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Cloud computing services over the Internet have the potential to spur a significant increase in government efficiency and decrease technology costs, as well as to create incentives and online platforms for innovation. Adoption of cloud computing technologies could lead to new, efficient ways of governing.

On April 7, the Brookings Institution hosted a policy forum that examines the economic benefits of cloud computing for local, state, and federal government. Federal Chief Information Officer Vivek Kundra delivered a keynote address on the role of the government in developing and promoting cloud computing. Brookings Vice President Darrell West moderated a panel of experts and detailed the findings in his paper, "Saving Money through Cloud Computing," which analyzes its governmental cost-savings potential.

After the program, panelists took audience questions.

Video

• Cloud Computing a Fiscally Smart Move
• Cloud Computing Saves Money, Makes Government More Open
• Cloud Computing Will Fundamentally Change Government Operations
• Government on Cloud Will Yield Cost-Effective System

Audio

• The Economic Gains of Cloud Computing

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20100407_cloud_computing
• 0407_cloud_computing_kundra_remarks
• 0407_cloud_computing_kundra_presentation

Introduction:

In the ebb and flow of Middle East diplomacy, the two interrelated issues of an Israeli-Syrian peace settlement and Washington’s bilateral relationship with Damascus have gone up and down on Washington’s scale of importance. The election of Barack Obama raised expectations that the United States would give the two issues the priority they had not received during the eight years of the George W. Bush administration. Candidate Obama promised to assign a high priority to the resuscitation of the Arab-Israeli peace process, and separately to “engage” with Iran and Syria (as recommended by the Iraq Study Group in 2006).

In May 2009, shortly after assuming office, President Obama sent the assistant secretary of state for Near Eastern affairs, Jeffrey Feltman, and the senior director for the Middle East in the National Security Council, Daniel Shapiro, to Damascus to open a dialogue with Bashar al-Asad’s regime. Several members of Congress also travelled to Syria early in Obama’s first year, including the chairman of the Senate Committee on Foreign Relations, John Kerry, and the chairman of the House Committee on Foreign Affairs, Howard Berman. In addition, when the president appointed George Mitchell as special envoy to the Middle East, Mitchell named as his deputy Fred Hof, a respected expert on Syria and the Israeli-Syrian dispute. Last summer, both Mitchell and Hof visited Damascus and began their give and take with Syria.

And yet, after this apparent auspicious beginning, neither the bilateral relationship between the United States and Syria, nor the effort to revive the Israeli-Syrian negotiation has gained much traction. Damascus must be chagrined by the fact that when the Arab-Israeli peace process is discussed now, it is practically equated with the Israeli-Palestinian track. This paper analyzes the difficulties confronting Washington’s and Jerusalem’s respective Syria policies and offers an approach for dealing with Syria. Many of the recommendations stem from lessons resulting from the past rounds of negotiations, so it is important to understand what occurred.

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The Saban Center for Middle East Policy joined with the American Enterprise Institute and the Institute for the Study of War in June 2012 to host a one-day crisis simulation that explored the implications of spillover from the ongoing violence in Syria. The simulation examined how the United States and its allies might address worsening instability in Lebanon, Iraq, Jordan, Turkey, and elsewhere in the Middle East as a result of the internecine conflict in Syria.

The Saban Center’s Middle East Memo, “Unraveling the Syria Mess: A Crisis Simulation of Spillover from the Syrian Civil War,” authored by simulation conveners Kenneth M. Pollack, Frederick W. Kagan, Kimberly Kagan, and Marisa C. Sullivan, presents key lessons and observations from the exercise.

Among the key findings:

• A humanitarian crisis alone is unlikely to spur the international community to take action in Syria.
   
• Turkey is a linchpin in any effort to end the fighting in Syria, but Washington and Ankara may not see eye-to-eye on what the end game should be.
   
• U.S. history in Iraq and Lebanon make intervention there unlikely, even if spillover causes a renewal of large-scale violence.

The simulation suggested a tension between U.S. political antipathy toward greater involvement in Syria and the potential strategic desirability of early action.

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• Unraveling the Syria Mess

The potential for confrontation between the United States and Iran, stemming from ongoing tensions over Iran’s nuclear program and western covert actions intended to delay or degrade it, remains a pressing concern for U.S. policymakers. The Saban Center for Middle East Policy hosted a one-day crisis simulation in September that explored different scenarios should a confrontation occur.

The Saban Center's new Middle East Memo, A Series of Unfortunate Events: A Crisis Simulation of a U.S.-Iranian Confrontation, authored by senior fellow Kenneth M. Pollack, presents lessons and observations from the exercise.

Key findings include:

• Growing tensions are significantly reducing the “margin of error” between the two sides, increasing the potential for miscalculations to escalate to a conflict between the two countries.

• Should Iran make significant progress in enriching fissile material, both sides would have a powerful incentive to think short-term rather than long-term, in turn reinforcing the propensity for rapid escalation.

• U.S. policymakers must recognize the possibility that Iranian rhetoric about how the Islamic Republic would react in various situations may prove consistent with actual Iranian actions.

