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posted on 24 February 2016

MACRA And Its Effect On The Healthcare Sector

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Though the USA's healthcare sector is one of the most inefficient in the world, one of the most prominent recent changes is called Medicare Access & CHIP Reauthorization Act (MACRA). This legislation ended the unpopular Sustainable Growth Rate formula, which was designed to control spending by Medicare on physician services.

The USA roughly spends 17% of the GDP on health care, the highest of all OECD countries. Though spending such a large amount, the USA is still significantly behind many other OECD countries in almost all metrics.

MACRA is fundamentally alters the process by which physicians are paid. Instead of payment for fee-for-service, The Centers for Medicare & Medicaid Servies (CMS, part of the Department of Health and Human Services) has designed MACRA to align payment with quality and value. Starting in 2019, MACRA will focus on two payment tracks for providers - MIPS (Merit-Based Incentive Payment System) and Alternative Payment Methods (Such as Accountable Care Organizations). By 2018, it is hoped to have 50% of provider payment via Alternative Payment Methods (APM) and 95% tied to quality.

The net cost of this legislation has been estimated to be around $102.8 billion through 2025, according to Centers for Medicare and Medicaid Services (CMS). The decreased costs and increased efficiencies would not be seen until the longer term, which is about 20 years off.

The chart above shows spending, as a percentage of GDP, on Part B Medicare. This is denoted by the H.R. 2 trendline. Part B covers preventative as well as necessary services, such as flu shots or walkers. Clinical research also falls under this category, which could prove very beneficial, though gains from this are hard to predict.

The CMS also studied the projected costs of Medicare prices for physicians' services under these changes, and saw a similar long-term effect. Up until 2024, bonuses totaling $500 million will be given to physicians working under MIPS who showed exceptional performance, though when these bonuses end costs should largely decrease.

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