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Washington Examiner
Restoring America
16 May 2023


NextImg:When Medicare reform goes wrong

Many lawmakers have insisted lately that they harbor no intentions to touch Medicare. The truth is that they will have to at some point: the program’s fiscal situation is untenable , and there is no shortage of areas to improve. One likely target is the part of the program that pays for clinician services (Medicare Part B). This is the fastest-growing part of Medicare and makes more than $220 billion in clinician payments annually, roughly a quarter of program expenditures.

Although Congress already enacted reforms less than a decade ago, key members have recently expressed interest in further fixes. It is crucial to examine what went wrong the last time around to ensure old problems are not replaced with new ones.

PRICE TAG FOR BIDEN SIGNATURE CLIMATE LAW BALLOONS TO MULTIPLE OF INITIAL ESTIMATES

The last major reform to clinician payment was the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), enacted by overwhelming majorities in Congress. The law sought to achieve two major goals: control overspending and improve quality of care.

These goals are simple, but Medicare’s underlying structure has long proved incapable of accomplishing them. Its fee-for-service design incentivizes doctors to deliver a high volume of services regardless of their underlying value.

Congress had previously tried to control spending by implementing a “Sustainable Growth Rate” (SGR) in the 1990s that would reduce payment updates if they exceeded growth targets. Doctors protested that these across-the-board cuts were excessively stringent and would damage their bottom line. Therefore, lawmakers regularly delayed the SGR’s spending reductions, although they were often forced to find offsets so as not to increase the overall deficit.

The magnitude of the cuts required by the SGR eventually topped 20%. This motivated Congress to repeal the SGR in MACRA and replace it with a new approach for paying doctors. MACRA enacted a fixed schedule of payment updates designed to contain costs over time and created two pathways to incentivize higher-quality care.

The first pathway provides doctors with either a bonus or a penalty depending on performance metrics within the Merit-Based Incentive Payment System (MIPS). The second pathway allows doctors to earn more sizable and consistent bonuses by participating in Advanced Alternative Payment Models (APMs). In theory, APMs test new reimbursement arrangements that require providers to be more accountable for patient outcomes and the total cost of care.

These reforms were acclaimed as major innovations for moving Medicare toward “value-based care,” paying for quality rather than quantity. Yet, in practice, they simply offered another approach to central planning that has failed to live up to its promise.

The goal of MIPS is to use quality measures to determine which doctors are providing better services and thus deserving of higher payment. But researchers have found that Medicare’s metrics have not led to improved quality. In fact, more than 70% of doctors were able to earn bonuses for “exceptional performance” the first four years, in part because they have the flexibility to choose to report some measures and ignore others. MIPS has also loaded up doctors with costly and burdensome new compliance rules. As a result, Congress’s Medicare Payment Advisory Commission recommended eliminating it after only a few years.

Policymakers placed even more hope in advanced APMs, but those have also largely failed. Federal officials found that only six out of more than 50 models tested over a decade yielded net spending reductions in Medicare, and only two of those meaningfully improved quality. These models were projected to save taxpayers $34 billion dollars between 2017 and 2026 but might cost them over $9 billion instead.

Since Congress may revisit MACRA, it should keep in mind the obvious limits of central planning. Fee-for-service payment drives overspending without regard for value, but quality metrics and payment models often reflect the priorities of federal bureaucracies rather than patients themselves. Turning the practice of medicine into a series of depersonalized box-checking exercises only increases cost and complexity without improving health.

A more market-driven approach would be better able to adapt to consumer needs. For example, in Medicare Advantage, seniors can choose between competing plans that often offer more benefits at lower costs than traditional Medicare.

Policymakers should consider how to better empower consumers to judge value for themselves within Medicare rather than trying to do so on their behalf. The experience of MACRA shows that continually replacing one centralized solution for another is not the recipe for success.

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Joe Albanese is a policy analyst at Paragon Health Institute and author of a new report, MACRA: Medicare’s Fitful Quest for Value-Based Care .