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Introduction

The issue of Iran has become a central preoccupation for the international community in recent months, thanks to the intersection of the historic changes in the region, an American presidential election, sharpening rhetoric from Israel, and Tehran’s relentless determination to advance its nuclear capabilities. The focus of policymakers in Washington and around the world remains fixed on the options for forestalling Iran’s determined march toward a nuclear weapons capability. This is the appropriate objective; the best possible outcome for maintaining peace and security in the Gulf and avoiding a deeply destabilizing nuclear arms race remains a credible, durable solution that curtails Iran’s nuclear ambitions. And while achieving such an outcome remains profoundly problematic, largely as a result of Tehran’s intransigence, preventing Iran from crossing the nuclear weapons threshold—either through persuasion, coercion, or some combination of the two—remains fully and unambiguously within the capabilities of the international community.

The shadow cast by Tehran has created a particularly intense sense of existential anxiety for the smaller Gulf states, including Kuwait, Bahrain, the United Arab Emirates, Qatar, and Oman. After all, these are the same states whose civil orders were repeatedly disrupted by Iranian subversion and sponsorship of terrorism during the first decade after Iran’s Islamic revolution, and whose thriving economies rely on unimpeded access to the global commons. The events of the past decade have only exacerbated the smaller Gulf states’ endemic sense of insecurity. Iran has achieved a synergistic, sometimes even parasitic, relationship with the leadership of post-Saddam Iraq that, together with Tehran’s longstanding relationships with Syria and Lebanese Hizballah, greatly enables its bid for predominance in the heart of the Middle East. Today, the uncertainties surrounding the implications of regional flux have left Tehran simultaneously weakened and emboldened—a particularly dangerous combination for this particular array of Iranian leaders.

With Iran’s nuclear program advancing by the month and its efforts to tilt the regional balance in its favor growing more forceful, the small states of the Persian Gulf must face the distinct dilemma of preparing for the possible worst-case scenario of the nuclearization of their neighborhood, while participating ever more robustly in the international efforts to preclude that very possibility. In some respects, the Gulf states’ situation is unique. Unlike Israel, another small state that perceives an existential threat from Iran, the Gulf states cannot fall back upon either a presumptive nuclear deterrent or a primordial bond to the body politic of the world’s only remaining superpower. And in contrast to Iran’s other neighbors, the vast resources and history of ideological and territorial disputes between the Gulf states and Tehran significantly intensify the stakes. Even before the Gulf became the vital transportation corridor for global energy, the fault line in the regional balance of power had always run between the northern states and their southern rivals. The mere possibility that the north may gain a nuclear advantage is reshaping the security environment for Iran’s neighbors in the Gulf.

Because the threat of Iran looms large, the exigency of considering the widest possible array of alternative prospects for the evolution of this protracted crisis is important. This paper tackles the scenarios that successive American presidents have deemed unacceptable—an Iranian development or acquisition of a nuclear weapons capability or of nuclear weapons themselves—and the implications that such scenarios would have for the global nonproliferation regime and regional security, with a particular focus on the special challenges faced by Iran’s southern neighbors. To protect against threats along their borders, the Gulf states have traditionally hedged their bets by seeking balanced relations with their more powerful neighbors while cultivating extra-regional allies. That formula is already changing, as evidenced by a new assertiveness in Gulf states’ postures toward Tehran and a new creativity in deploying strategies for deterring and mitigating Iran’s efforts to extend its influence and/or destabilize its neighbors. The Gulf states must transform this tactical innovation into a full-fledged new hedging policy: one that deploys every possible tool to prevent a nuclear Iran while taking every possible step to prepare for such an eventuality.

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• Thinking the Unthinkable: The Gulf States and a Nuclear Iran

This summer, the world has watched as an al Qaeda offshoot, the Islamic State group, launched a militant offensive into Iraq, seizing large swaths of land. This Center for Middle East Policy’s Middle East Memo, Kurdistan Rising: To Acknowledge or Ignore the Unraveling of Iraq, examines how the fall of Iraq’s key city of Mosul has changed matters for Kurds in Iraq, and the necessity for American policymakers to take stock of the reality of the Kurdistan Region in this “post-Mosul” world.

Highlights: 

• A look at the Kurds of Iraq, their history and how the United States has largely spurned a partnership with them. Having been autonomous in Iraq since 1991, the Kurds heeded the aspirations of the United States in 2003 to assist in the removal of the Baath regime of Saddam Hussein, and played by the rules of the game established in the post-2003 period, albeit unwillingly at times. However, they have consistently refused to follow a path that would result in relinquishing the powers they enjoy. They have even taken steps to extend their autonomy to the point of having economic sovereignty within a federal Iraq, thus bringing them into serious dispute with Baghdad and the government of Nouri al-Maliki and earning the rebuke of the United States.

• An examination of how, since 2011, failed U.S. and European policies aimed at healing Iraq’s sectarian and ethnic fissures have contributed to the current situation. By so strongly embracing the concept of Iraq’s integrity as crucial to American interests in the region, key allies and partners have been marginalized along the way.

• Policy recommendations for the United States and its western allies, given that the Kurdistan region now stands on the threshold of restructuring Iraq according to its federal or confederal design, or exercising its full right to self-determination and seceding from Iraq. By ignoring the realities of Kurdish strength in Iraq, U.S. and European powers run the risk of losing influence in the only part of Iraq that can be called a success story, and antagonizing what could be a key ally in an increasingly unpredictable Middle East.

