The Centers for Medicare and Medicaid Services (CMS) is on a transformative journey to transition all Medicare beneficiaries into value-based care arrangements by 2030. While progress has been notable, experts warn that the initiative is at a critical inflection point. Decisions made in the coming months—particularly around financial incentives and program benchmarks—will determine whether CMS can successfully reach its ambitious target.
Progress and Challenges: The Current State of Value-Based Care
In 2021, CMS set its sights on having all Medicare beneficiaries enrolled in accountable care models within a decade. At that time, only 24% of beneficiaries were part of accountable care organizations (ACOs) or similar programs. As of January 2024, that number had grown to 24%, representing 13.7 million Medicare enrollees.
Despite this growth, the number of ACOs has barely increased, rising from 477 in 2021 to 482 today. This stagnation underscores the complexities of shifting from a fee-for-service model—entrenched in healthcare for nearly 60 years—to a value-based system that rewards quality and cost savings.
The Role of Incentives in Driving Adoption
One of the immediate hurdles CMS faces is the expiration of financial incentives for providers participating in advanced alternative payment models (APMs). These incentives, introduced under the Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015 (MACRA), include a 5% bonus on Medicare reimbursement. This bonus was extended temporarily, but without congressional action, it is set to expire this year.
Experts argue that removing this incentive prematurely would discourage provider participation in value-based models. Smaller organizations, which often struggle with the high costs of transitioning to APMs, would be especially impacted.
The “Benchmark Ratchet” Problem
Another significant challenge lies in how CMS calculates benchmarks for ACO performance. Under the current system, successful cost-saving ACOs face progressively stricter benchmarks, making it harder to achieve savings over time. Known as the “benchmark ratchet,” this mechanism can inadvertently penalize high-performing organizations, discouraging long-term participation.
CMS must address this issue to ensure that ACOs are rewarded for their success rather than burdened by it. Adjusting benchmarks to reflect achievable goals could sustain provider engagement and innovation.
Measuring Success: A Question of Metrics
The metrics CMS uses to evaluate value-based models are another area of contention. Currently, models must demonstrate a 95% confidence level in cost savings while maintaining or improving quality to qualify for expansion. While this rigorous standard ensures accountability, it also slows the rollout of new initiatives.
Experts suggest that CMS should adopt more nuanced metrics to measure success. For example, the American Academy of Family Physicians advocates for evaluating whether models attract new providers or improve patient experience. Expanding the criteria could provide a more holistic view of progress and encourage broader participation.
Lessons from CMMI’s Journey
The Center for Medicare and Medicaid Innovation (CMMI) has played a pivotal role in driving the value-based care agenda. Since its inception under the Affordable Care Act, CMMI has tested 49 models, approving only five for expansion. Critics argue that these efforts have increased spending by $5.4 billion without achieving the desired savings.
However, supporters note that CMMI has generated valuable insights into what works, particularly for high-needs populations. By borrowing successful elements from underperforming models, the agency has laid the groundwork for future innovations.
CMMI’s experience highlights the complexity of transitioning to value-based care. As Rob Saunders of Duke University’s Margolis Institute for Health Policy noted, “The last 20% will be the hardest.”
The Path Forward: Strategies for Success
To achieve its 2030 goal, CMS must address several critical issues:
- Extend Financial Incentives
- Congress should prioritize renewing financial bonuses for APM participants to maintain provider engagement.
- Revise Benchmarks
- Adjust the benchmarking process to prevent penalizing high-performing ACOs and ensure sustainability.
- Expand Evaluation Metrics
- Broaden success criteria to include provider participation growth, patient experience improvements, and long-term quality outcomes.
- Support Smaller Organizations
- Provide technical and financial assistance to smaller providers, helping them overcome the high costs of transitioning to value-based models.
- Promote Innovation
- Encourage experimentation with new care delivery models, leveraging lessons from CMMI’s past initiatives.
Conclusion: An Opportunity for Transformation
The road to universal value-based care is challenging, but CMS has made significant strides. By addressing financial, operational, and policy barriers, the agency can accelerate progress and create a healthcare system that prioritizes quality, equity, and cost-effectiveness.
Achieving the 2030 goal will require collaboration among policymakers, providers, and stakeholders. With the right adjustments, this ambitious vision can become a reality, transforming the future of Medicare and improving care for millions of Americans.
