Ask The Advisor: What Did My Member of Congress Mean By That?

Ask The Advisor: What Did My Member of Congress Mean By That?

What Did My Member of Congress Mean By That?

Q:  What does it mean when a Member of Congress says he favors changing Medicare from a “fee-for-service” model to one where the patients would pay based on health outcomes?  Is he suggesting that Medicare should stop covering treatments if the patient can’t or doesn’t improve?


A: Your Member of Congress appears to be referring to “value-based healthcare.”  The idea is that by keeping people healthy we can reduce government spending on healthcare.

Medicare is structured to pay more to providers based on how sick people are — not on making them well.  Yet about one-half of all adults have at least one chronic condition, which is not only the most costly type of health problem to treat over time, but also the most preventable.

Medicare and many state Medicaid programs are in the process of transitioning to value-based medicine that would change the way government healthcare programs pay for care.  Doctors and healthcare providers are given incentives to improve health and to reduce the incidence of chronic disease — in order to lower spending on healthcare and provide better care at a lower cost.  There’s emphasis on giving providers single payments for a “bundle of services” instead of paying for each service, checkup or X-ray. This reimbursement system differs from traditional fee-for-service Medicare, as well as Medicare Advantage plans’ “capitated” payments, in which providers are paid more for sick patients, regardless of health outcomes.

Proponents of value-based healthcare say:

  1. Patients would spend less to achieve better health.  Value-based care systems focus on helping patients to recover from illness and on managing or avoiding chronic disease.  The aim is to decrease the need for doctor visits, medical tests and procedures, and to reduce the amount of money spent on prescriptions while improving health.  Value-based care encourages health providers to spend time on prevention-based services in order to focus more efforts on managing chronic disease with the goal of reducing costs like emergency room visits and hospitalizations.
  2. Healthcare would be more efficient and convenient for patients.  Value-based payment systems provide incentives for health providers to make it easy for patients to get all the services related to managing their condition in one “medical home.”  Payments to providers are “bundled,” covering the patients’ full care cycle, or for chronic conditions covering longer periods of time like a year or more.
  3. Lower spending on prescription drugs.  Under our current Medicare system, experts warn that Americans are taking too many unnecessary drugs for dubious reasons.  A value-based system would tie the price of prescription drugs to its value in the treatment of the patient.  For example, patients with high blood pressure would receive their blood pressure medications for the lowest price or even no co-pay.  Value-based systems could lead to reducing the number of unnecessary prescriptions and over-the-counter medications that patients take, while improving their health.

The jury is still out on value-based health systems, and whether they can save any significant amount of money remains to be seen.  The Congressional Budget Office issued a recent report outlining a number of issues and unintended consequences such as providing an incentive for providers to improve their “quality rankings” by avoiding sicker patients.  Critics say that the system places a new burden on primary care doctors that would potentially punish providers financially for patients’ bad health habits and behaviors.


Sources:  “Issues and Challenges In Measuring And Improving The Quality Of Health Care,” The Congressional Budget Office, December 2017.  “What Is Value-Based Healthcare?” NEJM Catalyst, January 1, 2017.  “After Single Payer Failed, Vermont Embarks On A Big Health Care Experiment,” Carolyn Johnson, The Washington Post, September 17, 2017.