Medicare's New Physician Payment System

A 2015 law has the potential to transform how Medicare pays physicians.
Medical professionals talking in a hospital corridor.

Government and private-sector leaders have resolved to trans­form how physicians are paid in a way that holds them more accountable for the care they deliver.

 

 

What’s the Issue?

For more than two decades Congress and the federal government have wrestled with how to pay physicians in the Medicare program, which covers forty-seven million Americans. In 2014 Medicare paid physicians and other clinicians around $138 billion—22 percent of total Medicare spending—up from $59 billion in 2000.

The primary challenge of physician pay­ment is determining fair fees for physicians and other clinicians. But, just as important, the challenge extends to paying physicians in a way that promotes efficient, effective, and safe care; does not incentivize excessive and unnecessary care; and fosters the judicious use of medical resources since physicians or­der and direct the care that constitutes the lion’s share of total Medicare spending.

An overwhelming body of research in recent years found that medical care in the United States was neither efficient nor as effective as it could be. Inappropriate and excessive care is common even as rising health care costs bur­den government, business, and families.

Against this backdrop, government and private-sector leaders have resolved to trans­form how physicians are paid in a way that holds them more accountable for the care they deliver. The latest salvo in this effort was the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, signed into law April 16, 2015. This policy brief does not discuss MACRA’s two-year extension of the Children’s Health Insurance Program (CHIP) or provi­sions pertaining to issues other than physician payment.

What’s Next?

MACRA creates a payment system for physi­cians that will accelerate Medicare’s transi­tion from fee-for-service to payment based on performance metrics, patient experience, and patient outcomes. But three years of complex MACRA rulemaking lie ahead amid a still-entrenched fee-for-service system, continued political rancor over the ACA, and a change in administrations and a new Congress. The trajectory of health care spending over the next few years could also affect the urgency and design components of MACRA implemen­tation. The hundreds of comments on CMS’s request for information signal many areas of tension but also areas of agreement. The ma­jor question is whether MACRA will succeed at improving quality, reducing unnecessary care, and lowering cost growth where past ef­forts have lagged or failed outright.