While seriously ill patients represent a growing portion of the Medicare population and overall program expenditures, there is significant evidence that quality of care for this population is inadequate. A major driver is fee-for-service (FFS) financing, which incentivizes provision of a high quantity of poorly coordinated clinical services that are often not aligned with patient care preferences. Studies show that patients and their families would prefer to receive care at home and in other community settings rather than more expensive services in acute care and institutional settings.

The path forward for health care delivery and payment under the Trump Administration and new Congress is uncertain. However, the Better Way health policy platform of Congressional Republicans continues to emphasize the importance of value-based care, with a focus on Medicare Advantage (MA) and other innovations in the private sector. Implementation of payment models that incentivize high-quality, patient-centered care for the seriously ill at a lower cost provides an opportunity for the new Congress and Administration to advance Republican policy priorities while building on progress made during the outgoing Congress and Obama Administration.

Discern Health, a consulting firm focused on enhancing health care value, recently developed a framework of principles for payment models to promote the delivery of community-based, comprehensive, high-quality, affordable serious illness care. We used this framework to assess current innovative payment models and identify opportunities for improvement going forward. This work was supported by the Gordon and Betty Moore Foundation.

In this post, we summarize the framework and findings of our analysis, and outline key opportunities for policymakers to continue progress toward high-value care for the seriously ill. These opportunities include expansion of successful voluntary payment models from the Centers for Medicare and Medicaid Services (CMS) and development of new physician-focused models, implementation of policies to support flexibility in MA, and efforts to catalyze innovation in private health plans.

Serious Illness Payment Model Framework and Analysis

Building on previous work by the Coalition to Transform Advanced Care and AHIP Foundation, the National Academy of Medicine, the National Quality Forum, and other organizations, Discern developed a conceptual framework for advancing serious illness care. The framework includes principles for payment models, as well as for care delivery and quality measurement, that are needed to maximize quality while lowering costs. The framework is intended is to serve as a benchmark for assessing current payment models and as a roadmap for future model development. Figure 1 presents key elements of the framework. The complete framework is found on page 10 of our full report on innovative payment models for serious illness care.

Figure 1

For the report, we conducted an environmental scan and identified 31 payment models that focus to some degree on serious illness care. These models fell into seven categories, as shown in Table 1. In assessing these models against the conceptual framework, we identified where progress has been made and where there are opportunities for improvement.

Table 1

Table 1. Payment Model Categories
Primary Care-Based Models (3)
Specialty Care-Based Models (4)
Hospital/Health System-Based Models (4)
Post-Acute Care-Based Models (7)
Health Plan-Based Models (4)
Accountable Care Organizations (5)
Global Payment Models (4)

Model Reach and Implementation Status

The size and scale of these models varies considerably, and overall only a fraction of the seriously ill nationwide receive care under one of these models. About half of the programs we identified were national, although their reach is limited. The national models are either mandatory CMS pay-for-reporting programs with no defined care delivery model, such as the Skilled Nursing Facility Value-Based Payment Program, or are voluntary models at the provider level that focus on a broader population than the seriously ill, such as the CMS Accountable Care Organization (ACO) models.

Recent estimates suggest that about 9 percent of Americans are covered by Medicare and private plan ACOs. On the other hand, the health system and health plan-based programs tend to be regional and have a comprehensive delivery model focused explicitly on the seriously ill that touches a relatively large portion of patients in the region. In addition, four of the models we reviewed are still in the conceptual or development phase and have yet to be implemented.

Payment and Incentives

Our review found that a range of innovative payment models are being used in serious illness care, including per-beneficiary-per-month (PBPM) payments for care management, shared savings, and bundled payments. To varying degrees, these models reward providers for improving quality and lowering spending, but only a few existing models penalize providers for poor performance. Very few models use multi-payer structures or align incentives across the care continuum, which is a significant area of opportunity moving forward.

