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This discussion is about two separate articles that were recently published in the New England Journal of Medicine regarding changes to the Medicare payment system.
Medicare’s new payment system reflects the movement toward value-based payment, which is built on the view that we can contain costs only by eliminating fee-for-service payment. But there are important problems with this belief and the reforms it inspires.
With the Merit-Based Incentive Payment System, Medicare shifts from payment based on macroeconomic indicators to relying on physician- or group-level indicators of cost and quality — and could create a large fee differential between high- and low-performing physicians.
Repealing Medicare’s sustainable growth rate formula (SGR) for calculating annual updates to physician payments has long been a priority for organized medicine. The annual “mandatory” fee cuts it dictated (that were then averted by last-minute congressional action) earned the SGR few fans in the medical profession. Many health policy analysts also saw the formula as deeply flawed, unfair, and ineffective. Yet it survived, largely because official budget projections continued to assume that steep cuts would actually be made to Medicare’s physician payments over the ensuing decade. Democrats and Republicans alike found it difficult to surrender these imaginary savings. Though most health policymakers wanted to eliminate the SGR, it seemed impossible to find a way out of the budgetary trap.
The “doc fix” — a permanent replacement for the unworkable sustainable growth rate formula (SGR) enacted in 1997 for calculating Medicare’s physician fees — had been a long time coming when it emerged from Congress this past spring. The law that did away with the SGR was an elegant compromise from a political point of view, crafted to end the tyranny of annual delays in physician-payment reductions but also to balance the need for public accountability against the profession’s interest in implementing a reasonable and predictable payment system.
At the heart of the legislation is the new Merit-Based Incentive Payment System (MIPS), which replaces the Physician Value-Based Payment Modifier to move physician payment under Medicare further into the territory of value-based purchasing. The MIPS will be phased in over 5 years beginning in 2019. Although many of the finer details will be wrought through the rulemaking process, it is now possible to discern the outlines of the economic issues that surround the MIPS.