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Key Findings

1. MACRA's two-track payment system encourages physicians to migrate to alternative payment models.
2. Medicare payments will be lower with MACRA than without it.
3. Spending on physician services will drop by $35 billion to $106 billion.
4. Payments to hospitals will change by +$32 billion to –$250 billion.
5. Spending effects depend critically on the kind of incentives embedded in alternative payment models.

The Medicare Access and CHIP Reauthorization Act (MACRA), enacted by Congress in 2015, was intended to eliminate a long-standing conundrum about how to determine Medicare reimbursement rates for physician services. MACRA also represents an aggressive expansion of the value-based payment model in Medicare, consistent with the ambitious goals set by former U.S. Department of Health and Human Services Secretary Sylvia Mathews Burwell.