The Obama administration unveiled an ambitious plan on Monday that will make historic changes to the way that doctors get paid. The ultimate goal is to tie more of doctors’ payments to the quality of care they provide, hopefully driving down the trillions of dollars that the U.S. currently spends on health services every year.
The reforms are targeted at Medicare, the government program that provides coverage for Americans over the age of 64. Most Medicare providers currently get paid through what’s called a “fee for service” system. They’re paid a flat free for every test or procedure they perform, regardless of whether those services actually improve their patients’ health.
Now, the administration wants to shift the program so that more of its payments are tied to health outcomes. Essentially, that means providers will be rewarded for keeping their patients healthy, and penalized for unnecessary services that don’t advance that goal. Proponents of payment reform are encouraged by the move — which they see as a serious step toward creating a health care system that’s based on the value, rather than the sheer volume, of services.
“It’s a really big deal for the largest insurer in the United States to signal to hospitals and doctors that it intends to move aggressively in this direction,” Chas Roades, the chief research officer at hospital consulting firm Advisory Board, told Vox.
The Affordable Care Act has been slowly moving in this direction over the past few years. The health law created alternative payment models — called “Accountable Care Organizations,” or ACOs — to incentivize providers to work together to improve patient care and cut down on costs. So far, there’s been some evidence that ACOs are successfully improving the quality of health care for Medicare patients. Some are also starting to generate cost savings. If ACOs save enough money, the participating providers earn bonuses, a goal that about a fourth of of them hit last year.
Under the policies announced by Health and Human Services (HHS) Secretary Sylvia Mathews Burwell on Monday, the administration will speed up this shift toward ACOs. Over the next four years, the department aims to increase value-based payments through ACOs by 50 percent in the Medicare program.
“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 health care dollars more wisely and results in healthier people,” Burwell said in a statement. “Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely.”
Health insurance companies, some of which have already started tying provider payments to health outcomes, are on board with the plan. Karen Ignagni, the president of America’s Health Insurance Plans and the lead advocate for the industry, called the reforms a “major step forward” for the health care system.
Other providers are more wary, concerned that there isn’t enough evidence that ACOs will accomplish their long-term goals and conscious of the fact that doctors may be spurred to provide fewer needed services in order to save money. In a statement, the American Hospital Association expressed hope that the payment changes will be phased in “in a thoughtful manner that is tailored to the specific needs of individual communities.”
“We’re just wanting to avoid a situation where a few years from now, where we’ve completely gotten rid of fee-for-service,” Suzanne Delbanco, the executive director of Catalyst For Payment Reform, a nonprofit organization that tracks reforms in the private sector, told CNN. “We don’t want to wake up and say, ‘Oh my gosh, we did it and we’re no better off.’”
Overall, there has been some evidence that the reforms included in the Affordable Care Act are starting to help contain health costs. Heath care spending has been growing significantly for decades — but in 2013, the most recent year for which we have data, it grew at the the lowest rate on record dating back to 1960. Thanks in part to some of those savings, the Congressional Budget Office revised down its estimate for the total cost of the health law’s coverage expansion by nearly $200 million between the fiscal years 2015 and 2019.