Major Changes to Medicare Coming for Senior Health Care
Policy + Politics

Major Changes to Medicare Coming for Senior Health Care

The Obama administration has announced a major change to the way the federal government pays doctors and hospitals under Medicare. It’s an historic attempt to shift away from the traditional, costly fee-for-service model and quell the ballooning costs of health care.

Here’s the plan: Starting next year, the federal government will begin paying Medicare providers based on their performance, rather than on the number of surgeries, check-ups or CT-scans they perform. Under the proposal, 30 percent of Medicare’s $362 billion in annual payments will be tied to performance. Health officials expect that will increase to 50 percent by 2018.

Related: If You Don’t Take Your Meds Should Your MD Be Punished?

Sylvia Mathews Burwell, secretary of Health and Human Services, said the goals are meant to drive transformative change.

Proponents of the pay-for-performance initiative say it is an effective way to slow health spending while improving the quality of care. It has the support of major industry trade groups and leaders, including the American Medical Association (AMA) and America’s Health Insurance Plans.

"Today's announcement by the U.S. Department of Health and Human Services aligns with the American Medical Association's commitment to work toward innovative care delivery reform that will promote high-quality and efficient care for our nation's seniors who count on Medicare, while reducing the administrative and regulatory burdens physicians face today.” Robert M. Wah, M.D., president of the AMA, said in a statement.

Patient advocate groups also threw their support behind the announcement.

Related:  Maryland Hospitals May Be Paid for Keeping People Out

“The transition away from fee-for-service is an important next step towards better care and lower costs in the Medicare program,” Joe Ditré, Families USA’s director of enterprise and innovation, said in a statement. “Since private insurers often follow Medicare’s lead, the announcement is likely to have a profound and positive impact.”

The plan focuses on patient outcomes. If patients fare well, their doctors are paid more; if the results are poor, doctors are paid less. The administration says about 20 percent of traditional Medicare payments are already going through similar programs that emphasize care, such as accountable care organizations and bundled payments. They hope to expand that reach significantly.


One unanswered question is tort reform. Is this plan placing doctors in a catch 22 if they don’t protect themselves by prescribing the scan, the medication or the surgery to protect themselves against lawsuits?

“Advancing a patient-centered health system requires a fundamental transformation in how we pay for and deliver care. Today’s announcement is a major step forward in achieving that goal,” America’s Health Insurance Plans (AHIP) CEO Karen Ignagni said in a statement.

Even so, questions remain on whether pay-for-performance programs actually achieve worthwhile results in quality as well as cost savings. In September, CMS released a report evaluating the ACA’s pilot programs and found mixed results. While the agency said patient results improved, cost savings were questionable.

Top Reads from The Fiscal Times: