Major Cost and Quality Provisions

The law seeks innovation in care delivery.

• CMS (Center for Medicare and Medicaid Services) will establish an innovation center to test new models of payment and care delivery. The law leaves the agency free to adopt any solutions found to lower costs and preserve or improve health care quality.

• Medicare is freed to evolve farther away from fee-for-service and toward “bundled” payments for packaged services spanning inpatient and outpatient settings. This will presumably have the effect of rewarding providers for cost efficiency and tighter coordination across the care continuum.

• Under Medicare, providers who form accountable care organizations — meeting quality thresholds, following evidence-based care guidelines, accepting new accountability for outcomes — will be eligible to share in any cost savings they achieve for the Medicare program.

• Under Medicaid, states will receive funds to establish health homes for high-risk patients, that is, standardized programs of intensive outpatient care coordination and prevention.

• A demonstration program will bring primary care to the homes of high-risk Medicare patients. Providers will share in any cost savings for preventing hospital admissions.

• The law establishes a national institute for comparative effectiveness research.

• Medicare will lower its fees across the board to hospitals with higher rates of preventable infections and readmissions.

• Public reporting of hospital and provider quality will increase.

• Insurers will be prevented from charging patient co-pays for essential preventive services.

• Insurers will have to keep administrative costs down, devoting at least 85 percent of revenue to patient claims or customer rebates.

• By 2014, each state will have a health insurance exchange, a market place allowing individuals and employers to compare policies and premiums.