Published June 1, 2016
The American people have become familiar with ObamaCare’s failings: higher premiums, fewer choices and a more powerful federal health bureaucracy. Yet another important piece of health-care legislation, signed into law last year, has gone almost unnoticed.
The Medicare Access and CHIP Reauthorization Act, known simply as Macra, was enacted to replace the outdated and dysfunctional system for paying doctors under Medicare. The old system, based on the universally despised sustainable-growth rate formula, perennially threatened to impose unsustainable cuts in physicians’ fees. Macra passed Congress with bipartisan support and President Obama quickly signed it. Unfortunately, the law empowers the federal bureaucracy at the expense of the doctor-patient relationship, putting the quality of American health care at risk.
In an effort to secure broad support, Congress wrote into the law general guidance but left important details of implementation to the executive branch. What happened next was predictable: In April the administration presented a 962-page regulatory behemoth. This new set of rules uses the power of Medicare to put the federal government in charge of almost every aspect of physician care in the U.S.
Macra adopts the same theory of cost control embedded in ObamaCare. It assumes that the federal government has the knowledge and wherewithal to engineer better health care through “delivery system reforms,” forgetting the utter failure of the bureaucracy’s previous effort. ObamaCare and now Macra use Medicare’s payment regulations to force hospitals and physicians to change how they care for their patients. The administration’s regulations will force doctors to comply with scores of new reporting requirements and intrusions into their practices. Physicians who refuse to bend will see their Medicare fees cut.
Macra and the new regulations force physicians to pick between a “merit-based incentive payment system” or an “alternative-payment model.” Doctors who choose the former will get paid fee-for-service, but they will receive meager annual increases of only 0.25% starting in 2019. Some doctors could earn “bonus payments” but only if the federal bureaucracy approves of their performance.
These rules are purposely onerous because the administration wants physicians to opt into the alternative-payment model. In that system, the government shifts regulatory control from individual physicians to organizations with responsibility for managing patient care. Physicians serving patients through this system will be eligible for annual payment increases of 0.75%, plus bonuses distributed if their organizations hit the government’s spending targets.
The not-so-hidden agenda of the Obama administration is to use Macra and related regulations to force physicians into joining accountable-care organizations. ObamaCare nudged hospitals and physician groups to form these organizations to manage patient care. But they are an unproven concept in Medicare, weighed down by a mountain of rules and information systems. Early data from the administration shows that they haven’t done much to cut costs or improve quality compared with traditional Medicare.
Another major flaw is patient retention. ObamaCare stipulates that a Medicare-eligible patient be automatically put in an accountable-care organization if his doctor is affiliated with one. However, the patient remains free to see any doctor he wants, and the patient usually doesn’t even know he has been placed in such an organization. It is difficult to control costs when the patient has no knowledge of or reason to stay within the system. In 2014, only one-quarter of the 333 accountable-care organizations received bonus payments for hitting financial and quality targets.
Many hospitals, physician groups and managed-care entities have ceased participating in the program because of its excessive rules and small rewards. Macra and the administration’s regulations are simply attempts to resuscitate accountable-care organizations through coercion. Physicians fed up with the bureaucratic rules and low payments of fee-for-service will have no recourse except to join one of the organizations. And when physicians join, their patients come with them, whether they know it or not.
The administration’s rule ignores that Medicare already has a thriving alternative-payment model. Private Medicare Advantage plans, many of which are HMOs with decades of experience managing care, have developed new ways of identifying and compensating the most cost-effective physicians. Some 30% of Medicare beneficiaries have voluntarily elected to get their care through these plans without being coerced, according to the 2015 Medicare Trustees Report.
Congress understandably jettisoned the failed sustainable-growth rate formula, and it is important to reward quality health care, rather than pay more for high volume. But Macra threatens to sidetrack this movement by embracing the same bureaucratic mind-set that underlies ObamaCare. A better plan would use competition and consumer choice to reward physicians for providing high-quality care at affordable and easily ascertained prices, without coercion by the federal government. The results would be better for physicians and their patients—not to mention taxpayers.
Mr. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute. Mr. Chen is a research fellow at the Hoover Institution and director of domestic-policy studies in the Public Policy Program at Stanford University.