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• Kurdistan Rising: To Acknowledge or Ignore the Unraveling of Iraq

Rumor has it that an economist started hitting the gym after finishing two milestone research papers, in expectation of a Nobel Prize, which is only rewarded to a living person. Almost no one denies that greater expectations translate into healthier behaviors, while the converse rarely enters the health policy discussion: expectations of a less-than-desirable future may lead to unhealthy behaviors, including smoking, excessive drinking, sedentary lifestyles, and drug abuse. The health issues of the deprived may have a deeper root in economics.

Professor Zhu Xi from Shanghai Jiao Tong University and I found evidence of this in our working paper “Affordable Care Encourages Healthy Living: Theory and Evidence from China's New Cooperative Medical Scheme”. Standard economic theory predicts that providing medical insurance encourages unhealthy behavior by mitigating economic consequences. We developed a novel theoretical framework in which the opposite is possible because insurance makes longevity more affordable and thus desirable.

We test the theory utilizing a unique experiment of China introducing the New Cooperative Medical Scheme, unique in its long-term credibility necessary for their proposed channel. This scheme reduces cigarette use by around 9% and bolsters subjective perception of the importance of physical exercise and healthy diet. These effects depend significantly on the number of children and the local culture of elderly care. We can rule out alternative explanations of these robust results. The empirical evidence affirms a causal link between concerns about negative bequest and unhealthy behavior, and how to break it.

Breaking the causal link would not be an easy task, because bringing a brighter future to the deprived would not be. But this does not revoke the necessity of considering this “expectation” mechanism in designing health policies. For example, it is trendy to study how smokers may substitute other tobacco products for cigarettes and the ensuing health consequences. According to our analytical framework, the substitution could be broader, that is, a person expecting a miserable future would consciously or unconsciously resort to other means of shortening life. Case and Deaton, in their sensational paper, pinned down drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis as the causes of the rising mortality in midlife among white Americans. The war against tobacco use may be complicated by this potential substitution.

In general, recognizing the source of a problem is the first step in solving it. The association between income and life expectancy in the United States is well identified by a Brookings study by Bosworth and Burke and a paper by Chetty et al. The hypothesis that poverty may rationally trigger unhealthy behaviors and thus shorter life expectancy is under-explored.

Our research suggests that constructing a social safety net – by subsidizing health or old-age insurance, for example – brightens the future and thus promotes healthy living. Libertarians who believe in “from each as they choose, to each as they are chosen” may frown upon the idea of expanding the government for the sake of saving people from their own poor choices. As usual, an argument could be made that the positive externality outweighs the cost. In this case, a better social safety net can make a person more forward-looking and thus more beneficial to the society.

Discovering hidden incentives and mechanisms is one of the primal tasks of economists. Our research suggests, surprisingly, that both the Center of Disease Control and Prevention and the Department of the Treasury are important players in promoting healthy living. Let them be.

Much public focus is being given to a broader role for hospitals in improving the health of their communities. This focus parallels a growing interest in addressing the social determinants of health as well as health care policy reforms designed to increase the efficiency and quality of care while improving health outcomes.

This interest in the community role of hospitals has drawn attention to the federal legal standards and requirements for nonprofit hospitals seeking federal tax exemption. Tax-exempt hospitals are required to provide community benefits. And while financial assistance to patients unable to pay for care is a basic requirement of tax-exemption, IRS guidelines define the concept of community benefit to include a range of community health improvement efforts.

At the same time, the IRS draws a distinction between community health improvement spending–which it automatically considers a community benefit–and certain “community-building” activities where additional information is required in order to be compliant with IRS rules. In addition, community benefit obligations are included in the Affordable Care Act (ACA).

Specifically, the ACA requires nonprofit hospitals periodically to complete a community health needs assessment (CHNA), which means the hospital must conduct a review of health conditions in its community and develop a plan to address concerns. While these requirements are causing hospitals to look more closely at their role in the community, challenges remain. For instance, complex language in the rules can mean hospitals are unclear what activities and expenditures count as a “community benefit.” Hospitals must take additional steps in order to report community building as community health improvement.

These policies can discourage creative approaches. Moreover, transparency rules and competing hospital priorities can also weaken hospital-community partnerships. To encourage more effective partnerships in community investments by nonprofit hospitals:

• The IRS needs to clarify the relationship between community spending and the requirements of the CHNA. 
• There needs to be greater transparency in the implementation strategy phase of the CHNA. 
• The IRS needs to broaden the definition of community health improvement to encourage innovation and upstream investment by hospitals.

Download "Hospitals as Community Hubs: Integrating Community Benefit Spending, Community Health Needs Assessment, and Community Health Improvement" »

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The Center for Medicare and Medicaid Innovation (CMMI, or “the Innovation Center”) recently announced an initiative called Comprehensive Primary Care Plus (CPC+). It evolved from the Comprehensive Primary Care (CPC) initiative, which began in 2012 and runs through the end of this year. Both initiatives are designed to promote and support primary care physicians in organizing their practices to deliver comprehensive primary care services. Comprehensive Primary Care Plus has some very promising components, but also misses some compelling opportunities to further advance payment for primary care services.

