Blog Post March 5, 2014 Meaningful Use Incentive and Penalty Scenarios: Medicare Authors ECG Management Consultants CMS recently released its attestation data from the meaningful use (MU) program, generating widespread speculation about MU dropout rates and the future of attestation trends. Dropout rates from Year 1 to Year 2 for Medicare are roughly 17%, and surveys have indicated that about 15% of providers do not plan to attest in Stage 2. Given these statistics, providers should consider how skipping an attestation year could lead to future penalties and diminished incentives.Guide to Medicare Penalty and Incentive RulesMU incentives are paid soon after completing attestation, often in the same year. However, penalties are implemented with a lag of 2 years through 2017. So, dropping out in 2013 means an eligible professional (EP) will see a penalty in 2015. And not starting at all by 2014 means an EP will see penalties in both 2015 and 2016 (as a result of not attesting in 2013 and 2014 respectively). This creates dozens of incentive/penalty permutations across the Medicare award years.The first penalties begin in 2015, while incentives are paid out across 5 years beginning in 2011 and ending in 2016. For providers who attested originally with the Medicare program, there are a few key program rules that determine the impact of dropping out:Penalties increase by 1% each year unless fewer than 75% of EPs nationally achieve MU by 2018; otherwise, the penalty caps at 5%.Medicare penalties only grow in years that EPs do not attest. So, if the first dropout year is 2013, the penalty in 2015 is 1%. If the provider resumes participation and attests in 2014, the EP avoids any penalties in 2016. Dropping out again in subsequent years incurs another penalty, implemented 2 years after the next dropout year, with the penalty increasing by 1%.Dropout years count toward the maximum allowed number of years of program participation for both incentive payments and attestation requirements. So, an EP who attests in 2011 and then drops out in 2012 forfeits the 2012 payment and cannot make it up. The EP can attest again in 2013, based on the stage and year requirements of the third year of participation, and receive the third payment year incentive.Medicare Penalty and Incentive ScenariosThe graphic below shows the impact of attestations and dropout years across a variety of EP scenarios. There are dozens of incentive and penalty scenarios that providers should understand when considering MU participation and dropouts in order to properly anticipate CMS compensation.The scenarios presented above only include Medicare attestation considerations. The impact of Medicaid/Medicare switches and Medicaid dropouts will be discussed further in a future post.Given the variety of potential combinations of incentives and penalties, EPs should review the guidelines and scenarios carefully prior to skipping a year of attestation or dropping out of the MU incentive program altogether.