Payment and Delivery System Reform in Medicare

Policymakers, health care providers, and policy analysts continue to call for “delivery system reform”—changes to the way health care is provided and paid for in the United States—to address concerns about rising costs, quality of care, and inefficient spending. The Affordable Care Act (ACA) established several initiatives to identify and test new health care payment models that focus on these issues. Many of these ACA programs apply specifically to Medicare, the social insurance program that provides coverage to 55 million Americans age 65 and older and younger adults with permanent disabilities.

This Primer describes the framework and concepts of three payment models that CMS is currently testing and implementing within traditional Medicare—medical homes, ACOs, and bundled payments. Combined, these three models account for care provided to about 10 million Medicare beneficiaries and are frequently cited by media, researchers, and policymakers as current examples of ongoing delivery system reforms. Within each of these three broad models, the Centers for Medicare and Medicaid Services (CMS) is testing a variety of individual payment approaches and program structures. This Primer reviews each of the models, including their goals, financial incentives, size (number of participating providers and beneficiaries affected), and potential beneficiary implications. It also summarizes early results with respect to Medicare savings and quality.