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Value-based payment — the bipartisan health care win America needs

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One of health care policy’s current parlor games is over: The Trump administration will move forward with federal support for value-based payment for health care services.

In a recent op-ed in the Wall Street Journal, Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS), expressed strong support for value-based payment, including the powerful testing laboratory that is the Center for Medicare & Medicaid Innovation (CMMI).

{mosads}This is welcome news and a notable development. Here’s why. Like most health insurers, Medicare pays for most medical services without regard for outcomes, the so-called fee-for-service system. By contrast, value-based payment aligns payments with the desired outcomes of better health, better care and lower costs.


Uncertainty has existed around whether value-based payment would be a Trump administration priority. Verma’s declaration of support sends an important signal that the federal government will remain a meaningful partner to the providers and payers working to implement value-based models in commercial markets.

Medicare accounts for 20 percent of all health care spending, and thus sets the tone for other payers. Without ongoing federal support, private sector momentum toward value could slow and maybe even lead to backsliding by some organizations.

The Health Care Transformation Task Force, a consortium of patients, providers, payers and purchasers dedicated to accelerating the pace of value-based transformation, applauds administrator Verma’s leadership. Our members include regional Blues plans and national insurance carriers, large health systems and physician-directed community-based providers, business coalitions and patient advocates all committed to transforming how healthcare is paid for and delivered.

We too support value-based payment models, especially those that are patient-centered and provide better care, better health and reduce the total cost of care at or below GDP growth.

As the private sector evolves to value-based payment, it will be important for policymakers to reiterate their support, and recognize the significant investments being made and its positive economic impact. Further, policymakers and the health care sector should collaborate to clarify a common definition of “value.”

CMS seeks public input on the future direction of CMMI. This presents an opportunity to build a new pathway with the private sector that favors consumers and competitive marketplaces. CMS should carefully evaluate existing models, many of which have required significant stakeholder investment and don’t necessarily lend themselves to overnight success, but which nonetheless show signs of long-term promise.

The Trump administration will look to put its stamp on CMMI and the types of models it tests going forward. However, it would be unwise to wipe the slate clean. Some models, such as accountable care organizations and clinical episode payments, are reporting positive results. They also have bipartisan roots going back to the George W. Bush administration. CMS should not throw out the baby with the bathwater as it looks to take CMMI in a new direction.

There are several reasons to be optimistic about the transition to value-based payment. The progress to date has contributed to record low per capita increases in health care spending since the great recession of 2009.

Over the first three years of the Medicare Accountable Care Organization program, 428 participating Shared Savings Program ACOs serving 9.7 million beneficiaries reduced spending by $1 billion. CMS reports that a majority of clinical episode models under the Bundled Payment for Care Improvement program showed first year savings. For example, savings per orthopedic surgery episode at BPCI-participating hospitals was $864 per episode compared to non-participating hospitals. And we’ve only just begun.

Moving forward, CMS should incentivize new entrants by making the financial arrangements more attractive. At the same time, it should require participants to accept increased accountability and financial risk as a condition of continued participation in value-based models.

We support CMS’s desire to find ways to reduce the programmatic and measurement reporting burden associated with certain value models and remove regulatory barriers to innovation. Both will help increase participation. We also share CMS’s goal of empowering consumers with greater choice and high quality insurance and health care service offerings. To date, Medicare models have focused on providers and payers and need to redirect that focus more to patients and consumers.

The Task Force is a private sector accelerator of transformation. Administrator Verma’s message should embolden our members and other stakeholders to push forward apace with their transitions.

Yet, it’s time for all stakeholders to double down on their commitments to change their systems, fortify the necessary investments, and hire the right people to do the essential work that is now beginning to bear real fruit. With CMS as our partner, a sustainable value-based payment system that can drive better, more affordable health care is within our reach.

David Lansky, CEO, Pacific Business Group on Health and Chair, Health Care Transformation Task Force and Jeff Micklos, Executive Director, Health Care Transformation Task Force.

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