AARP Hearing Center
Background
Value-based purchasing (VBP) in Medicare is a term that describes a variety of payment methods. They all share a common goal of measuring and rewarding high-quality and cost-effective health care delivery. This approach makes health providers accountable for the care they provide. Various VBP strategies use different methods. For example, some use financial incentives to reward providers for desired activities or outcomes or link provider payments to performance on quality measures. Others use financial or other incentives to encourage consumers to choose high-performing providers. Evaluation of the effects of VBP initiatives on Medicare spending and the quality of care requires timely data, meaningful outcome measures, large enough rates of beneficiary participation to yield valid estimates of a program’s impact, and well-matched comparison groups.
The Center for Medicare & Medicaid Innovation (CMMI), established in 2010 by the Affordable Care Act, tests new ways to deliver and pay for health care services, including VBP strategies. In 2021, CMS charted a 2030 goal for CMMI. The goal is that by 2030, all Medicare beneficiaries who are enrolled in Parts A and B of Medicare (including both people enrolled in Traditional Medicare and those in MA will be cared for by providers in a value-based care arrangement with accountability for quality and total cost of care.
Incentives directed at providers: As a rule, value-based payment creates incentives for reporting or improving quality. This is because providers are paid based on how they perform on a set of measures. For example, one approach is to pay higher bonus payments to providers or health care organizations that demonstrate higher quality and efficiency. Another approach requires providers to meet quality benchmarks before benefiting from payment incentives (such as shared savings in which providers get a portion of any Medicare savings relative to a specified amount). Conversely, providers or health care organizations that perform poorly on quality measures may be subject to penalties, such as not receiving a shared savings payment or the denial of a scheduled payment increase.
Incentives directed at beneficiaries: An example of a consumer incentive related to value or cost would be establishing different cost-sharing levels to steer beneficiaries to specific provider networks that meet certain requirements for quality and efficiency. Medicare has little experience with this type of incentive directed at beneficiaries.
(Medicare does include, however, some other types of incentives for beneficiaries, such as not requiring cost-sharing for certain preventive health care services. In addition, in some of Medicare’s innovative payment and delivery models, participating health care organizations are permitted to offer some limited financial incentives designed to encourage people to manage their health care, such as gift cards for individuals who take part in a chronic-care management program.)
If Medicare implements beneficiary incentives, it must ensure that they do not adversely affect beneficiaries.
First, the design and implementation of incentives should be evidence-based. For evidence to be applicable in benefit design and useful in patient and clinician decision-making, it must be clear under what circumstances and to which patients this evidence applies. Evidence that supports the incentive must be disclosed to patients and providers, including when and to whom it applies.
Second, the effects of consumer incentives on beneficiaries must be carefully considered. Consumer incentives must produce high-quality, safe, and efficient care. They should not create barriers to care or provider access or deter individuals from obtaining services. The Centers for Medicare & Medicaid Services (CMS) should monitor consumer incentives to protect beneficiaries from adverse effects. CMS should also assess the impact on vulnerable beneficiaries, such as those who are frail, those in the oldest age groups, groups that are discriminated against, as well as those with cognitive impairments or with poor health-literacy or decision-making skills.
It is essential to assess how incentives that steer individuals to certain providers, networks, or services affect beneficiaries’ decisions. Incentives can potentially have a positive effect. For example, they could encourage more use of preventive services, better management of chronic conditions, or the selection of high-quality providers. But incentives may also potentially have negative consequences, such as impeding access to care, making a particular service unaffordable, shifting costs to individuals or their families, or leading to a poor outcome.
Third, achieving the desired response to appropriately designed consumer incentives requires that consumers be well-informed. Consumers need information to make informed decisions and manage their care, including information that compares providers within and across health care settings. The information must be valid, reliable, and easily understood by the diverse Medicare population to help beneficiaries differentiate between high- and low-performing clinicians and institutions.
