Repeal the Sustainable Growth Rate (SGR), avoiding annual double digit payment cuts;

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1 Background Summary of H.R. 2: The Medicare Access and CHIP Reauthorization Act of 2015 SGR Reform Law Enacts Payment Reforms to Improve Quality, Outcomes, and Cost On April 16, 2015, the President signed into law H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015, a bipartisan agreement to reform Medicare s physician payment program (P.L ). The package updates payments to providers who are reimbursed under the Medicare fee schedule, while improving and providing new incentives to deliver quality, efficient care. Briefly, the law will: Repeal the Sustainable Growth Rate (SGR), avoiding annual double digit payment cuts; Provide stable, annual updates for services paid under the Medicare physician fee schedule; Consolidate three Medicare incentive programs into one program that rewards performance based on value and improvement; Establish new priorities and provide funding for the development of quality measures; Encourage flexibility through alternative payment models (APM), such as medical homes and shared risk arrangements; and Extend federal funding for the Children s Health Insurance Program (CHIP) for two years. Several provisions in the law will facilitate Medicare s transition away from fee-for-service (FFS) to valuebased payments, incentivize providers to adopt APMs, and promote better health outcomes at lower cost. The major provisions of the law are outlined in this document. Medicare Payment Updates and Incentive Programs (Title I) Updates to Payments Sec. 101 The law repeals the SGR and provides stable updates to providers paid under the physician fee schedule. The updates are described (and displayed in Figure 1) below. July 1, : 0.5 percent annual update : 0 percent annual update, but payments to individual providers will be adjusted based on performance in the Merit-Based Incentive Payment System, as outlined below. o : Providers participating in qualified APMs will receive a 5 percent annual bonus and beyond: There are two annual update factors, one for providers participating in qualified APMs (0.75 percent) and one for providers in non-qualifying APMs (0.25 percent). Page 1 of 6

2 Figure 1: H.R. 2 Medicare Payment Updates by Year 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% FFS APM (Bonus) APM MIPS (Variable) Merit-Based Incentive Payment System (MIPS) Sec. 101 Starting in 2019, the law rewards certain providers (MDs, DOs, dentists, podiatrists, optometrists, chiropractors, PAs, NPs, Clinical Nurse Specialists, and CRNAs) based on performance on several quality measures. Other providers may be added beginning in This program, the Merit-Based Incentive Payment System (MIPS), consolidates three existing Medicare incentive payment programs (Physician Quality Reporting System, Meaningful Use, and Value-Based Payment Modifier) into one comprehensive program. Current rewards and penalties associated with these programs are repealed and new performance-based incentives will begin starting in Providers will be assigned a composite score, and, based on the score, will receive negative, positive, or zero updates. Performance is based on: 1. Quality (30 percent). In this category, the Secretary will be required to align quality measures across programs. Measures will be updated annually. Use of outcomes measures and qualified clinical data registries will be encouraged, and the Department of Health and Human Services (HHS) must encourage providers to report on MIPS measures via Electronic Health Records (EHRs). 2. Resource Use (30 percent). This category is based on measures of quality and efficiency with risk adjustments made for clinical severity. 3. Meaningful Use (25 percent). To avoid reporting duplication, this category requires professionals who report quality measures via EHRs for the MIPS quality category will be deemed to meet the Meaningful Use (MU) clinical quality components. All other MU measures (erx, medication reconciliation, summary of care exchange, etc.) will continue to apply and likely evolve. 4. Clinical Practice Improvement Activities (15 percent). This category includes participation in qualified clinical registries, timely communication of test results, timely exchange of clinical information to patients, and beneficiary engagement to support shared decision-making. Participation in a medical home earns the highest potential score. Participation in other APM models will earn at least half the maximum automatically. Page 2 of 6

