Exploring MACRA and What It Means for Medicare Payments

The Medicare program, which is administered by the federal Centers for Medicare & Medicaid Services (CMS), provides health insurance for more than 55 million Americans and makes payments to more than 1 million medical providers each year. Because of this massive scale, the program’s payment policies are a source of intense interest for nearly everybody in the medical field, and these policies are currently undergoing their largest update in years, courtesy of new legislation: the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

MACRA will, in some way, affect every physician and patient in the United States. Whether the effects will be positive or negative, however, will depend on each physician’s approach to and understanding of the law, which includes both carrots and sticks to incentivize the government’s favored practice patterns.

So exactly how will MACRA impact Medicare payments? Let’s explore, starting from the top!

How Does MACRA Change Medicare?

Medicare is organized into four parts, each of which covers different types of medical care. In broad strokes, here is what each part does:

  • Part A: Inpatient hospital care
  • Part B: Outpatient medical care (fee for service)
  • Part C: “Medicare Advantage” plans, which provide extended benefits on top of parts A and B but often restrict patients to a specific network of providers
  • Part D: Prescription drug coverage

MACRA is expected to have its biggest immediate impact on Part B of Medicare, which is the part that pays physicians in a fee-for-service manner for outpatient medical care. Current Part B payments are governed by the Sustainable Growth Rate formula, but MACRA repeals this and replaces it with a new system, called the “Quality Payment Program” (QPP).

The Quality Payment Program

The details of the QPP were drafted by CMS, which is the Department of Health and Human Services agency that is charged with implementing MACRA, and the final regulations for the new plan were released on October 14th, 2016.

Overall, QPP policies are intended to provide financial rewards for high-quality, efficient care, while monetarily punishing care that is deemed subpar. In pursuit of this, the program has two “tracks” that providers must choose between:

  1. Advanced Alternative Payment Models (Advanced APMs)
  2. Merit-based Incentive Payment System (MIPS)

Advanced APMs are payment approaches in which care organizations take on financial risk related to patient outcomes in return for financial incentives if they are able to deliver quality care at a reduced expenditure. CMS approves such models in a very specific fashion, and it plans to add more to the list each year. Initial advanced APMs include payment arrangements for health concerns such as comprehensive end-stage renal disease care and oncology care.

While advanced APMs will undoubtedly be important to the future of healthcare in the U.S., we won’t discuss them further here, as most providers will initially be part of the second QPP track: the Merit-based Incentive Payment System (MIPS).


Under MIPS, providers will bill Medicare (fee for service), as they have in the past, but their eventual payments will be adjusted either up or down based on “quality data.” These data will come from practice reporting in four categories:

  1. MIPS Category Weights for 2017
    MIPS category weights for 2017. “Quality” measures contribute most to payment adjustments.

    Quality (60% of overall adjustment score)
    Reporting on measures of clinical care “quality.” Example: “Percentage of patients aged 2 years and older with a diagnosis of acute otitis externa who were not prescribed systemic antimicrobial therapy.”

  2. Improvement Activities (15% of overall adjustment score)
    Performance measures of practice activities focused on care coordination, beneficiary engagement, and patient safety. Example: “Implementation of an antibiotic stewardship program that measures the appropriate use of antibiotics for several different conditions.”
  3. Advancing Care Information (25% of overall adjustment score)
    Measures of electronic health record and health information technology/systems use. Example: “At least one permissible prescription is queried for a drug formulary and transmitted electronically using certified EHR technology.”
  4. Cost (0% of overall adjustment score for first year only, then will be more)
    No data submission required. Calculated from adjudicated claims.

Mercifully, MIPS consolidates and replaces three other current Medicare incentive programs: Meaningful Use, the Physician Quality Reporting System, and the Value-Based Payment Modifier. You won’t have to use any of these anymore; it’ll be all MIPS all the time.

When Does This All Start, and How Big Will the Effects Be?

MACRA and MIPS will eventually result in payment variations of up to 18%.

MIPS will begin adjusting payments for services that are furnished in 2019. However, the first adjustments applied will be based on reporting from 2017 activities, so it’s important to get started on your MIPS strategy as soon as possible.

In 2019, the first year of adjustments, a total payment will be adjusted anywhere from -4% to +4%. This becomes more extreme each year afterward, until 2022, when the range becomes -9% to +9%. That’s a pretty significant swing of nearly 20% in possible payment amount for the same services rendered, so the program has some teeth to back up its desires.

What About MACRA and Telehealth?

Medicare has traditionally been very limited in its approach to telehealth, and it’s exciting to wonder if any part of MACRA might help to change this. After all, the law does represent the biggest reshaping of Medicare that we are likely to see for a decade or two. In fact, given this huge importance, we’re going to completely devote our next post to exploring the possible implications of MACRA for telehealth. So read on! And, if you want to know more about MACRA and the QPP, check out the CMS site.

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