MACRA, The Sustainable Growth Rate (SGR) Reform Bill, Signed Into Law

CMS Quality Reporting Programs and Value-Based Payments Will Be Significantly Impacted

Miranda A. Franco is a Sr Public Affairs Advisor in our Washington DC office .

HIGHLIGHTS:

The Medicare Access and Children's Health Insurance Program (CHIP) Reauthorization Act, or MACRA, was signed into law on April 16, 2015. The legislation averted a 21 percent cut to Medicare physician rates and permanently repealed the flawed Medicare Sustainable Growth Rate (SGR) formula. The law replaces the SGR formula with statutorily prescribed physician payment updates and provisions that will likely accelerate progress toward physician-hospital integration. The MACRA legislation has broad implications on the current reimbursement system by setting up a new two-track payment system designed to prod eligible professionals (EPs) to move more of their patients into risk-based payment models. The Medicare Access and Children's Health Insurance Program (CHIP) Reauthorization Act, or MACRA, was signed into law on April 16, 2015. The law replaces the sustainable growth rate (SGR) formula with statutorily prescribed physician payment updates and provisions. In addition, Congress included a two-year extension of the CHIP and reinstated global surgical bundles as part of the legislation.

The vote came after years of negotiations to get rid of the SGR formula, which linked physician reimbursement under Medicare to increases in gross domestic product. The much maligned formula invariably resulted in payment cuts for physicians. The cuts were staved off each year by a series of payment "patches" passed by Congress.

To offset the budgetary cost of these provisions, the law cut Medicare payments to hospitals and post-acute providers; eliminated first-dollar Medigap coverage; and required high-income beneficiaries to pay a greater portion of Medicare premiums. In all, about $70 billion of the $210 billion legislation was offset.

The SGR formula has been repealed, but it contains significant shifts in future Medicare payments to EPs. Although physicians experience the most direct impact of SGR changes, life sciences companies also track the effect of the SGR on physician services related to their drugs and devices. Further, hospitals should track the structural reforms to the Medicare program.

This alert summarizes the major Medicare payment reform provisions of MACRA.

SGR Repeal and Payment Updates

The core of the law is repeal of the SGR and abandonment of the 21 percent cut...