Analysis of the carrot and stick policy of repeal of the sustainable growth rate formula: The good, the bad, and the Ugly

The Balanced Budget Act which became law in 1997 was designed to help stem the increasing in costs of healthcare. The Sustainable Growth Rate (SGR) formula was incorporated into that law as a method of helping balance the budget through a complex formula tying reimbursement to the growth in the economy. Soon after its inception, the flawed nature of the formula, linking the balancing of the federal budget to physician professional fees was realized. Congress has provided multiple short-term fixes known as SGR patches over the years so as to avoid generally progressively larger negative corrections to professional reimbursement. The near annual SGR correction requirement has been compared to Groundhog Day in the legislative arena. Over the years, physician and other providers faced numerous looming, large cuts. Most recently, on April 1, 2015 physicians faced a 21.2% cut in provider payments. To the surprise of many, in April 2015 a bipartisan bicameral effort permanently repealed the Medicare SGR formula for controlling provider payment. The repeal of SGR means the temporary measures to override the growth rate formula will no longer dominate Medicare policy discussions and now the focus turns to continue payment reforms. The MACRA provides physicians and other health care professionals with stable fee update for 5 years and it follows with a new incentive program, termed the Merit-based Incentive Payment System (MIPS) replacing and consolidating pre-existing incentive payment programs: meaningful use of electronic health records (EHR), physician quality reporting system, and the value-based payment modified. Thus, payments to clinicians will be subjected to adjustments based on participation in MIPS or other approved alternative payment mechanisms. This legislation also creates numerous other regulations. The MACRA has been criticized for providing insufficient statutory updates, enacting a flawed quality and performance improvement program associated with MIPS and inappropriate use of utilization and payment data. Thus, the MACRA offers physicians a predictable schedule for Medicare rates – a carrot, and controls the physician behaviours with payment reforms analogous to a stick. Thus, it could be said that this legislation embodies some good, bad, and ugly aspects.