3 Under the MIPS program, the Secretary will be required to publish quality measures annually, through notice and comment rulemaking, that are either endorsed by a consensus-based entity (e.g., the National Quality Forum) or that are evidence-based. Medical specialty societies and other relevant stakeholders will be requested to identify and submit quality measures for consideration. In addition, the Secretary is required to submit the methods for developing and selecting the measures including clinical and other data supporting such measures for publication in applicable specialty-appropriate, peer-reviewed journals. This process is meant to allow for greater diversity in the measure development process than in recent years, where the Centers for Medicare and Medicaid Services (CMS) has relied on National Quality Forum (NQF) recommendations. Initial payment incentives based on performance will be between +/-4 percent in 2019, +/-5 percent in 2020, +/-7 percent in 2021, and +/-9 percent in 2022 and subsequent years (see Figure 2). The average for one year becomes the new performance bar for the subsequent year. Exceptional performers will receive additional incentives totaling $500 million annually through Information on a provider s performance in each category will be made publicly available on the CMS Physician Compare web site. Figure 2: Range of MIPS Payment Adjustments by Year 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 9% 9% 9% 9% 7% 4% 5% -4% -5% -7% -9% -9% -9% -9% Positive Negative Alternative Payment Models (APM) Sec. 101 Providers who receive a substantial share of Medicare revenue through APMs will receive bonus payments of 5 percent annually from 2019 to 2024, and will be excluded from the MIPS requirements. To qualify as an APM participant, providers must receive a certain threshold of Medicare revenues through APMs, defined per the timeline as follows: : 25 percent of Medicare revenue; : 50 percent of Medicare revenue or 50 percent of all-payer revenue along with 25 percent of Medicare revenue; and 2023 and beyond: 75 percent of Medicare revenue or 75 percent of all-payer revenue along with 25 percent of Medicare revenue. Page 3 of 6

4 The law defines APMs to include models under the Center for Medicaid and Medicare Innovation, Medicare Shared Savings Program accountable care organizations, Medicare Health Care Quality demonstration programs, or other risk-sharing arrangements or demonstrations as required by federal law. Qualifying APMs must include quality measures, involve two-sided financial risk, and use certified EHR technology. However, patient-centered medical homes will be exempt from the requirement for downside financial risk if they demonstrate effectiveness in lowering costs and improving quality in the Medicare population. HHS will be tasked with ensuring a diverse array of APM options for providers, particularly those who may not fit well into existing APMs. The Department will evaluate APMs for their viability for relevant specialty providers, providers in small and/or rural practices, and providers that align with private and state-based payer initiatives. To support this process, the law establishes a Technical Advisory Committee (Committee) to provide comments and recommendations to the Secretary on proposed physician-focused payment models. HHS will establish criteria for physician-focused payment models through notice and comment rulemaking by November 1, 2016, and individuals and stakeholders will be permitted to submit proposals for such models to the Committee. The Committee will review the proposed models based on the established criteria and submit recommendations to the Secretary for qualifying APMs. The Secretary will be required to review and post a detailed response to the Committee s recommendations online through the CMS website. Priorities and Funding for Quality Measure Development Sec. 102 The law establishes new priorities and includes $15 million in annual funding to CMS from FY ($75 million total) for quality measure development. By January 1, 2016, HHS will be required to develop and post online through the CMS website a draft plan for the development of quality measures. The plan must address measures in several quality domains, including clinical care, safety, care coordination, patient and caregiver experience, and population health and prevention. Furthermore, in developing the draft plan, the Secretary is required to prioritize the following types of measures: Outcome measures, including patient-reported outcome and functional status measures; Patient experience measures; Care coordination measures; and Measures of appropriate use of services, including measures of overuse. HHS will finalize the operational plan for the development of quality measures for use by May 1, Starting on May 1, 2017, the Secretary will be required to publish annual reports, including stakeholder input, on the progress made in developing and implementing quality measures. Access to Information on Physicians Services Sec. 104 Starting with 2015, the Secretary is required to annually publish, in an easily understandable online format, information on physician services and costs for Medicare beneficiaries. At a minimum, this information must include: The number of services furnished by the physician or other eligible provider, which may include information on the most frequent services or grouping of services; Submitted charges and payments for services; and Page 4 of 6