The earlier initiative, CPC, paid qualified primary care practices a monthly fee per Medicare beneficiary to support practices in making changes in the way they deliver care, centered on five comprehensive primary care functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement; and, (5) planned care and population health. For all other care, regular fee-for-service (FFS) payment continued. The initiative was limited to seven regions where CMMI could reach agreements with key private insurers and the Medicaid program to pursue a parallel approach. The evaluation funded by CMMI found quality improvements and expenditure reductions, but savings did not cover the extra payments to practices.

Comprehensive Primary Care Plus uses the same strategy of conducting the experiment in regions where key payers are pursuing parallel efforts. In these regions, qualifying primary care practices can choose one of two tracks. Track 1 is very similar to CPC. The monthly care management fee per beneficiary remains the same, but an extra $2.50 is paid in advance, subject to refund to the government if a practice does not meet quality and utilization performance thresholds.

The Promise Of CPC+

Track 2, the more interesting part of the initiative, is for practices that are already capable of carrying out the primary care functions and are ready to increase their comprehensiveness. In addition to a higher monthly care management fee ($28), practices receive Comprehensive Primary Care Payments. These include a portion of the expected reimbursements for Evaluation and Management services, paid in advance, and reduced regular fee-for-service payments. Track 2 also includes larger rewards than does Track 1 for meeting performance thresholds.

The combination of larger per beneficiary monthly payments and lower payments for services is the most important part of the initiative. By blending capitation (monthly payments not tied to service volume) and FFS, this approach might achieve the best of both worlds.

Even when FFS payment rates are calibrated correctly (discussed below), the rates are pegged to the average costs across practices. But since a large part of practice cost is fixed, it means that the marginal cost of providing additional services is lower than the average cost, leading to incentives to increase volume under FFS. The lower payments reduce or eliminate these incentives. Fixed costs, which must also be covered, are addressed through the Comprehensive Primary Care Payments. By involving multiple payers, practices are put in a better position to pursue these changes.

An advantage of any program that increases payments to primary care practices is that it can partially compensate for a flaw in the relative value scale behind the Medicare physician fee schedule. This flaw leads to underpayment for primary care services. Although the initial relative value scale implemented in 1992 led to substantial redistribution in favor of evaluation and management services and to physicians who provide the bulk of them, a flawed update process has eroded these gains over the years to a substantial degree.

In response to legislation, the Centers for Medicare and Medicaid Services are working correct these problems, but progress is likely to come slowly. Higher payments for primary care practices through the CPC+ can help slow the degree to which physicians are leaving primary care until more fundamental fixes are made to the fee schedule. Indeed, years of interviews with private insurance executives have convinced us that concern about loss of the primary care physician workforce has been a key motivation for offering higher payment to primary care physicians in practices certified as patient centered medical homes.

Two Downsides

But there are two downsides to the CPC+.

One concerns the lack of incentives for primary care physicians to take steps to reduce costs for services beyond those delivered by their practices. These include referring their patients to efficient specialists and hospitals, as well as limiting hospital admissions. There are rewards in CPC+ for lower overall utilization by attributed beneficiaries and higher quality, but they are very small.

We had hoped that CMMI might have been inspired by the promising initiatives of CareFirst Blue Cross Blue Shield and the Arkansas Health Care Improvement initiative, which includes the Arkansas Medicaid program and Arkansas Blue Cross Blue Shield. Under those programs, primary care physicians are offered substantial bonuses for keeping spending for all services under trend for their panel of patients; there is no downside risk, which is understandable given the small percentage of spending accounted for by primary care. The private and public payers also support the primary care practices with care managers and with data on all of the services used by their patients and on the efficiency of providers they might refer to. These programs appear to be popular with physicians and have had promising early results.

The second downside concerns the inability of physicians participating in CPC+ to participate in accountable care organizations (ACOs). One of CMMI’s challenges in pursuing a wide variety of payment innovations is apportioning responsibility across the programs for beneficiaries who are attributed to multiple payment reforms. As an example, if a beneficiary attributed to an ACO has a knee replacement under one of Medicare’s a bundled payment initiatives, to avoid overpayment of shared savings, gains or losses are credited to the providers involved in the bundled payment and not to the ACO. As a result, ACOs are no longer rewarded for using certain tools to address overall spending, such as steering attributed beneficiaries to efficient providers for an episode of care or encouraging primary care physicians to increase the comprehensiveness of the care they deliver.

Keeping the physician participants in CPC+ out of ACOs altogether seems to be another step to undermine the potential of ACOs in favor of other payment approaches. This is not wise. The Innovation Center has appropriately not established a priority ranking for its various initiatives, but some of its actions have implicitly put ACOs at the bottom of the rankings. Recently, Mostashari, Kocher, and McClellan proposed addressing this issue by adding a CPC+ACO option to this initiative.

In an update to its FAQ published May 27, 2016 (after out blog was put into final form), CMMI eased its restriction somewhat by allowing up to 1,500 of the 5000 practices expected to participate in CPC+ to also participate in Medicare Shared Savings Program (MSSP) ACOs. But the prohibition continues to apply to Next Gen ACOs, the model that has created the most enthusiasm in the field. If demand for these positions in MSSP ACOs exceeds 1,500, a lottery will be held. This change is welcome but does not really address the issue of disadvantaging ACOs in situations where a beneficiary is attributed to two or more payment reform models. CMMI is sending a signal that CPC+, notwithstanding its lack of incentives concerning spending outside of primary care, is a powerful enough reform that diverting practices away from ACOs is not a problem. ACOs are completely dependent on primary care physician membership to function, meaning that any physician practices beyond 1,500 that enroll in CPC+ will reduce the size and the impact of the ACO program. CMMI has never published a priority ranking of reform models, but its actions keep indicating that ACOs are at the bottom.

The Innovation Center should be lauded for continuing to support improved payment models for primary care. Its blending of substantial monthly payments with lower payments per service is promising. But the highest potential rewards come from broadening primary care physicians’ incentives to include the cost and quality of services by other providers. CMMI should pursue this approach.

Editor's note: This piece originally appeared in Health Affairs Blog.

The Medicare Access and CHIP Reauthorization Act of 2015, referred to most often as “MACRA,” set in motion a new approach to Medicare physician payment and replaced the oft-criticized Sustainable Growth Rate with two new payment schemes. In late April, the Centers for Medicare and Medicaid Services (CMS) released many proposed details surrounding the law’s implementation; however, it is important to keep in mind that the final rule is still forthcoming and may incorporate significant changes in response to public comments made on the proposed rule.

While there are many stakeholders trying to understand the implications of this significant legislation, physicians and other providers—whose response is critical to the success of MACRA—must prepare quickly and almost immediately make decisions about which incentive program to pursue and what steps will increase prospects for success. Starting January 1, 2017, physicians’ and other providers’ performance will determine their payment rate updates. Because of the time required to gather and evaluate performance data, spending and other performance measures in calendar year 2017 will provide the basis for physician payments in 2019.

In this piece, we offer a glimpse into the potential financial changes in physician payment based on the proposed rule. Due to the complexity of the MACRA provisions and their significant effects on payment, policymakers, physicians, and other providers alike must better understand the various dimensions of MACRA. We focus on the financial flow of dollars to help physicians and other providers assess which path within MACRA to take and how best to forecast the impact on their payments, as well as to provide an overview for policymakers on the financial implications of different options physicians are actively weighing now as a result of MACRA.

MACRA overview

As established in the law, MACRA creates two primary payment schemes that physicians accepting Medicare can choose to be judged under:

1. The Merit-Based Incentive Payment System (MIPS), which administers bonuses or penalties based on how well physicians perform relative to other physicians on a set of quality and value measures (detailed later); or
2. The Advanced Alternative Payment Model (APM), which initially offers bonuses and then provides higher annual fee updates than MIPS when physicians earn a sufficient amount of their revenue (or see a sufficient percentage of their patients) through qualifying Medicare or approved private payer payment models that require accepting financial risk if spending exceeds targets.

At least initially, the large majority of physicians and other providers likely will be judged under MIPS, with CMS projecting in the proposed rule that only 4 to 11 percent of Medicare providers will qualify for the Advanced APM payment approach in its first year because of the relatively strict standards to qualify. Unlike the expectations expressed during congressional debate over MACRA, which mainly focused on encouraging physicians to form or contract with APMs, the rules proposed by CMS will lead many to remain in MIPS for the foreseeable future. Indeed, we understand that many physician specialty societies are advising their members to remain in MIPS. In a comment letter to CMS, we suggested ways to better support the pipeline of physicians and other providers into APMs.

The graph below illustrates the potential scenarios for the flow of funds under the proposed rule. In MIPS, payment is based upon physician performance relative to all other physicians in the program, with bonuses and penalties centered around the base fee-for-service (FFS) payment rates and annual payment updates. MACRA explicitly requires bonuses or penalties in MIPS—not including exceptional performance bonuses—to be budget neutral.

Unlike MIPS, the Advanced APM program dictates that physicians receive a fixed 5 percent bonus for each of the first six years and higher base payment rate updates than MIPS from 2026 onward, in addition to additional bonuses or penalties based on quality and cost performance under their respective Advanced APM contracts. Adding to the contrast with MIPS, bonuses in the Advanced APM program, as well as contractually specified bonuses or penalties, have no requirement to be budget neutral.

The graph below illustrates that consistently high performers in MIPS can actually financially outperform physicians in APMs for many years. In theory, therefore, physicians in an APM—for instance, a Next Generation Accountable Care Organization (ACO)—who are confident that they would score well on relevant quality and value metrics might actually prefer to be judged as a group under MIPS.

In assessing their options, though, it is important to recognize that performance under MIPS as an individual physician or small group may be less predictable than as a part of an APM, because performance in MIPS is relative to the performance of other physicians. This unpredictability occurs because, as explained above, MACRA requires MIPS incentive payments to be budget neutral, which makes performance among MIPS providers a zero-sum-game—one physician’s increase in performance threatens the payment of another, such that bonuses and penalties offset each other overall.

The Merit-Based Incentive Payment System (MIPS)

MIPS consolidates three existing programs that dictate physician bonuses or penalties for Medicare physicians and other providers (the physician quality reporting system, a meaningful use incentive program for electronic health record use, and the value-based payment modifier) into a new system that creates a composite score based on:

• The quality of care provided (30 percent in 2021 and beyond), as measured under current law;
• Resource use (30 percent in 2021 and beyond), which consists of the “measures of resource use established for the value-based modifier under current law and, to the extent feasible, accounting for the cost of Part D Drugs”;
• Meaningful use of electronic health records (EHRs) (25 percent), established under current law to determine whether a provider is meaningfully using EHRs; and
• Clinical practice improvement activities (15 percent), a broad subsection decided on by the Secretary.

