of the new bill is about $200 billion, of which only $70 billion will be offset.   The Center for Medicare Advocacy says of the $70 billion portion of the SGR package that will be offset, roughly half would come from Medicare beneficiaries through changes that will increase their out-of-pocket costs for health care.  Key changes that will have seniors help pay for the SGR package are:


  • Starting in 2018, Medicare beneficiaries with incomes above $133,500 (higher thresholds for couples) will pay more for Medicare coverage;

  • Beginning in 2020, “Medigap” policies will not be able to provide first-dollar coverage of Part B deductibles for new beneficiaries; and

  • Overall increases in Part B hospital premiums across the board.


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