Medicare Payment and Delivery Reform Policy Position Statement

Medicare’s movement from fee-for-service (FFS) toward alternative pay-for-performance models reinforce employer efforts to improve quality, outcomes, experience and efficiency in health care delivery.


January 01, 2024

Business Group on Health’s position statements on health policy issues impacting employer-sponsored health coverage.

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 others 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, currently covering more than half (51%) of all beneficiaries in 2023 – almost 31 million people out of 60 million eligible Medicare beneficiaries with both Medicare Part A and Medicare Part B – 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. However, it is 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 payment reforms, such as:

  • Continuing the work of the Center for Medicare and Medicaid Innovation (CMMI) to test promising APMs in both Medicare and Medicaid;
  • Encouraging CMMI to mandate certain payment models as those models prove to be effective;
  • Focusing 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;
  • Advancing successful pilots and models promoting financial sustainability, managing the total cost of care, focusing on population health, keeping people healthy and effectively treating them; and
  • Continued efforts by CMS to increase pay-for-performance mechanisms within the fee-for-service system to improve quality, eliminate waste, and reduce costs.

Medicare administrative reforms, such as:

  • Promoting Medicare Advantage innovations, including the ability to provide non-health services for beneficiaries to stay in their communities and reduce hospital admissions; and
  • Providing federal assistance to independent and smaller group practices that are committed to and making progress toward moving away from FFS toward value-based purchasing (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.

Reforms to increase transparency within Medicare, such as:

  • Adopting appropriate site-neutral payment reforms that align Medicare payment rates for services across the three main sites where patients receive outpatient care – (i) hospital outpatient departments, (ii) ambulatory surgical centers, and (iii) freestanding physician offices; and
  • Requiring all Medicare provider outpatient departments to obtain and utilize unique national provider identification numbers (NPINs) for claims administration and associated billing practices.


  • We can’t fix health care without fixing Medicare. As the largest single payer for health care in the US, Medicare plays an important role and must partner with the private sector to drive delivery transformation. Moving swiftly together toward APMs that have demonstrated success will improve quality and reduce wasteful spending.
  • Successful APMs will also reduce efforts by stakeholders to make up payment shortfalls in Medicare by shifting costs to employer plan sponsors. However, while APMs and other reforms are being tested, it will be important for these efforts to be constructed in ways that avoid cost shifting to the private sector.
  • 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.
  • The Medicare Payment Advisory Commission (MedPAC) projects Medicare spending to grow almost 5% faster than inflation over the next 10 years. Without changes in Medicare, the Medicare Part A Trust Fund, which pays for hospital care, is projected to begin depleting its reserves in 2031. It is imperative that Medicare get its fiscal house in order.
  • Employers and employees risk higher Medicare payroll taxes unless Medicare’s fiscal picture improves.
  • In its June 2022 report, MedPAC estimated expanding site-neutral payment policies in Medicare could generate $6.6 billion in annual savings for Medicare and taxpayers and lower cost-sharing for Medicare beneficiaries by $1.7 billion. Expanding site-neutral payment reforms would lower patient cost-sharing and lead to more consistent care.

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