Physicians and other providers’ weighted scores in each of these categories for a year are aggregated into an overarching Composite Performance Score (CPS) for each practice. The CPS values are ranked from highest to lowest, and the relative ranking of each score determines how provider payments are adjusted, dictating whether a bonus or penalty results as well as its size. Each year, the Secretary will select either the mean or the median of CPSs for that year to serve as the performance threshold above and below which physicians and other providers will receive bonuses or penalties, respectively.

Initially in 2019, 4 percent of a medical professional’s revenue generated through Medicare fee-for-service payments will be redistributed under MIPS, growing to 9 percent by 2022 and remaining at that level indefinitely. By comparison, under the three previous reporting programs, physicians in small practices were subject to combined penalties as high as 6 percent or bonuses up to 2 percent; larger practices (with 8 or more physicians) were subject to maximum penalties and bonuses of 8 percent and 4 percent, respectively.

Maintaining budget neutrality requires that CMS pay the same amount in bonuses as it receives in penalties. To assure that penalties offset bonuses, the MIPS bonus percentages described above are potentially subject to a scaling factor of up to three-times to maintain budget neutrality. For example, having the Secretary adopt the median CPS would mean half of all physician practices would rank above that value and half would rank below. However, because practices can differ in both number of physicians and the extent of their Medicare billing, there is no guarantee that the Medicare payments—and associated bonuses—earned by practices above the midpoint would exactly equal the penalties owed by practices below the midpoint. CMS would compute and apply an appropriate scaling factor to assure total bonuses equal total penalties and achieve budget neutrality.

Outside of the budget neutrality requirement, the law provided $500 million each year from 2019 to 2024 to award “exceptional performance” bonuses to MIPS providers with the highest composite performance scores. The bonuses would be awarded on a sliding scale up to as high as 10 percent added to the base MIPS bonus.

Advanced Alternative Payment Models (Advanced APMs)

The other pathway under MACRA involves alternative payment models that meet the criteria established by CMS to be designated “advanced.” Advanced APMs are defined as (i) measuring physicians and other providers according to metrics similar to those of MIPS, (ii) requiring providers’ use of certified EHRs, and (iii) holding providers accountable for at least “nominal financial risk.” In the proposed rule, CMS outlines which of its current APMs measure up to this “Advanced” threshold, including:

• Medicare Shared Savings Program ACOs, Tracks 2 and 3;
• Medicare Next Generation ACOs;
• Comprehensive Primary Care Plus (CPC+) Model;
• Oncology Care Model (two-sided risk); and
• Comprehensive End-Stage Renal Disease Care Model (Large Dialysis Organization arrangement).

Notably absent from this list of proposed approved Advanced APMs are Track 1 MSSP ACOs and various bundled payment models.

By earning a sufficient percentage of their revenue through an Advanced APM, physicians can qualify for a bonus payment equal to 5 percent of their annual fee-for-service revenue in years 2019-2024 and a 0.5 percentage-point higher annual fee rate increase than physicians and other providers in MIPS each year starting in 2026 (0.75 percent vs. 0.25 percent). Alternatively, as a new feature under this rule, physicians can also qualify by seeing a sufficient percentage of their patients through an Advanced APM; notably, the patient percentage thresholds are lower than the revenue percentage thresholds.

Specifically, for physicians participating in Advanced APMs, there are four ways to qualify for the bonuses and higher payment updates of the Advanced APM track. Across all, the thresholds increase in the initial years and remain constant from 2023 onward. However, the thresholds are distinct in whether they are based on revenue or patient volume, as well as whether they are based on Medicare alone or on all payers. The four categories for qualification are:

1. Earn a minimum percentage of their Medicare Part B revenue through an Advanced APM;

2. Starting in 2021, earn a lower minimum percentage of their Medicare Part B revenue AND a minimum percentage of their revenue from all payers through an Advanced APM;

3. See a minimum percentage of their Medicare patients through an Advanced APM; or

4. Starting in 2021, see a lower minimum percentage of their Medicare patients AND a minimum percentage of their patients from all payers through an Advanced APM.

Importantly, if physicians and other providers fall short of these minimums, they would not qualify under the Advanced APM track. However, physicians and other providers participating in APMs who meet the lower “Partial Qualifying Provider” percentage thresholds for either revenue or patients can choose to opt out of MIPS reporting altogether, guaranteeing that they will receive neither a penalty nor bonus for the year. Further, the providers participating in APMs that were not designated Advanced may still qualify as MIPS APMs and receive some automatic credit under the Clinical Practice Improvement Activities (CPIA) category.

Potential for low specialist participation in the Advanced APM program

Over time, MACRA is likely to continue to evolve and the All-Payer Combination Advanced APM option will become available, making payment models developed by private insurers increasingly available and allowing more payment models to gain “advanced” recognition.

Notably, however, the “advanced” list does not include any of the current bundled payment models established by CMMI. This omission will be particularly critical to specialists, as bundled payments represent a significant share of their participation in APMs and many of the proposed “advanced” APM qualifiers have more effectively engaged primary care physicians and other providers than specialists to-date.

