When people ask me why I studied economics before med school, I usually wax philosophical about the importance of understanding systems that circumscribe wellbeing. There’s another factor, too: economics is the study of how people deal with scarce resources. People propose different strategies to alleviate the suffering born from said scarcities–be they NGO initiatives, policies, frameworks, etc. An economist gets to examine these different strategies, study the incentives that they create, and measure their impact.
I’ve recently realized that this is the kind of research I want to do as a doctor and advocate. Consequently, I’ve been thinking a lot about how (and when!) I can study evidence-based policy reform and impact analysis.
In the meantime, I wrote this review of some current conversations around a recent healthcare reform: the Medicare Access and CHIP Reauthorization Act (MACRA).
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In sharp contrast to the partisan debates surrounding the Affordable Care Act, last April saw Congress pass a different, major healthcare reform with relatively little fanfare. The Medicare Access and CHIP Reauthorization Act (MACRA) passed 392-37 in House and 92-8 in the Senate, heralding dramatic changes for how physicians are compensated for Medicare services from January 2017 onward. Yet despite the legislation’s popularity among officials, MACRA has generated significant controversy.
MACRA intends to tie physician income directly to quality of care, and accordingly gives physicians two options. The first is the Merit-based Incentive Payment System, MIPS, which requires physicians to report performance measures and calculates their payment bonuses and penalties based on four areas: cost of care (30%); resource usage (30%); use of electronic health records (25%), and clinical practice improvement activities (15%). Alternatively, physicians can join a CMS-approved Advanced Alternative Payment Model–an accountable care organization or other pay-for-performance, patient-centered medical home—and receive regular bonuses. The Centers for Medicare and Medicaid Services (CMS) touts MACRA as “part of a broader shift towards value and quality,” boasting that it steers us toward “better care, smarter spending, and healthier people.”
It is worth noting Medicare’s schema for physician payment inspired contention long before MACRA. Leading up to Medicare’s inception in 1965, worried physicians pressured Congress to maintain the “usual, customary, and reasonable” fees they received from private insurers, and keep quality monitoring in the hands of doctors. The government soon faced the consequences of its compliance: in 1969, the Senate held hearings berating some providers for billing the government two to four times what they billed private insurers.
During the next three decades, the government valiantly strove to curb costs. Present-day Centers for Medicare and Medicaid Services (CMS) and Quality Improvement Organizations were founded as oversight entities. A new fee formula, the resource-based relative value scale (RBRVS), delineated physician payments based on “efforts” associated with each procedure. And the notorious Medicare Sustainable Growth Rate formula was introduced, preventing physician payments from growing faster than the GDP–which, in practice, would have resulted in regular, drastic reductions to physician payments.
Facing outrage in the medical world, Congress instead implemented a near-annual “doc fix:” an eleven-year long embarrassment in which it waited until the last moment, overrode its own dictates, and offered physicians a pay freeze or small raise. For context, without a policy change: 2015 would have seen an unmanageable 21.2 percent reduction in physician fees from the previous year.
MACRA finally repealed the SGR, and no doubt the absurdity of the “doc fix” contributed to the legislation’s success in Congress. And on paper, quality-focused reform of healthcare sounds promising. But as with any policy, predicting its downsides requires thinking about how it will distort incentives for stakeholders, and how those incentives affect the policy’s implementation and impact.
One critique is reminiscent of the outcry against using test scores to evaluate instructors: if physicians know they will be graded on patient outcomes, they will be incentivized to pick healthier patients and turn down their more ill counterparts. Consequently, teaching centers taking on the sickest patients will be impacted the most. Many such facilities, including the Stanford Hospital and Cleveland Clinic, have already been penalized by a 2014 Medicare policy for having higher rates of patient complications than their peers. Despite the associated financial and reputational repercussions, that policy has not been shown to improve patient outcomes; critics worry that MACRA may prove similarly ineffective.
Doctors might additionally inflate their own metrics by misrepresenting their work. Three out of the four metrics under MIPS are self-reported by clinicians, and self-reported institutional metrics under Medicare have something of an unsavory reputation. In the case of nursing homes ranked on a five-star rating system, the New York Times did an exposé of inconsistencies between homes’ five star ratings and patients’ personal experiences. Even if doctors hold themselves to the high moral standard ascribed to their profession, self-reporting will increase their desk-work; and for a career that involves spending two hours at a desk per hour with patients, that prospect is daunting.
Policy analysts Mr. Capretta and Mr. Chen offer an additional perspective, writing, “The not-so-hidden agenda …is to force physicians into joining accountable-care organizations.” They lambast ACOs as not being proven to cut costs or improve quality, and worry that, government coercion and bureaucracy will be less effective than consumer choice and competition in achieving MACRA’s goals.
The final concern is inevitable, no matter what policy reform. As Dr. Driss, an Arizona-based internist, told Medical Economics: “It just seems that a lot of [doctors] know in a general sense what the rule is, but no one seems to know exactly and specifically what you have to do.” With the added mixed messaging from the federal administration regarding Medicare’s fate more broadly, that clarity may be a long time coming.