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Medicare Physician Payment Reform

Understanding how MACRA will impact physicians

Following years of advocacy by the nation's physicians standing up for their patients and their practices, Congress repealed the sustainable growth rate (SGR) formula. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was signed into law on April 16, 2015. The legislation (P.L. 114-10) provides positive annual payment updates of 0.5 percent, starting July 1 and lasting through 2019.

While the bill supports physicians who choose to adopt new payment and delivery models, it also retains Medicare’s fee-for-service model. Participation in new models is entirely voluntary.

MACRA stabilizes Medicare payment rates

The Medicare conversion factor was $35.80 prior to the enactment of MACRA. With the SGR cut scheduled for April 1, 2015, the conversion factor would have fallen to $28.22. MACRA prevented this cut, and provides for an increase in the conversion factor to just under $36 on July 1, 2015 (along with further increases for 2016 to 2019).

As a result, Medicare physician pay on April 1, 2015 (and for the remainder of the year) will be 27% greater than it would have been under SGR.

AMA projections of SGR updates provide an indication of future impacts (these projections grow more uncertain as we move further out in time). Medicare physician pay under MACRA in 2024 is 12% greater than projected pay under SGR. Over the ten years from 2015 to 2024, Medicare physician pay under MACRA is, on average, 17% greater than projected pay under SGR.

Over the ten years from 2015 to 2024, the update provisions of MACRA are projected to increase funding for Medicare physician services by roughly $150 billion.

SGR repeal legislation: What else is in it?

In addition to addressing Medicare payment, the legislation outlines several provisions that should be beneficial for physicians, including:

  • Medicare's current quality reporting programs will be streamlined and simplified into one merit-based incentive payment system, referred to as “MIPS.” This consolidation will reduce the aggregate level of financial penalties physicians otherwise could have faced.
  • Protections are included so that medical liability cases cannot use Medicare quality program standards and measures as a standard or duty of care.
  • Incentive payments will be available for physicians who participate in alternative payment models and meet certain thresholds.
  • Technical support will be provided to help smaller practices participate in alternative payment models or the new fee-for-service incentive program.

MACRA Frequently Asked Questions and Myth/Fact Clarifications

MACRA Bill Summary

MACRA Comparison vs Prior Law

2015 Medicare Physician Fee Schedule Final Rule Highlights

2014 Medicare Physician Fee Schedule Final Rule Summary

Medicare physician payment reform benefits in your state

Select your state below to see how enactment of the "Medicare Access and CHIP Reauthorization Act of 2015" benefits your state, including new funding for Medicare physician services in each state, the delivery and payment models available in each state, and the number of medical practice employees and Medicare and TRICARE beneficiaries in each state, which will benefit from the new law.

Alabama Indiana Nebraska Rhode Island
Alaska Iowa Nevada South Carolina
Arizona Kansas New Hampshire South Dakota
Arkansas Kentucky New Jersey Tennessee
California Louisiana New Mexico Texas
Colorado Maine New York Utah
Connecticut Maryland North Carolina Vermont
Delaware Massachusetts North Dakota Virginia
Florida Michigan Ohio Washington
Georgia Minnesota Oklahoma Washington, DC
Hawaii Mississippi Oregon West Virginia
Idaho Missouri Pennsylvania Wisconsin
Illinois Montana Puerto Rico Wyoming

Related testimony and correspondence
Developing new physician payment models

The AMA has been working for over five years to encourage the development and implementation of better health care payment systems that would:

  • Give physicians more resources and greater flexibility to deliver appropriate care to their patients than they have today
  • Improve the financial viability of physician practices in all specialties, particularly independent practices of all sizes
  • Minimize administrative burdens on physicians that do not improve the quality of patient care
  • Enable physicians to help control aspects of health care spending that they can influence, rather than having Medicare and health plans use inappropriate mechanisms to control costs such as payment cuts, prior authorization, and/or non-coverage of services
  • Avoid transferring inappropriate financial risk to physicians or jeopardizing the quality of patient care.

AMA advocacy on new payment models
On September 1, 2015, AMA provided comments on CMS proposed rule on a bundled payment program for total joint replacement surgery

On March 16, 2015, AMA responded to CMMI request for information regarding Advanced Primary Care Model Concepts

On February 6, 2015 a sign-on comment letter in response to proposed policy and payment changes was submitted to CMS on Medicare Shared Savings Program (MSSP); Accountable Care Organizations (ACOs)

On February 6, 2015 a sign-on comment letter was submitted to CMS in response to MSSP; ACOs; Proposed Rule

On April 10, 2014, AMA responded to CMMI request for information on specialty practitioner payment model opportunities.

On February 28, 2014, AMA responded to CMMI request for information: Evolution of ACO Initiatives at CMS.

Additional payment and delivery reform resources
2015 Medicare sequester update

The 2 percent across-the-board Medicare provider payment cut mandated by the sequester order began on April 1, 2013.  A memo circulated by the Centers for Medicare and Medicaid Services (CMS) on March 8 highlighted a few key points:

  • The 2 percent physician payment cuts applies to all Medicare fee-for-service with dates of service on or after April 1, 2013.
  • The same payment reductions affects other providers with April 1 (or later) dates-of-discharge, dates of service, start date of DME equipment rental, and start date of rental equipment or multi-day supplies.
  • The reduction will be applied to claims payments, after beneficiary coinsurance, deductibles, and any applicable Medicare Secondary Payment adjustments are made.  Allowed charge amounts are not affected.
  • Although beneficiary payments for deductibles and coinsurance are not subject to the 2 percent payment reduction, Medicare payments made to beneficiaries for unassigned claims will be subject to the 2 percent payment cut.
  • Nothing about the sequester has changed; it is being applied in 2015 exactly the same way as it was in 2013 and 2014.

See examples of how the cuts may affect payments.