To this end, in their proposed rule, CMS’ requested comment on how to offer an option based on bundled payments, a model that has garnered comparatively greater specialist participation. Bundled payments as a concept have often been cited by economists and health care policymakers as a strong policy lever to shift to value-based payment, but their exclusion may effectively limit many physicians and other providers.

Concluding thoughts and outstanding questions

With only six months before physicians’ performance will have an impact on their payment under MACRA, physicians are intensely scrutinizing the two payment incentive programs and how they would fare under them. But most are confused about how best to navigate the various programs given the complexity of the rules and options. The lack of timely data with which to assess their performance on an ongoing basis may further handicap the ability of physicians to make informed choices and improve their performance.

While the proposed rule elucidates many elements of the new payment systems and the final rule will help clarify some remaining questions, many questions about moving parts remain, including those related to: the different risks and rewards for MIPS vs APMs; the uncertainty of movement between both pathways; and the potential for additional payment models (such as the Physician-Focused Payment Model option). These and other uncertainties have raised concerns about the viability of small practices in this environment and the risk that MACRA will lead large numbers of physicians to seek employment by hospitals and large physician organizations. This risks potentially leading to to much higher degrees of consolidation and losses in physician productivity.

MACRA remains a fundamentally important change from the status quo. It offers significant promise to change—and hopefully improve—physician practice and move payment from volume to value. Without question, its implementation will be watched intently.

At the previous Summit of the Americas in Cartagena, Colombia in April 2012, President Barack Obama was badly roughed up by his Latin American counterparts (and embarrassed by his Secret Service for entertaining sex workers). Happily, the president and his entourage did much better at last week’s Summit in Panama, but the United States still has a way to go before the Summits once again become the productive vehicle for U.S. foreign policy that they once were, at their founding in Miami in 1994.

In Cartagena, leader after leader criticized the United States for allegedly heavy-handed counter-narcotics policies; oppressive treatment of immigrants; a weak response to crime and poverty in Central America; and monetary policies that supposedly harmed their economies. Most pointedly, speakers denounced the decades-old economic sanctions against Cuba. But given the upcoming Congressional elections, Obama and his Secretary of State Hillary Clinton did not want to do anything to endanger their Democratic Party’s chances. Obama was reduced to affirming, uncharacteristically, “I am here to listen, but our policies will not change.”

Once the November 2012 mid-term elections were over, policies did, in fact, change as the United States took a more relaxed approach to counternarcotics; the administration announced immigration policy reforms, including negotiating agreements with Central American nations to reduce the outflow of children and promote economic growth and jobs at home; and Vice President Joseph Biden met repeatedly with Central American leaders, and offered $1 billion in economic and security assistance.

In Cartagena, the Latin Americans threatened to boycott the Panama Summit if Cuba was not invited. But last December 17, President Obama and Cuban President Raúl Castro announced their agreement to negotiate the normalization of diplomatic relations, and in one blow, the United States transformed a thorn in relations with Latin America into a triumph of inter-American diplomacy that significantly enhanced U.S. prestige in the region.

So in Panama, most of the Latin American and Caribbean leaders, rather than berate the U.S. president, praised him for his courage and generally treated him with courtesy and respect. The three leaders of Central America’s Northern Tier (Guatemala, Honduras, and El Salvador—whose president is a former guerrilla commander) were effusive in their praise. The president of Brazil, Dilma Rousseff, who in Cartagena had sharply criticized U.S. monetary policies and had cancelled a visit to the White House to protest NSA spying, was pleased to announce that her visit had been rescheduled for this June. 

Obama’s own performance was more spirited than it had been in Cartagena. In response to a harsh polemic by Ecuadorean President Rafael Correa, Obama shot back: “The U.S. may be a handy excuse for diverting attention from domestic political problems, but it won’t solve those problems.” After listening politely through Raúl Castro’s extended remarks—during which Castro praised him as a man of honesty and authenticity—Obama departed to avoid having to sit through the predictable harangues of Argentine President Cristina Kirchner and Bolivian leader Evo Morales. Few could blame him.

At the parallel CEO Summit of business executives, Obama delivered thoughtful responses to questions posed by several entrepreneurs including Facebook founder Mark Zuckerberg, distinguishing himself from the facile rhetorical answers of the other presidents on the panel. At a Civil Society Forum where delegates affiliated with Cuban government organizations engaged in disruptive tactics, Obama lectured firmly on the virtues of civility and tolerance. Together with two other presidents (Tabaré Vasquez of Uruguay and Guillermo Solis of Costa Rica), Obama met privately with a dozen leaders of nongovernmental organizations, took notes, and incorporated at least one of their suggestions into his later public remarks.

But Obama’s Panama experience was marred by an inexplicable misstep by his White House aides a month earlier—the very public sanctioning of seven Venezuelan officials for alleged human rights violation and corruption, and the declaration that Venezuela was a “threat to U.S. national security.” To Latin American ears, that language recalled Cold War-era justifications for CIA plots and military coups. The State Department claims it warned the White House against Latin American blowback, but perhaps not forcefully enough. Once Latin American anger become apparent, the White House tried to walk the “national security” language back, saying it was just a formality required by U.S. legislation, but the damage was done. Speaker after speaker condemned the “unilateral sanctions” and called for their repeal.

