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Alternative Payment Models (APMs) can address the limitations inherent in fee-for-service payment to support new approaches to health care delivery that produce greater value. But the models being tested are directly layered on top of fee-for-service architecture, specifically the Medicare Physician Fee Schedule. Shoring up that architecture to produce greater value, in combination with APMs, should be considered an integral part of the movement to value-based payment. We propose ending the split within the Centers for Medicare and Medicaid Services between the people managing the Medicare Physician Fee Schedule and those creating and testing APMs, with both groups advised by a revamped Physician-Focused Payment Model Technical Advisory Committee that covers both dimensions of creating greater value.

Medicare Part D prescription drug plans must offer medication therapy management to beneficiaries with multiple chronic conditions and high drug expenditures. However, plan sponsors have considerable latitude in setting eligibility criteria. Newly available data indicate that enrollment rates in medication therapy management among stand-alone prescription drug plans and Medicare Advantage drug plans averaged only 10 percent in 2012. The enrollment variation across plan sponsors-from less than 0.2 percent to more than 57.0 percent-was associated with the restrictiveness of their eligibility criteria. For example, enrollment was 16.4 percent in plans requiring two chronic conditions versus 9.2 percent in plans requiring three, and 12.7 percent in plans requiring the use of any Part D drug versus 4.4 percent in plans requiring the use of drugs in specific classes. This variation represents inequities in access to medication therapy management across plans and results in missed opportunities for interventions that might improve therapeutic outcomes and reduce spending. The new Part D Enhanced Medication Therapy Management model of the Centers for Medicare and Medicaid Services has the potential to significantly increase the impact of medication therapy management by aligning financial incentives with improvements in medication use and encouraging innovation., (Project HOPE—The People-to-People Health Foundation, Inc.)

Health spending growth in the United States for 2015-25 is projected to average 5.8 percent-1.3 percentage points faster than growth in the gross domestic product-and to represent 20.1 percent of the total economy by 2025. As the initial impacts associated with the Affordable Care Act's coverage expansions fade, growth in health spending is expected to be influenced by changes in economic growth, faster growth in medical prices, and population aging. Projected national health spending growth, though faster than observed in the recent history, is slower than in the two decades before the recent Great Recession, in part because of trends such as increasing cost sharing in private health insurance plans and various Medicare payment update provisions. In addition, the share of total health expenditures paid for by federal, state, and local governments is projected to increase to 47 percent by 2025., (Project HOPE—The People-to-People Health Foundation, Inc.)

Under the Affordable Care Act, the new Center for Medicare and Medicaid Innovation will guide a number of experimental programs in health care payment and delivery. Among the most ambitious of the reform models is the accountable care organization (ACO), which will offer providers economic rewards if they can reduce Medicare's cost growth in their communities. However, the dismal history of provider-led attempts to manage costs suggests that this program is unlikely to accomplish its objectives. What's more, if ACOs foster more market concentration among providers, they have the potential to shift costs onto private insurers. This paper proposes a more flexible payment model for providers and private insurers that would divide health care services into three categories: long-term, low-intensity primary care; unscheduled care, including unscheduled emergency services; and major clinical interventions that usually involve hospitalization or organized outpatient care. Each category of care would be paid for differently, with each containing different elements of financial risk for the providers. Health plans would then be encouraged to provide logistical and analytic support to providers in managing health costs in these categories.