Medicare Value-Based Formula Will Be Included in House Reform Bill

Janice Simmons, for HealthLeaders Media , October 23, 2009

Following an agreement completed on Thursday, the proposed House healthcare reform bill will include a provision that would change the way Medicare pays hospitals and physicians—by moving from a formula that pays for the volume of tests and procedures performed to a value-based formula that emphasizes quality care and cost-effectiveness.

Fifteen legislators, primarily from Midwestern and West Coast states, had been pressuring for the change, saying that many of their providers who deliver high-quality, low-cost services were being reimbursed far less than providers in other parts of the country.

Rep. Ron Kind (D-WI), one if the key supporters of the change, said that providers in his region "have long been delivering the kind of high-quality, low-cost care that has been looked to as a national model."

He added that the agreement "ends discrimination" against patients in the low-cost areas by preventing the cost shifts that occurs when private insurers increase payments to providers to make up the difference in the amount providers are reimbursed for Medicare patients.

The agreement calls for two studies to be carried out by the Institute of Medicine: One would address geographic variations in payment, and the other how to reset Medicare payments to providers.

Under the agreement, the IOM's recommendations could not lead to a rise in total Medicare spending; the final recommendations would be carried out unless Congress objected.

Firming up how Medicare payments would be made in the future was seen crucial by the Democratic leadership in getting the 218 or more votes needed to pass a healthcare reform bill when it is finally introduced on the House floor.

A bill is anticipated by early next month. The bill is expected to have a public insurance option in place, and one of the option formulas calls for basing provider payments on how much Medicare pays plus 5%.

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at

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