Major development in how Medicare plans to cut costs

The American Medical Association published an online commentary in April, ’15 which discusses recent Medicare proposals which are likely to have significant impact on how behavioral health providers are reimbursed. The article, “Payment Reform is About to Become a Reality,” by David M. Cutler, Ph.D. Dr. Cutler is a Harvard economist who specializes in health care economic issues.

To cut to the chase, Dr. Cutler discusses a recent cost-saving proposal made by the US Department of Health and Human Services to “transform the payment system for Medicare.” He writes, discussing an announcement by HHS Secretary Sylvia Mathews Burwell:

Secretary Burwell’s proposal calls for 30% of Medicare payments to be based on non–fee-for-service models by the end of 2016, and 50% to be so by the end of 2018 ( By comparison, such payments did not exist in 2011 and account for about 20% of Medicare payments today. In addition, the Secretary intends to have 85% of Medicare fee-for-service payments tied to quality or value in some fashion by the end of 2019.


Make no mistake: this is major news. Medicare is the largest health care purchaser in the country, so these changes matter a lot. In addition, many private insurers that have been hesitant about payment reform are likely to follow Medicare’s lead. Payment reform is about to become a reality. (emphasis added)

Of course, the devil is in the details, and it is currently unknown how HHS would implement cost savings. Dr. Cutler suggestions the following options:

  • Creating incentives for providers to join accountable care organizations (ACOs);
  • To more aggressively push bundled payments for episodes of acute care;
  • (this is the one that is most likely, I think, to directly affect behavioral specialists) Tying more of its fee-for-service payments to quality indicators (eg, PQRS).

He notes that some quality programs have been very successful by reducing costs significantly, but some have failed, and he predicts that it will be challenging for both systems and providers to adapt.

mhconcierge’s take: we should expect our professional organizations to show awareness of this major development and to seek input into how “value based” programs and payment systems affect behavioral health services.


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