Business Group on Health's Position Statement on Payment and Delivery Reform

Medicare has embarked on an effort to move away from fee-for-service (FFS) model and toward pay-for-performance within the FFS system as providers transition toward APMs.


October 20, 2020

Medicare has embarked on an effort to move away from the fragmented, inefficient legacy fee-for-service (FFS) model of paying for health care toward alternative payment models (APMs) in the long-term and toward pay-for-performance within the FFS system as providers transition toward APMs. Employers, health plans, and other in the private sector have also led efforts to drive alternative payment and delivery models among providers they contract with.

On a parallel track, growth in the Medicare Advantage (MA) program, projected to cover 24.4 million people in 2020 representing 36% of Medicare beneficiaries, and policy changes to increase its flexibility for innovation are also positive steps toward transforming Medicare.

These efforts by Medicare are important to employers because they reinforce similar employer actions to drive better quality, outcomes, patient satisfaction, and efficiency in health care delivery. It is also important that Medicare’s efforts fundamentally change the payment and delivery model for all and not result in further cost shifting to the commercial market.


We strongly support and encourage Medicare to:

  • Continue the work of the Center for Medicare and Medicaid Innovation (CMMI) to test promising APMs in both Medicare and Medicaid;
  • Focus on scaling up proven, successful models rather than a proliferation of models. Encourage total cost of care models, comprehensive primary care plus, the diabetes intervention model, and the pioneer and advanced ACO models, which have demonstrated success and hold promise;
  • Advance successful pilots and models using global budgets, managing the total cost of care, focusing on population health, keeping people healthy and effectively treating them;
  • Promote Medicare Advantage innovations, including the ability to provide non-health services for beneficiaries to stay in their communities and reduce hospital admissions; and
  • In the interim, CMS should continue to increase pay-for-performance mechanisms within the fee-for-service system to improve quality, eliminate waste, and reduce costs.

We strongly encourage that federal COVID-19 assistance for health care be directed to:

  • Independent and smaller group practices facing significant revenue shortfalls due to the pandemic that are committed to and making progress toward moving away from FFS toward VBP models, prioritizing care innovations that result in improved quality, promote care coordination, infrastructure to support telehealth and home-based care, more convenient access, patient engagement tools, better outcomes, and less costly approaches to effective care; and
  • Other providers that already have or are moving toward APMs and demonstrating reductions in wasteful spending.

Why It Matters

  • We can’t fix health care without fixing Medicare. As the largest single payer for health care in the US, Medicare must lead the way and partner with the private sector to drive delivery transformation. Moving swiftly together toward APMs that have demonstrated success will not only improve quality and reduce wasteful spending but will also reduce cost-shifting or efforts to make up payment shortfalls in other areas.
  • Without changes in Medicare, the Medicare Part A Trust Fund, which pays for hospital care, will begin depleting its reserves in 2026. It is imperative that Medicare get its fiscal house in order.
  • Spending on health care is reaching almost 20% of the GDP and is crowding out expenditures for other important priorities including infrastructure and education. It is also encompassing an ever-larger part of the budget in the absence of major improvements in the effectiveness and efficiency of care.
  • Employers and employees risk higher Medicare payroll taxes unless Medicare’s fiscal picture improves.

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