Goals

The U.S. health care system is the most expensive in the world. National health spending is projected to double from $2.5 trillion in 2009 to $5.0 trillion—21.3 percent of our nation's gross domestic product—by 2020. Yet, this high level of spending does not produce commensurate returns in access, health outcomes, or value. To achieve a high performing health system, we must curb spending growth and improve the way health care is provided. Payment system reform is critical to accomplishing these objectives. As a nation, we need to align incentives so that health care providers are rewarded for high-value care rather than a high volume of services. Rewarding value over volume will also encourage the development of a more integrated health care delivery system. The Commonwealth Fund, through its Program on Payment System Reform, supports analysis and the development of policy options to accomplish these goals. Areas of interest include:

• reforming the existing payment structure to improve the alignment of incentives and to provide a base for more comprehensive payment reform;
• modeling and analyzing the potential impact of alternative options for payment reform in Medicare and throughout the health system;
• using payment reform to encourage the development of new models of health care delivery that provide better and more coordinated care; and
• using comparative effectiveness research to support better decision-making by providers, payers, and patients.
  

History

The Program on Payment System Reform grew out of the Fund's former Program on Medicare's Future, which was dedicated to improving Medicare's ability to protect access to care for the nation's elderly and disabled, particularly the most vulnerable among them, and enhancing Medicare's role as a platform for the development, implementation, and evaluation of efficiency and quality improvements that could be applied to the health care system as a whole.

Projects

The Program on Payment System Reform is currently supporting the following projects:

Understanding the Quality and Performance of Medical Groups. Elliott Fisher, M.D., M.P.H., of Dartmouth College and colleagues are investigating the characteristics of medical groups and how they relate to population-based measures of health system performance at the regional level.

Promoting Integrated Delivery Systems for Medicare's Most Vulnerable Beneficiaries. Melanie Bella, M.B.A., of Center for Health Care Strategies, Inc., and colleagues are working with seven states to provide technical assistance in developing and implementing mechanisms to improve alignment of currently conflicting incentives between Medicare and Medicaid in the treatment of beneficiaries who are eligible for both programs.

Using Cost-Effectiveness Research to Improve Value in the Medicare Program. Peter Neumann, Sc.D., of Tufts Medical Center and colleagues are examining opportunities to improve the value of Medicare spending by identifying services with high costs relative to the outcome achieved as well as services that could produce more cost-effective outcomes. The researchers will also develop estimates of the savings and improved outcomes that are possible from allocating Medicare resources more appropriately.

Improving Medicare's Performance Through Reform of Its Benefit Structure and Provider Payment System. Stephen Zuckerman, Ph.D., of the Urban Institute and colleagues are investigating policy options for helping low-income beneficiaries access a more unified and comprehensive set of Medicare benefits. They also are developing and modeling the impact of approaches to improving the way Medicare pays physicians.

Implications of Benefit Design in Medicare Prescription Drug Plans. John Hsu, M.D., M.B.A., M.S.C.E., of the Center for Health Policy Studies at Kaiser Permanente of Northern California and colleagues are investigating the impact that Medicare Part D drug plans have had on beneficiaries, looking at the characteristics of enrollees in different types of plans and the impact that plan type has on drug utilization and spending.

Analyzing Medicare's Payment Policy for Hospital-Acquired Conditions and Its Impact on Safety-Net Hospitals. Megan McHugh, Ph.D., of Health Research and Educational Trust is examining the potential impact of Medicare's new payment policy on hospital-acquired conditions in safety-net and other hospitals. She will also identify strategies different types of hospitals are using to respond to the resulting incentives, reduce the incidence of hospital-acquired conditions, and develop quality improvement programs.

Future projects will focus on Medicare and private payment initiatives that can reduce cost growth and improve health care delivery, as well as modeling the potential impacts of payment reform policy options.

Featured Item

Medicare Advantage Private Plans: Assessing the Value for Elderly and Disabled Beneficiaries. Brian Biles, M.D., M.P.H., of George Washington University has for several years been examining the Medicare Advantage program for private plans to determine the magnitude of plan payments relative to the costs that plans face, what the Medicare program and its beneficiaries receive for those payments, and the implications of alternative payment policies.

Dr. Biles has most recently produced a paper on “The Continuing Cost of Privatization: Extra Payments to Medicare Advantage Plans Jump to $11.4 Billion in 2009,” coauthored by Jonah Pozen and Stuart Guterman, which examines the implications of increasing Medicare payments to private Medicare Advantage plans, and the distributions of those extra payments. The authors find that extra payments will total $11.4 billion in 2009, and that there is wide variation in the distribution of extra payments across states.

To apply for a grant from the program, visit the Applicant and Grantee Resources page.