Medicare Payment Overhaul is in the Works

The Obama Administration recently announced a rapid reconstruction of the American Medicare system by the year 2018. The president intends to change the way that the enormous Medicare program makes payments to hospitals and physicians, shifting away from a “fee-for-service” system, which simply encourages to see a large volume of patients rather than deliver each one the best possible care.

According to the LA Times, Medicare will start making 30% of its direct payments to hospitals and doctors through alternative payment models. These models offer a rewards system to doctors and hospitals that provide care to patients under budget while simultaneously delivering excellent care to the patients. The overall goal of this transition is to transform the American healthcare system into a quality-based institution. The LA Times also reports that such a change to the Medicare system is paramount, as finding an efficient way to pay for healthcare will become more and more important as the baby boomer generation starts to retire.

In 2014, only 20% of Medicare spending (about $72 billion, according to Kaiser Health News) was done through alternative payment models. The shift to 30% will raise the total sum to about $113 billion. On January 26th, U.S. Secretary of Health and Human Services Sylvia M. Burwell wrote an article in the New England Journal of Medicine in which she announced that by 2018, she hopes to have 50% of all Medicare payments done through alternative payment models.

The ramifications of this plan are already being felt throughout the private sector of the healthcare industry, as commercial insurers and prominent employers have begun to invest in new payment models, the LA Times reports.

Most influential figures in the healthcare world have heralded this as a progressive and necessary step. Ensuring that the Medicare system spends its money wisely is remarkably important, as this year it is estimated that the program will spend over $600 billion to insure nearly 50 million different disabled and retired Americans. Kaiser Health News reports that with these aforementioned changes implemented, 90% of all Medicare spending will be linked to quality of care in some regard.

Comments are closed.