Medicare Payment Formula Repealed

Congress has approved legislation repealing the flawed Medicare payment formula that has plagued physicians for more than 17 years.

The Sustainable Growth Rate, or SGR, was an element of the Medicare physician payment formula that tied annual changes in payment rates to fluctuations in various economic benchmarks. The formula inaccurately compensated physicians for the cost of medical practice, and it has destabilized the finances of the Medicare program.

The SGR repeal legislation passed the House and Senate by overwhelming majorities in April.

The approval came just hours before yet another payment patch was set to expire and Medicare would have been forced to cut physician payments by 21 percent for all services provided ­after March 31.

In the weeks leading to the vote, thousands of physicians from around the country — including several hundred from Massachusetts — participated in an email campaign urging Congressional lawmakers in both chambers to pass the bill.

The new legislation guarantees physicians a 0.5 percent rate increase every year through 2019, when a series of quality incentive payments become available. The first 0.5 percent increase takes effect July 1, 2015, followed by another on Jan. 1, 2016.

MMS President Richard Pieters, M.D., called the repeal agreement “critical” to re-establishing a stable practice environment for physicians and more than one million Massachusetts seniors who depend on Medicare.

“We thank all the members of the Massachusetts Congressional Delegation who not only voted in favor of the bill, but remained committed over the years to reforming the Medicare payment schedule on behalf of the nation’s seniors, military families, and persons with disabilities,” said Dr. Pieters. “We are equally grateful to the leadership and members on both sides of the aisle that made passage of this landmark law a reality.”

“We also thank the physicians who reached out and contacted their representatives in Congress,” Dr. Pieters said. “Your voices were heard.”

Read more about the history of the Medicare payment formula and the vote to repeal it at www.massmed.org/medicare.

Current LawSGR & Physician Payment
Annual Medicare Update for Physician Services
  • –21.2% SGR cut takes effect April 1, 2015.
  • Future SGR cuts could exceed 25%.
Annual Update of:
  • 0% January through June 2015
  • 0.5% July 2015 through 2019
  • 0% in 2020 through 2025
  • 2026 & beyond: 0.75% for APM participants; 0.25% for all others.
Pay for Performance/ Quality Reporting ProgramsPQRS + MU + VBM Maximum Total Penalties
  • 2015: 4.5%
  • 2016: 6%
  • 2017: 9%
  • 2018: 10% or more
  • 2019: 11% or more
  • 2020: 11% or more
PQRS: Physician Quality Reporting System

MU: EHR Incentive Program/Meaningful Use 

VBM: Value-Based Payment Modifier
Merit-based Incentive Payment System (MIPS) Maximum Penalties & Bonuses
  • 2015–2018: PQRS, MU, VBM continue.
  • 2019: 4% (Extra bonus possible)
  • 2020: 5% (Extra bonus possible)
  • 2021: 7% (Extra bonus possible)
  • 2022 & after: 9% (Extra bonus 2022–2024)
All physicians could earn a bonus if they meet MIPS quality standards.

Extra bonus 2019–2024:Up to 10% for exceptional performance (up to $500 million/year). MIPS has more accurate assessment, scoring, flexibility, predictability than under PQRS, MU, or VBM. MIPS abandons current VBM “tournament” model (requiring penalties to equal bonuses).
EHR Meaningful Use (MU)No clear timeline or enforcement tools to achieve interoperability.MU measures count 25% in MIPS. Goal is interoperability by 2018; Secretary may adjust penalties/decertify EHRs if this is not achieved.
Alternative Payment Models (APMs)No guaranteed payment update or bonus for physician participation in medical homes, ACOs, or other existing APMs. Limited support for physicians to develop new payment models.5% Bonus payment for 2019–2024 for successful participation in eligible models. APMs must bear more than nominal risk, or be a qualifying medical home. Physicians can propose new APMs. $20 million/year (2016–2020) in technical assistance for small practices to develop new models or participate in MIPS.

©2015 American Medical Association. All rights reserved.

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