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CMS Administrator: Medicare Should Move from Fee-For-Service to Value-Based Model

Published July 28, 2020

There are many who believe that Medicare should transition away from the fee-for-service model and closer to the value-based model of care. Count CMS administrator Seema Verma and the Medicare Payment Advisory Commission among them. 

Verma cited the vulnerabilities of Medicare’s fee-for-service model that have been partly exposed by the COVID-19 pandemic as evidence for change and described the current model as “insufficient” for seniors even during a post-COVID world. 

“It is clear that our fee-for-service system is insufficient for the most vulnerable Americans because it limits payment to what goes on inside a doctor’s office. The transition to a value-based system has never been so urgent.” – Seema Verma, CMS Administrator1

What is fee-for-service compared to a value-based payment model?

“Fee-for-service” is a system where health care providers are paid separately for each service rendered. Original Medicare (Medicare Parts A and B, provided by the federal government) operates as a fee-for-service program. 

“Value-based” models reward health care providers with incentive payments for the quality of care they administer. Many Medicare Advantage (Medicare Part C) plans – which are sold on the private insurance market as an alternative to Original Medicare – utilize a value-based model. 

Value-based contracts pay providers based on the health outcomes of their patients rather than simply the services rendered. Some value-based insurance plan carriers share financial risk with doctors, hospitals, labs and other participating providers.

“Vulnerable” Americans exposed by COVID-19

The “vulnerable” Americans referenced by Verma allude to the differing rates of infection and death from COVID-19 among racial minorities and people who have lower incomes.

Research shows that minorities and people with low incomes have been hospitalized for COVID-19 at a disproportionate rate

“The disparities in the data reflect longstanding challenges facing minority communities and low income older adults, many of whom face structural challenges to their health that go far beyond what is traditionally considered ‘medical,’” Verma said. 

In its June 2020 report to Congress, the Medicare Payment Advisory Commission (MedPAC) called for CMS to accelerate its shift to value-based payment systems. MedPAC is a nonpartisan legislative branch agency that provides the U.S. Congress with analysis and policy advice about the Medicare program. 

Today, more than one out of every three Medicare beneficiaries is enrolled in a Medicare Advantage plan, a rate that nearly doubled over the last decade.

Learn more about how Medicare is changing and stay up to date by reading more Medicare news.

 

1 CMS. (Jun. 22, 2020). Trump Administration Issues Call to Action Based on New Data Detailing COVID-19 Impacts on Medicare Beneficiaries [press release]. Retrieved from www.cms.gov/newsroom/press-releases/trump-administration-issues-call-action-based-new-data-detailing-covid-19-impacts-medicare.

2 Kaiser Family Foundation. (June 6, 2019). Medicare Advantage Fact Sheet. Retrieved from https://www.kff.org/medicare/fact-sheet/medicare-advantage.