(Bloomberg) — The Obama administration plans to make historic changes in how Medicare pays enrollees' medical bills.
Starting next year, Medicare, which covers about 50 million elderly and disabled Americans, intends to base 30 percent of payments on how well health providers care for patients.
The goal is to put half of the payments under the new system by 2018.
"We believe these goals can drive transformative change," Sylvia Mathews Burwell, secretary of the U.S. Department of Health and Human Services (HHS), said in a statement.
See also: Democrats praise GOP doc fix effort.
For doctors and health facilities, the system could eventually tie hundreds of billions of dollars in payments to how their patients fare, rather than how much work a doctor or hospital does. The shift would end Medicare's current fee-for-service reimbursement system, which involves paying providers for each scan, test and surgery.
See also: House, Senate talk Medicare physician pay.
Medicare paid about $362 billion to care providers in 2014, HHS said. That makes Medicare the single biggest buyer of health care services in the United States.
HHS has organized many Medicare reimbursement pilot programs over the years. The Patient Protection and Affordable Care Act of 2010 (PPACA) started several major programs. Today, about 20 percent of Medicare spending goes through programs that tie providers' pay to quality measures, or require providers to assume some financial risk.
Those programs have saved government health programs $417 million, HHS officials said.
But today's announcement marks the first effort by HHS to set specific goals for steering the nation away from fee-for-service provider payments.
