The final MACRA rules are out.

MACRA stands for the Medicare Access and CHIP Reauthorization Act (MACRA), the historic Medicare reform law that passed last year that nobody outside of healthcare has even heard of, and everyone inside the industry is in a sweat about.

There is plenty of room for debate about the rules, but one thing is clear: They are a fine example of why we cannot expect the federal government to be the key and most powerful driver of change in healthcare.

This is not a political statement, not an anti-government slogan, not a libertarian assertion. This is a systemic observation.

This is not because the law or the CMS rule-makers are not well-intentioned. To the contrary, MACRA seems like a noble enterprise. Congress is to be congratulated for at least temporarily getting itself unstuck long enough to pass it. CMS is trying their mightiest to push healthcare in the direction of actually offering value for all the money we keep shoveling into it.

But just look at it: Over 2,000 pages, full of complexities, exceptions, subsidiary re-payment clauses, labels and circles and arrow that will keep healthcare lawyers and consultants in fine shape for quite some time to come. As THCB’s Kip Sullivan has pointed out, MACRA is supposed to be rewarding good “volume to value” behavior and punishing its opposite, but it is so complex that few physicians will be able to honestly tell whether they will get rewarded, how much, or for exactly what.

Operant Conditioning

Or when. Have you ever tried to train a dog? If you want them to stop some behavior, like digging in the garden or jumping up on you, you have to catch them in the act and give them a negative response right then. If you want to reward them for something, you have to give them the treat (or the clicker click that signals a reward) the moment they do it, so that they know what the heck you are talking about and how compelling the reward or punishment is. (My lab used to be all, “If it’s not cheese, don’t even bother.”)

People are not that different, especially people trying to run the increasingly complex business of a medical practice out of one hand while trying to actually practice medicine with the other. If you want them to do something that is both different and difficult, give them an impressive reward the instant they do it, a reward that is significant in comparison to all the other influences on their bottom line, and that happens in this billing cycle.

So if physicians (and physician practice managers) can figure out exactly what they are going to do to get the MACRA bonuses, and then manages to spend the right time and effort and money to do that right behavior, how does MACRA reward them? 

A 4% bonus. In two years. CMS will pay them in 2019 for changes they make and reports they give in 2017. That’s not going to move any needle you care to stare at.

Don’t blame CMS

Is this their fault? No. Here’s why: They are by law trying to move the entire industry for which they are the largest paymaster. That would seem to give them huge, compelling leverage. But it doesn’t. Since they have to pay the whole industry, they can’t act like a real customer. They can’t pick and choose who they pay. They can’t walk away from deals. And being that this is the U.S. system with U.S. politics, they can’t simply issue draconian rules and expect everyone to follow them. They have to work with the industry to find the sweet spot where they can coax at least some of the industry in the right direction. They cannot be truly compelling with either carrot or stick.

Contrast that with private employers and self-funded pension plans and the like, whose true bottom-line incentives are closely aligned with those of their employees and beneficiaries: They want the best healthcare for the lowest price. And crucially they can act as real customers. They can shop. They can demand transparency, bundled prices, and audits. They can make deals or walk away from them. They can reward their employees and beneficiaries for going to the low-cost high-quality providers. They can, in effect, say, “I’m sorry, but you charge too much. We will take our business elsewhere.”

Compelling? Yes. Absolutely. It brings the healthcare providers’ behavior change, and the business model change, and the workflow change down to this year, even this quarter. “Do good business with us, and you will do well.” And there is no question or confusion about what constitutes the behavior that will get the reward, such as a bundled price for a particular operation, with warranties and quality controls.

We have, and will likely continue to have, a mixed system, with about half of medical expenses being paid through public programs like Medicare, Medicaid, CHIP, the Indian Health Service, the military medical program, and the Veterans’ Administration. Those supporting a “single payer” model clearly imagine not only that would bring healthcare to everyone (which it would) but that it would give the government the whip handle over costs. MACRA is another clear demonstration of why that is not true, why a strong, well-operating economic system needs customers and entities that can act like true customers, and why in our system that means private, independent payers paying with their own money.