ECONOMIC EVALUATION OF THE 2015 MEDICARE ACCESS AND CHIP REAUTHORIZATION ACT

Purpose: The Medicare Access and CHIP Reauthorization Act (MACRA) replaced the sustainable growth rate formula-mandated recommendations for Medicare reimbursement with intentions of creating new federal health care policies for guiding cost-effective care. This study compares US health care expenses to economic inflation and simulates the long term effects of MACRA on health care expenses through multiple phases of implementation from 2015-2030 (Figure 1).

Method(s): Inflation is measured by the Consumer Price Index (US Bureau of Labor Statistics) and examined from 2000-2015 for incorporation into a financial model. Medical care, broken down into medical care commodities and services, will be extracted as a subcomponent of CPI-Urban, which represents approximately 87% of the US population. Reimbursement modeling will focus on $68.6 billion of services provided by health professionals in the traditional fee-for-service (FFS) program from 2013. Sensitivity analysis will include variables from Table 1 that will be calculated based on net present value (NPV) of all services rendered between 2015-2030 using time value of money based on the 10 year US treasury bill yield (May 2015).

Result(s): Figure 2 shows the per year Medicare reimbursement under MACRA 2015 versus the same basket of goods affected by inflation for both general CPI and medical commodities/services specifically. MACRA heavily promotes consolidation of health professionals into alternative payment systems, producing between -8.5% to +9.7% of predicted variation in reimbursement (Figure 3). This is associated with a 109-146% increase in reimbursement, depending on aggressiveness of alternative system incentive payments. Traditional FFS reimbursement will be adjusted for meeting pay-for-performance quality metrics, with incentives responsible for changes between -2.3% and +9.4% of total NPV.

Conclusion(s): Medical commodities/services are the fastest growing subset of price increases, and this trend in the CPI is unlikely to change in the future. The model of MACRA shows that the dollar amount attributed to medical services will be lower than essentially all scenarios of CPI rates. This phenomenon may control health care costs but may also result in scenarios where costs exceeds revenue of providing medical services.

Figure 1: Multiphase Implementation of MACRA 2015 Medicare Payment System.

Table 1: Model Parameters and Sensitivity Analysis Variables.

Figure 2: Forecast Model (in billions of $) for Amount Spent Annually.

Figure 3: Tornado Chart of MACRA 2015 Reimbursement.