Fee-For-Service, Accountable Care Organizations, And Medicare Advantage: Why?

This Perspective discusses the fiscal challenge facing Medicare and how that challenge may be differentially met by fee-for-service, accountable care organization (ACO), and Medicare Advantage (MA) payment systems. The non-MA part of Medicare includes both fee-for-service and ACO payment systems and is sometimes referred to as traditional Medicare. Fee-for-service, although in need of reform, is inherently ill suited to improving the efficiency of care delivery. MA and ACOs offer more promise, but design issues related to MA payment policy and ACO program features have limited their ability to reduce program spending. In the case of MA, which is paid more by Medicare than would be spent if beneficiaries were in traditional Medicare, the core questions are how much value is created by the added benefits that higher payment helps finance, and what would be lost If MA payment were changed. In the case of ACOs, the key question is how program design can build on the demonstrated ability of some ACO models to provide care more efficiently and save money.