A bipartisan group of lawmakers wants input on how Congress can improve the federal government’s approach to paying physicians in Medicare, the large federal program that provides health insurance for people over 65 as well as some younger people with disabilities.
Arnold Ventures has identified policy solutions that can help physicians better meet patients’ needs while also creating a more affordable and sustainable path forward for the Medicare program.
How the federal government pays physicians historically – and why it’s a problem.
The federal government has historically paid physicians caring for Medicare patients by reimbursing them based on the number and type of services they provide. This payment system, known as “fee-for-service,” is not only the predominant way we pay physicians in Medicare, but usual practice throughout the health care system, including under private insurance. Paying service by service may make sense for buying most goods, but doesn’t always work well for medical care.
“The problem is that the fee-for-service system incentivizes physicians to deliver more and higher-priced care even when services have no benefit to patients or could harm them,” said Mark E. Miller, the Executive Vice President of Health Care for Arnold Ventures. “Too often this results in unaffordable, low-quality care for patients.”
Why should we address the way Medicare pays physicians?
Physician payment in Medicare last drew the spotlight in 2015 when Congress passed the bipartisan Medicare Access and CHIP Reauthorization Act (MACRA). That legislation overhauled the government’s approach to paying physicians under Medicare. The new law aimed to create more stability in physician payments, improve quality and patient care, and shift physicians out of fee-for-service and into promising alternative payment models such as population-based models. Despite the best intentions, MACRA hasn’t worked.
“Unfortunately, that didn’t work as well as hoped,” Miller said. “MACRA has had limited success in shifting physicians into population-based payment models due in part to shortcomings with the law.”
Policy solutions highlighted
A Request for Information from a bipartisan group of House Representatives led AV’s Provider Payment Incentives team to share a series of federal policy recommendations to shift more physicians into alternatives to fee-for-service and increase value in our health care system.
“The status quo fee-for-service system often fails to meet patients’ health care needs,” said Erica Socker, vice president of health care. “And it contributes to inefficient care that drives up costs.”
Key to the solution is policy that drives physicians in Medicare from fee-for-service into different payment arrangements such as population-based payment models.
“Unlike fee-for-service, population-based payment models hold providers financially accountable for the health of a group of patients and the cost of their care.”
Policymakers should look to accountable care organizations (ACOs), which are a promising type of population-based payment model that enable physicians to work together to manage patients’ health and the costs of care.
“ACOs incentivize physicians to provide the care needed to keep people healthy and to deliver that care efficiently,” Socker said. “This approach can improve patient outcomes while also helping to contain Medicare spending.”
For physicians that do not join alternative payment models, MACRA created the Merit-Based Incentive Payment System (MIPS), which adjusts physicians’ fee-for-service payments based on their performance across various metrics. This system was intended to link payments to the quality of care provided, but it suffers from critical flaws that make it unlikely to achieve policymakers’ goal of driving quality improvements in fee-for-service and acts as a barrier to moving physicians out of fee-for-service and into population-based payment models.
“In our view, lawmakers should consider eliminating MIPS, but if they’re intent on preserving it, major changes are needed to strengthen it,” Socker explained.
Here’s how AV’s Provider Payment Incentives team responded to Congressional lawmakers request for advice on increasing value in our health care system.
Learn more about AV’s federal policy recommendations to shift more physicians into promising alternatives to fee-for-service and increase value in our health care system by reading AV’s response to a recent Request for Information (RFI) from a bipartisan group of House lawmakers.
The response explains the importance of moving physicians from fee-for-service into advanced alternative payment models like accountable care organizations (ACOs). The letter notes how a 2015 bipartisan law called the Medicare Access and CHIP Reauthorization Act (MACRA) attempted to do this. However, challenges remain with MACRA. The team highlights three potential policy solutions:
1. Strengthen incentives for physicians to participate in alternative payment models, including by extending and increasing the size of MACRA’s financial bonuses that reward participation and smoothing the thresholds that determine which physicians are eligible for the bonus.
2. Eliminate the Merit-Based Incentive Payment System (MIPS) for physicians outside of alternative payment models. Given flaws in the basic structure of the quality program in fee-for-service, incremental changes are unlikely to improve it. Although we recommend eliminating MIPS, if Congress is committed to retaining the program, revamping the performance measures could improve the program.
3. Implement other changes to fee-for-service to increase value, including by rebalancing Medicare physician payments so that they better reflect the value of services, paying the same amount for certain services regardless of setting, and introducing prospective per-patient per-month payments for primary care providers so they have greater flexibility to deliver the services that are essential to keeping patients healthy. In addition, if physician payment updates are increased, Congress should do this in a targeted way to reflect value and direct resources to providers that need them such as safety-net providers.