5 A unique identifier for the physician or other eligible provider that is available to the public. The information published must be searchable by at least the specialty or type of physician, the characteristics of services furnished, and the location of the physician or other eligible provider. Beginning in 2016, HHS is required to integrate this information with the CMS Physician Compare website. Expanding Use of Medicare Data Sec. 105 Starting July 1, 2016, non-governmental access to Medicare claims data (Parts A, B, and D) will be broadened to allow Qualified Entities (QE) to conduct additional analyses and provide or sell the data or aggregated reports to providers, suppliers, employers, insurers, medical specialty societies, and hospital associations. Prior law, enacted in 2010, gave QEs access to Medicare claims data and required that all analyses be published. HHS may expand available data to include Medicaid and CHIP data. The law also permits QEs to provide analyses, and, in some cases, data for a range of non-public uses, such as assisting providers in developing and participating in quality and patient care improvement activities including MIPS and APMs, population health management, disease monitoring and insurance network development and selection. Interoperability of Electronic Health Records Sec. 106 The law establishes a national objective to achieve widespread exchange of health information through interoperable certified EHR technology nationwide by December 31, The legislation defines interoperability as the ability of two or more health information systems or components to exchange clinical and other information, and to utilize that information using common standards to provide access to longitudinal information for health care providers to facilitate coordinated care and improved patient outcomes. No later than July 1, 2016, the law establishes metrics to determine whether the widespread interoperability objective has been met. If the goal of nationwide interoperability is not achieved by the end of 2018, HHS must issue a report by the end of 2019 that identifies the barriers to the objective and issues recommendations to address those barriers, which may include adjustments to provider payments or criteria for decertification of EHR products. The law also requires physicians and other eligible providers and eligible hospitals in the Medicare Meaningful Use program to attest that they are not blocking information. Medicare and Other Health Extenders (Title II) The law extends several Medicare provisions, including some that increase payments for certain hospitals, physicians, and ambulance providers, that were originally set to expire on April 1, 2015, for an additional two years through either FY 2017 or calendar year 2017, depending on the provision s original funding timetable. In addition, the law extends a number of programs administered by CMS, the Administration for Children and Families, the Health Resources and Services Administration (HRSA), and other agencies of HHS, for two additional years through FY A full list of the Medicare and other health extenders is available here. Children s Health Insurance Program (Title III) The law provides $39.7 billion to extend federal funding for CHIP through FY Although the CHIP program is authorized through FY 2019, funding was originally set to expire after September 30, The extension of federal funding preserves CHIP coverage for more than 8 million children and pregnant women in families with income above Medicaid eligibility levels. The law also extends CHIP s Express Lane Page 5 of 6

6 Eligibility and Outreach and Enrollment programs, to help states find uninsured children that are eligible for CHIP and enroll them in coverage efficiently. Fiscal Offsets (Title IV) Limitation on Medigap Sec. 401 Beginning on or after January 1, 2020, Medigap policies that provide coverage of the part B deductible (currently $147 per year) may not be sold or issued to newly eligible Medicare beneficiaries. The Congressional Budget Office (CBO) estimates that this change would save $400 million over the Fiscal Year (FY) window. Income-Related Premium Adjustment for Parts B and D Sec. 402 Starting in 2018, the premiums that certain beneficiaries with relatively high income pay to participate in Part B and Part D will increase. The percentage that beneficiaries pay will increase from 50 percent to 65 percent for those with modified adjusted gross income (MAGI) between $133,501 and $160,000, and to 80 percent for those with $160,001 and above. In addition, beginning in 2020, the income thresholds will be indexed to inflation. CBO estimates that these changes would save $34.3 billion over the FY window. Reduction in Payment Updates for Post-Acute Providers Sec. 411 In 2018, Medicare will reduce its payment update for certain providers of post-acute-care and long-termcare services to 1 percent. CBO estimates that this change would save $15.4 billion over the FY window. Delay of Reduction to Medicaid Disproportionate Share Hospital (DSH) Payments Sec. 412 Currently, reductions in state DSH allotments are scheduled to begin in FY 2017 and continue through FY This policy delays the start of the Medicaid DSH reductions until FY 2018 and adds another year of cuts in FY In addition, the law increases net allotments in the first few years of the budget window and decreases net allotments in later years. CBO estimates that these changes would save $4.1 billion over the FY window. Adjustment to Inpatient Hospital Payment Rates Sec. 414 The scheduled 3.2 percent increase in payment rates for hospital inpatient services for FY 2018 will be replaced with an increase of 0.5 percent each year from FY 2018 through CBO estimates the provision will save $15.1 billion over the FY window. Miscellaneous (Title V) The law includes a number of other miscellaneous provisions, including an exclusion from the statutory Pay-As-You-Go (PAYGO) scorecard. Cost Over the FY window, CBO estimates that H.R. 2 would increase direct spending by $144.7 billion and revenues by $3.7 billion, resulting in an approximately $141 billion increase in federal budget deficits. Page 6 of 6