Therefore financial incentives aimed at consumers (or their intermediaries) should be phased in gradually, with ongoing monitoring and evaluation (see also Private Health Plans: Managed Care).
VALUE-BASED PURCHASING: Policy
VALUE-BASED PURCHASING: Policy
Alignment of the health care system
Medicare should work with purchasers and payers in the public and private sectors to align their respective incentive programs. Alignment would ensure that the entire health care system is focused on the same quality, safety, and efficiency objectives.
Medicare and the private sector should implement incentives consistent with the National Quality Strategy. The National Quality Strategy is led by the Agency for Healthcare Research and Quality for the Department of Health and Human Services. It is intended to align goals for better health care across all health programs.
Provider incentives
Medicare should focus on incentives that financially reward providers and practitioners who improve care, allocating higher payments when they achieve high quality or demonstrate improvement, and consider penalties when they fail to meet specified minimum performance criteria.
Medicare should use objective evidence to inform provider incentives. As knowledge accrues, incentives should be updated and refined to enable Medicare to target incentives to achieve desired outcomes.
Medicare should encourage clinicians to ensure that patients receive support services to achieve healthy behaviors and successfully manage their conditions.
Medicare should offer clinicians the tools and technical support needed to improve quality and assist patients in adopting healthy lifestyles.
Beneficiary incentives
Policymakers should employ selective use of incentives for evidence-based services in Medicare to encourage beneficiaries to seek high-quality, efficient, safe, and equitable care. The incentives should result in reduced or eliminated cost-sharing.
Beneficiary incentives in Medicare should neither reduce access to health care nor create barriers to care by imposing unaffordable cost-sharing charges.
Medicare should educate beneficiaries to understand that quality and resource use vary by provider and that quality can be measured and improved. Educational information should be designed in conjunction with the dissemination of comparative information available at medicare.gov. That data compares provider performance in several settings, demonstrates quality differences between and among providers and practitioners, and helps beneficiaries make more informed decisions based on providers’ quality, safety, and efficiency.
Medicare should continue to improve and widely disseminate educational materials for consumers. Materials should be sensitive to the linguistic and cultural needs of the target population. And they should also consider the target population’s health-literacy and decision-making skills. Medicare should conduct outreach to help beneficiaries understand their role in improving health care quality and efficiency and the importance of adopting healthy behaviors, such as using evidence-based support tools and consumer engagement.
Before implementing differential cost-sharing for consumers, Medicare should give adequate notice to beneficiaries of its intention to do so.
The Centers for Medicare & Medicaid Services (CMS) should evaluate the impact on beneficiaries and program resources to determine whether consumer incentives achieve expected outcomes. Medicare should not alter cost-sharing requirements to encourage beneficiaries to seek care from high-performing providers and practitioners unless there is strong evidence that the quality of care provided will improve. There should also be an indication that savings will result immediately or over time. A reasonable transition period should be allowed for beneficiaries to demonstrate their ability to use and act on comparative information.
Protections and safeguards for cost-sharing and consumer incentives
Medicare should not use incentives to discriminate based on a beneficiary’s health status, lifestyle, or behaviors. Health status or failure to achieve specified outcomes should not trigger higher premiums, increased cost-sharing, or other charges.
Cost-sharing measures should encourage the appropriate use of high-value prescription drugs (brand name or generic) based on the clinical benefits achieved.
Cost alone is an inadequate measure of providers’ and clinicians’ performance. It must not be used as the sole determinant of value in designing incentives.
CMS should ensure that differential cost-sharing designed to encourage particular behaviors works as intended through improved quality and reduced costs. They should actively and routinely monitor performance as well as beneficiary impact. CMS should look for any unintended consequences (e.g., barriers impeding access to care, barriers to accessing care from high-performing providers, or inability to afford care due to high cost-sharing charges) that may arise when value-based purchasing is implemented among all population groups. This should include members of groups who are discriminated against, people with low incomes, and members of other vulnerable subpopulations. If unintended consequences are identified, CMS must take immediate action to stop them.