As the largest payer for health services in the United States, Medicare has the potential to use its payment policies to stimulate change in the organization of care to improve quality and mitigate cost growth. This paper proposes a framework in which Medicare would offer an array of new bundled payment options for physician group practices, hospitals, and delivery systems, with incentives to encourage greater integration in the organization of health care delivery and the provision of more coordinated care to beneficiaries. These changes could also serve as a model for other payers to improve quality and efficiency throughout the health system.