Saving Money or Improving Health? Reconsidering Payment Reform
KUSHAL T. KADAKIA, ZIRUI SONG (Milbank Quarterly 10/25/2022)
Medicare enrollment will exceed 76 million by 2030—a 19% increase from today. Amid this aging population, Medicare spending is expected to grow nearly 40% faster than spending in other insurance programs.1 To slow spending, policymakers have experimented with more than 50 alternative payment and delivery models through the Affordable Care Act (ACA).
Most models have aimed to slow spending and improve quality—thus increasing the value of care—but they have encountered common challenges. First, paying for process quality measures has been expensive, often offsetting savings and leading to additional spending without clear health improvements. Second, most value-based models have been evaluated based on an implied notion of “clinical non-inferiority”: whether reducing utilization can lower spending without producing worse outcomes. While this approach is aligned with lawmakers’ explicit focus on controlling spending, it may not have always aligned with patients’ definition of success, which is actual improvements in health.
This disconnect begs the question: Should Medicare consider payment models successful if savings are generated without observable improvements in beneficiary health? Conversely, if beneficiaries’ health outcomes improve under a model that was “financially non-inferior” (cost neutral) or even incurred excess spending for Medicare, should the additional cost of better health imperil the model’s broader adoption?
