Obama administration sets goals for Medicare’s shift to “value based” payment

BMJ 2015; 350 doi: (Published 27 January 2015) Cite this as: BMJ 2015;350:h486
  1. Michael McCarthy
  1. 1Seattle

Sylvia Burwell, the US health and human services secretary, announced on 23 January that the Obama administration aims to have 85% of all traditional Medicare fee for service payments tied to at least some quality measures by 2016 and 90% by 2018.

The administration also intends to have 30% of Medicare payments disbursed through alternative payment models, such as accountable care organizations (ACOs) and bundled payment arrangements, by the end of 2016, and it aims to increase that proportion to 50% by the end of 2018. About 20% of Medicare payments are currently disbursed through these payment models.

“Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a healthcare system that delivers better care, spends healthcare dollars more wisely and results in healthier people,” said Burwell.

Under the traditional fee for service arrangement, doctors and hospitals are paid for each service provided and each procedure performed, whether or not it helped or harmed the patient. Critics of the fee for service payment system say that it drives up the cost of care by rewarding providers for the volume of services they provide, not for the quality of those services.

In recent years Medicare has sought to increase the focus on quality by awarding bonuses to fee for service providers if they achieve certain quality benchmarks—such as how well they adhere to clinical guidelines—and imposing penalties when they fall short.

In the alternate payment ACO model a network of doctors and hospitals agree to provide care to a population of patients while meeting certain quality standards and cost control targets. ACOs typically seek to achieve these goals by focusing on primary care, prevention, and better coordination of care. In the bundled payment model, providers are reimbursed together for the entire “episode of care”—such as a hip replacement—in one lump sum, to encourage them to provide more cost effective care.

Robert M Wah, president of the American Medical Association, said that the administration’s goals were aligned with the association’s commitment to reform healthcare delivery. “We look forward to hearing more details behind the percentages HHS [the Department of Health and Human Services] put forward as well as their plans to reach these percentage targets,” said Wah.

Burrell said that, to promote the adoption of similar payment reforms in the private sector and in the state run Medicaid systems, her department was launching a new initiative called the Health Care Payment Learning and Action Network. The goal of the network will be to foster collaboration between government agencies, private payers, healthcare providers, consumers, and other stakeholders interested in adopting new payment models and care delivery systems. The network will hold its first meeting in March 2015.


Cite this as: BMJ 2015;350:h486

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