May 19 round-up: King v. Burwell; Medicare payment reform

By Julie Barnes, Director of Health Policy
May 19, 2015

Countdown to King v. Burwell

At the Utah Association of Healthcare Underwriters Sales Congress held last week in Salt Lake City, I shared observations about what’s going on in Congress with a few hundred insurance brokers. The answer is “not much.”  Until the Supreme Court decides the King v. Burwell case in late June, there is very little health care legislation being considered (with the exception of the SGR repeal passing in mid-April). 

When the Republicans took over the leadership of both chambers of Congress in January of this year, they had big plans to change a number of key Affordable Care Act provisions. They were hoping to repeal the individual mandate, the health insurance tax, the medical device tax and delay the employer mandate. It was widely expected that Congress would change the definition of the full-time work week from 30 hours to 40 hours, so that fewer employers would be impacted by an employer mandate penalty for failing to provide health care coverage – or allow them to pay less – for what they consider part-time workers.  None of these bills have been seriously considered while Congress waits for the Supreme Court to rule on King v. Burwell.

More recently, it seemed like Congress was poised to consider legislation that would delay the Affordable Care Act’s expansion of the small group market to include businesses with more than 50 employees.  It is true that bills were introduced in both the House and Senate that would allow states to keep the small group market definition to include 1-50 employees. This would help current small businesses from potential health care premium increases that will result from subjecting mid-sized businesses to the different rating rules and other ACA requirements. But these bills will also have to wait for the King v. Burwell decision.

Why must Congress wait? Because, despite a Republican majority in both congressional chambers, President Obama can and probably will veto any bill that repeals or changes part of the Affordable Care Act. If the Supreme Court rules against the Administration, however, and decides that the government cannot offer individuals subsidies for the health insurance premiums if they bought plans through a federal insurance exchange, then the White House will need Congress to pass legislation to fix it -- or millions of people will promptly be uninsured. And that presents a new moment for negotiation.

The Supreme Court will likely issue its decision on June 29, 2015. Stay tuned to see if health care reform for the insurance industry will happen all over again.


Trading pay cuts for performance bonuses

On April 16, 2015, President Obama signed into law a bipartisan bill with broad support (Medicare Access and CHIP Reauthorization Act – “MACRA”) that will change how the Medicare program pays physicians.

Brief Summary of MACRA:

  • Replaces the much-despised Sustainable Growth Rate (SGR) formula with a plan to give physicians modest payment raises for five years;
  • Creates a long-term plan for Medicare incentive payments so physicians are rewarded based on performance;
  • Encourages payment flexibility through alternative payment models (APMs), such as medical homes and shared risk arrangements.

What does this mean for private insurers?

The new law will accelerate the movement toward value-based payment systems. With Medicare pushing providers toward more accountable care-type models, private insurers must also address physician performance in their contracts.

  • Starting in 2019, providers receiving a significant portion of their Medicare revenue through APMs that involve risk of financial losses (e.g. an ACO with downside risk) will receive a 5% bonus.
  • Existing ACOs and providers considering accountable care will be more likely to consider a two-sided risk model, because the bonus maximizes the financial opportunity and can potentially offset shared losses.
  • An alternative option in the law makes providers eligible for the bonus if a majority of all payer revenue is received through APMs. In some markets, this second option will increase demand for commercial payers to offer qualifying arrangements.

What does the law do?

Provides a pay raise:

Between 2015 and 2019, physicians in the Medicare program will receive an annual update of 0.5 percent. 

Offers a transition to new bonus/penalty scheme:

The base reimbursement rate will hold steady at 2019 levels through 2025, while giving physicians the ability to supplement their reimbursement through payment adjustments in the newly created “Merit-Based Incentive Payment System” (MIPS). Providers will receive either a positive or negative payment adjustment based on their performance in four categories: quality, resource use, meaningful use and clinical practice improvement activities.

Streamlines physicians’ obligation to report quality data:

Under MIPS, the Physician Quality Reporting System (PQRS), EHR Incentive Program, and Physician Value-Based Modifier become part of a single payment adjustment to physician payments. Until now, these data have been reported in these three separate CMS initiatives, causing many physicians to forego reporting and simply accept a financial penalty.

  • For the 2013 reporting year, about 642,000 healthcare providers submitted quality data, earning a .5% boost in payments in 2015.
  • But more than 460,000 providers out of 1.2 million who were eligible opted to absorb a 1.5% pay cut due to non-participation in PQRS.
  • An estimated 257,000 providers are also seeing a 1% pay cut for not meeting targets for the use of electronic medical records.

It is expected that MIPS will influence many more providers to take advantage of the financial incentives to self-report data on quality measures.

Encourages alternative payment models:

MACRA allows providers participating in “Alternative Payment Models” (APMs) to opt out of MIPS. From 2019 to 2024, providers qualifying for the APM track will receive a 5% annual lump sum bonus on PFS payments.

Starting in 2026 and beyond, physicians who receive a significant share of their revenues through an APM are eligible for 1% annual increases as opposed to 0.5 percent updates for those not participating in APMs.

To qualify as an APM participant, physicians must meet increasing thresholds for the percentage of their revenue they receive through qualifying APMs. Providers who are below but close to the required level of APM revenue can be exempted from MIPS adjustments. The law defines qualifying APMs as programs that require participating providers to take on “more than nominal” financial risk; report quality measures; and use certified EHR technology.

Extension of funding for CHIP and community health centers

In addition to dealing with the expiration of the most recent SGR patch, MACRA also addresses the looming expiration of funding for the Children’s Health Insurance Program (CHIP) and community health centers. While funding for both was scheduled to end this year, the law instead extends funding for both by an additional two years through 2017.