Value-Based Payment in Medicare: Progress, Challenges, and Future Directions

Despite having the highest health care spending globally, the United States lags in key health outcomes compared to peer nations. Over recent decades, this concerning disconnect between spending and outcomes has spurred substantial national reforms focused on promoting "value" of care over "volume," prompting the development of numerous value-based payment models. In this analysis, the authors provide an overview of the experience with value-based payment efforts in the United States, particularly within the Medicare program. They outline and evaluate four main value-based care paradigms: public reporting programs, pay-for-performance models, episode-based payment models, and population-based payment models. Across these models, they argue that there has been mixed success in achieving cost reduction and quality improvements. Although some episode-based and population-based models have shown modest savings, the overall efficacy of value-based care reforms remains suboptimal, and many models have yielded unintended consequences that have exacerbated existing health disparities. Considering this evidence alongside the current and emerging threats to value-based payment efforts, we identify several key areas for improvement across these models and discuss a path forward for strengthening value-based payment and delivery system reforms, highlighting key strategies to ensure that future value-based payment models achieve the goals of fostering high-quality, cost-effective, equitable care.