The ill-timed sanctions announcement provided Venezuelan President Nicolás Maduro and his populist allies with a ready stick to beat the United States. For whileObama’s diplomacy had managed to peel off most of the Central Americans and win over or at least diminish the antagonism of other leaders, it had not found a way to tranquilize the rejectionist states (Ecuador, Bolivia, Nicaragua, Argentina) tied to Venezuela in an “anti-imperialist” alliance. Although a relatively small minority, these spoilers seriously disrupt plenary meetings with long and vituperative monologues, and small minorities of “veto” players can block the signing of otherwise consensus documents such that in Panama, as in Cartagena, no consensus declaration was issued; rather the host leader signed brief “mandates for action” that lacked full legitimacy.

The problem of the rejectionist minority will be partially alleviated when Kirchner is shortly replaced, likely by a more moderate government in Argentina, and political turnover will eventually come in Venezuela, but the hemisphere needs new rules that protect majority rights to get things done. Some simple procedural innovations, such as a more forceful chair, or even the simple system of red-yellow-green lights that alert speakers to their time limits, would help.

Notwithstanding the misstep on Venezuela sanctions and the disruptive tactics of the rejectionist minority, the overall mood in Panama was upbeat, even celebratory. Leaders made reference to the xenophobic violence and religious intolerance plaguing other continents, and remarked with some pride that, in comparison, Latin America was a zone of peace that was also making progress, however inadequate, on human rights, poverty alleviation, and clean energy. With some procedural fixes, favorable political winds, and continued progress on concrete issues of mutual interest, inter-American relations could well continue their upward trajectory.

Read more about the Summit with Richard Feinberg's post on Cuba's multi-level strategy at the Seventh Summit of the Americas.

Introduction

President Obama has proposed expanding the Peace Corps and building a global network of volunteers, “so that Americans work side-by-side with volunteers from other countries.” Achieving this goal will require building on the success of the Peace Corps with a new combination of public and private initiatives designed to expand opportunities for volunteers to address critical global problems such as poverty, contagious diseases, climate change, and conflict.

We examine alternative service models, both domestic and foreign, and offer recommendations to the Obama Administration for harnessing the energy and skills of Americans eager to engage in volunteer work in foreign countries as part of a multilateral mobilization effort and smart power diplomacy.

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Over 200 delegates from 50 countries gather this week in Washington for the Presidential Summit on Entrepreneurship. The summit hosts entrepreneurs to teach and learn innovative ways to strengthen professional and social relationships between the U.S. and the Islamic world. During his first major address to the Muslim world, delivered in Cairo last June, President Obama pledged to increase engagement through entrepreneurship, exchange programs and multilateral service initiatives.

Volunteer-led development initiatives have begun to act on Obama’s call for citizen diplomacy and private-sector engagement. The Initiative on International Volunteering and Service at Brookings and the Building Bridges Coalition have fueled an emerging legislative initiative that calls for increasing the role of international volunteers in the U.S. diplomatic agenda and development programs. This Service World Initiative has drawn from Brookings research outlining options to advance the president’s call for multilateral service.

As seen last year, for the first time in history, the majority of the world’s population lived in urban areas. And this trend is accelerating at an unprecedented rate. By 2050, urban dwellers are expected to make up about 70 percent of Earth’s total population. These informed 21st century urban citizens demand 24-7 connectivity, smart electric grids, efficient transportation networks, safe food and water, and transparent social services. All these demands place a huge strain on existing city infrastructures and the global environment. Most affected by this rapid urban boom, are the emerging markets. So how do we tackle this development dilemma?

One way is for highly-skilled experts, from a range of countries, to volunteer their time in emerging markets to help improve economic development, government services and stimulate job growth. This type of pro-bono program has many benefits. It benefits the urban areas in these emerging markets by leveraging intelligence, connecting systems and providing near-term impact on critical issues such as transportation, water, food safety, education and healthcare. It benefits the expert volunteers by fostering their teamwork skills, providing a cultural learning experience, and broadening their expertise in emerging markets.

IBM, which chairs the Building Bridges Coalition’s corporate sector, hosts a range of volunteer-led global entrepreneurship programs that improve economic stability for small- and medium-sized businesses, increase technology in emerging markets and open doors for the next generation of business and social leaders. This program connects high-talent employees with growing urban centers around the world and fosters the type of leadership to help IBM in the 21st century.

Recently, IBM sent a group of experts to Ho Chi Minh City as part of its Corporate Service Corps, a business version of the Peace Corps. This was the first Corporate Service Corps mission to be made up of executives, and the first to help a city in an emerging market analyze its challenges holistically and produce a plan to manage them. As a result, the city has now adopted a 10-year redevelopment plan that includes seven pilot programs in areas ranging from transportation to food safety. IBM will also help the city set up academic programs to prepare young Vietnamese to launch careers in technology services. IBM will continue this program throughout the next couple years to evolve the next set of global business and cultural hubs utilizing the volunteer hours of some of its most seasoned experts.

The Presidential Summit this week will further Obama’s call to “turn dialogue into interfaith service, so bridges between peoples lead to action.” The policy initiative of the Building Bridges Coalition, coupled with entrepreneurial innovations such as IBMs, can foster greater prosperity and service between the U.S. and our global partners.