Medicare Unveils Big Changes in How It Makes Payments
Policy + Politics

Medicare Unveils Big Changes in How It Makes Payments

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The Obama administration on Friday took a big step in its effort to “bend the cost curve” of health care with the release of a new rule dramatically altering the way doctors are compensated for treating Medicare patients.

For decades, doctors and hospitals have routinely received a set fee for their services and tests in treating elderly Americans under the Medicare program, regardless of the outcome. This fee-for-service approach provided virtually no incentives for physicians to achieve better outcomes and assure that the patient wasn’t coming back for more treatment or hospitalization anytime soon.

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The new rule, an outgrowth of bipartisan legislation approved by Congress last year to change the way physicians are paid, is designed to shift the medical system toward rewarding quality over quantity of treatment while saving hundreds of billions of dollars in the coming years, starting in 2019.

“We’re trying to get doctors back to doing what they do best, care for patients, through a lot off simplification and support,” Andy Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS), said during a call with reporters Friday.

Republicans and Democrats joined together in April 2015 to approve the Medicare Access and CHIP Reauthorization Act, designed in part  to scrap an outmoded Medicare “sustainable growth” reimbursement program designed to save money by gradually reducing payments to doctors on a regional basis but that was repeatedly postponed for fear that many doctors would simply stop treating Medicare patients. 

Under the new rules unveiled Friday, health care providers to Medicare beneficiaries would have two pathways for being reimbursed. A Merit-based Incentive Payment System (MIPS) would compensate doctors and other health care providers based on their success rate in providing care in four broad categories. They would stress evidence-based, specialty-specific standards, as well as practice-based improvement activities; cost; the use of certified electronic health records; and advanced quality objectives to avoid redundancies and waste. Health care providers who decline to report under this new program would eventually see a pay cut.

The second path is an Advanced Alternative Payment Model designed for doctors and other providers who are prepared to embrace quality-based changes or have already begun integrating them into their practice. Providers operating in the same geographic region could join forces as part of an “accountable care organization” to coordinate care for patients. They would be allowed to share in a portion of the money that Medicare saves through that type of quality care.

About 380,000 clinicians throughout the country would be exempted from the program, according to Morning Consult, because they do not treat enough Medicare beneficiaries.

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Slavitt said that his agency would stress providing physicians with flexibility and time to prepare for the change in the payment system, with an eye to making the transition “as simple and flexible as possible.”

The American Medical Association (AMA) said today that while its officials were still reviewing the details of the new rule, “a first review reveals that CMS responded to many of the concerns expressed by physicians about the proposed rule issued last spring.”