How Medicare Can Lead Efforts to Reward Value, Not Volume

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As many observers have noted, one of the most serious flaws in the U.S. health care system is the way health care is paid for: the predominant fee-for-service system rewards providers for the volume of services delivered, not necessarily for care that is more effective and efficient.

In a new Commonwealth Fund issue brief, experts argue that the health care system as a whole would do well to emulate top-performing providers that embrace accountability for health care quality, outcomes, and cost. And they say the Medicare program — the nation's largest payer for health care — is the logical place to start.

The authors, who are based at the Kaiser Permanente Institute for Health Policy, The Commonwealth Fund, and the Council of Accountable Physician Practices, discuss policies that could begin to remove the adverse incentives embedded in the current payment system and put in place incentives that encourage better care and better value. One important step, they say, is for the government to support the development and spread of "accountable care organizations" — including multispecialty group practices and integrated delivery systems — that assume responsibility for quality and cost across the continuum of patient care.

"Given the Obama administration's push for health reform, Medicare should be open to a variety of methods to encourage greater integration in local delivery systems," the authors say. "Moreover, if Medicare engages in such initiatives, other payers can be expected to follow suit."