The Government Seeks to Change Medicare Reimbursements

Today, Medicare pays healthcare providers a fee in exchange for services which are rendered.  Most healthcare providers including hospitals and doctors either accept the fee which is offered by Medicare or negotiate independently with healthcare insurance providers and private parties for a different fee.   For years, many have argued that the Fee For Service model is inefficient, provides no value to the goal of improving healthcare, and is often unrelated to the actual costof services provided.

On January 26, 2015, Health and Human Services Secretary Silvia M. Burwell announced that the government’s Medicare reimbursement plan intends to change the model under which it reimburses healthcare providers.   It will abandon the traditional fee for service model and adapt a “quality” or “value based” model no later than 2018.  If it can be accomplished, this transition represents a sea change in the way healthcare providers are paid and healthcare providers of all types should sit up and take notice.

According to Burwell and others, providing reimbursement in exchange for improved quality of care, rather than simply paying for each individual  service without evaluating the outcome of the service, promotes the goals of building a healthcare system that delivers better care, spends healthcare dollars more wisely, and results in a healthier American population.

Ms. Burwell has set forth a timeline as follows:

  • By the end of 2016, 30% of traditional Medicare payments would be tied to quality or value for alternative payment models such as accountable care organizations or bundled payment arrangements;
  • By 2016, 85% of all such payments would be tied to quality or value in general;
  • By the end of 2018, 50% of traditional Medicare payments would be tied to such alternative payment models;
  • By 2018, 90% of all traditional Medicare payments would be tied to quality or value through programs such as hospital value based purchasing and the hospital readmission reduction programs.

Not wasting any time, Burwell announced the creation of a Healthcare Payment Learning and Action Network to work with private payers, employers, consumers, providers, states and Medicaid programs to expand the alternative payments models into their programs.

The details regarding how value will be measured, how those values will be compensated and other important criteria are yet to be worked out.  You can be sure that healthcare providers and insurance companies will participate in the debate in the coming months in order to protect their various interests.