Whether you’re a field sales rep, an account executive, a medical liaison, or a customer service manager, you are expected to know a great deal about the health care delivery system—and it can be complicated.

The health care market is rapidly changing. To stay ahead of the competition and to establish credibility with your customers, you need to be viewed as a valuable resource. Building that trust starts with having a firm understanding of the health care system in a changing environment.

This briefing is part one of a five-part educational series, which introduces key elements that make up our health care system and the transition from fee-for-service to value-based care (also called value-based payment).

In this first part, Introduction to Medicare payment reform, you’ll learn what Medicare is and how it works, the problems with fee-for-service, and why value-based care is seen as the solution. Check out the below article to get a preview and download part one of our complimentary resource to learn more.

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Why move to a value-based care model?

U.S. health care spending is rising fast and is expected to reach nearly $6.0 trillion by 2027 with today’s current laws and infrastructure. To put that in perspective, health care spending was 17.9% of U.S. gross domestic product (GDP) in 2017 (≈$3.5 trillion) and is expected to grow to almost 20% by 2027 (≈$5.7 trillion). The takeaway: U.S. health care spending is high, and it’s growing faster than the overall economic growth of the country.

What is fueling the increase in health care spending?

There are a number of factors, but a few of the main drivers include population aging, population growth, and disease prevalence. Not only is the overall number of people who may require health care growing, but that growth is also creating a larger population of seniors (age 65+), who tend to have a high need for medical care.

To combat increasing health care costs in our 65+ population, the Centers for Medicare and Medicaid Services (CMS) imposed payment reform in Medicare. Like overall U.S. health care costs, Medicare-specific health care costs are steadily increasing. In fact, assuming no changes are made to the system, Medicare’s hospital insurance fund is expected to become insolvent in 2026. The proposed solution to our increasing health care costs is value-based care.

Total Medicare spending for traditional Medicare and Medicare Advantage is steadily rising
(Expenditures in billions of dollars)

What is Medicare and how does it work?

Medicare is a federally funded insurance program for seniors age 65+ and some individuals with disabilities. It currently covers more than 60 million Americans. While many refer to Medicare as a single entity, it is actually made up of four different programs.

• Medicare Part A (hospital insurance): Covers hospital and post-acute care. It is funded by payroll deductions, so there are no premiums for users.
• Medicare Part B (medical insurance): Covers physician services and diagnostic tests. Part B is funded entirely by taxes, and enrollees typically pay a small monthly premium and copayments.
• Medicare Part C (Medicare Advantage): Medicare Advantage is essentially privately administered Medicare. Commercial insurers combine the minimum Part A and Part B services, and usually include a few other add-ons. Medicare Advantage plans are funded through enrollees paying premiums and copays as if they were in a commercial plan, but the federal government subsidizes the plans.
• Medicare Part D (prescription drug coverage): Part D covers prescription drugs. It is funded through enrollees paying premiums to Medicare.

To learn more about Medicare value-based payment programs, download part one of our complimentary resource, Medicare and the Transition to Value-Based Care.

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More for you

Check out part two of this series to learn about three pay-for-performance programs and how P4P programs impact hospitals. Download part two.

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