A small but growing number are providing flexibility to providers through more frequent, prospective payments, rather than bonus payments that are calculated and provided retrospectively. A related area of opportunity for improvement is administrative complexity. Most of the payment structures are highly complex and difficult to understand, leading to administrative burden and uncertainty for the provider

Care Delivery

More than one-third of the reviewed models include services provided in the patient’s home, which is significant progress from traditional delivery models focused on institutional care. Primary care-based models tend to focus on care coordination and include care planning and interdisciplinary care teams, although they do not always include significant alignment with services delivered in other settings. Models designed specifically to address the needs of the serious illness population—rather than focusing on a broader population—are more likely to include a significant number of patient-centered elements, such as care plans that capture patient preferences, palliative care, social care, and discharge planning. Implementation of these elements in the models that are focused on a broader population is an area for improvement moving forward.

In the next section, we highlight some of the most promising models and identify other policy and program opportunities moving forward.

Opportunities for the New Congress and Administration

The findings from our analysis show that while significant progress has been made, additional payment innovation will be needed to ensure that the right incentives are in place to promote high-quality care for the seriously ill. As policymakers consider the future direction of value-based payment, there are substantial opportunities to continue this progress while aligning with Republican priorities.

CMS Demonstration Models

Models being implemented by CMS, and particularly by the Center for Medicare and Medicaid Innovation (CMMI), are demonstrating that quality can be improved by providing community-based, patient-centered services to the seriously ill population while lowering spending. An example is Independence at Home (IAH), a voluntary model with 14 participating sites nationwide through which the seriously ill receive primary care services at home from multidisciplinary care teams. IAH saved more than $10 million across its sites while improving quality.

While it has yet to be evaluated, the Medicare Care Choices Model provides a flexible PBPM payment to 141 participating hospices across the U.S. for a broad range of supportive care services, driven by a care plan, to patients still receiving curative care from their usual providers. These services may include social work, nutritional support, and respite care for family members. Outside of this model, Medicare currently allows supportive care services to be provided only to patients who forgo curative care. In addition, the Program of All-Inclusive Care for the Elderly (PACE), which is available in most states, continues to demonstrate success in providing a full range of services to the seriously ill at home in the community. PACE has been shown to be cost neutral or cost saving while increasing patient quality of life and reducing mortality.

Rather than being viewed through a partisan lens, policymakers should view CMMI demonstrations and physician payment reform under the Medicare Access and CHIP Reauthorization Act (MACRA) as tools that can be leveraged to meet their larger policy goals. Incoming Secretary of Health and Human Services Tom Price has raised concerns about lack of stakeholder engagement and physician input on CMMI model development. However, MACRA established the Physician-Focused Payment Model Technical Advisory Committee (PTAC), through which physician groups and other stakeholders propose, review, and recommend new payment and delivery models to be implemented by CMMI. The PTAC presents a significant opportunity to create voluntary models that emphasize community-based, high- quality serious illness care, and attract physician participation by qualifying as Advanced Alternative Payment Models (AAPMs) under MACRA. Providers who have a certain number of patients or Medicare payments in AAPMs are exempt from potential negative payment adjustments and receive an annual 5 percent bonus in Medicare payment.

Medicare Advantage (MA)

As MA participation continues to grow, the Better Way policy paper by congressional Republicans calls for strengthening the program. Several innovative serious illness care delivery models are provided through MA, such as the Regence Personalized Care Support Program in Oregon and Utah and the rapidly expanding Aspire Health model, which is currently offered in 11 states. Both models focus on goal-based palliative care that is multidisciplinary and provided in the home.

The new Congress and Administration can take steps to further encourage innovation in serious illness care within MA. On January 1, 2017, CMMI launched the MA Value-Based Insurance Design (VBID) model, which allows MA plans in seven select states to alter benefit structures to encourage use of high-value services for beneficiaries with chronic conditions. The Better Way paper and the recent bi-partisan CHRONIC Care Act propose that VBIDs be allowed in all MA plans, which could drive use of community-based serious illness services and reduce acute care utilization in MA beneficiaries nationwide. A recent analysis by the University of Michigan V-BID Center found that removing cost sharing for high-value services for patients with chronic heart failure and chronic obstructive pulmonary disease (COPD) increases utilization of these services, with costs offset by reduced ED visits and hospitalizations. Another roadblock that could be remedied as part of these MA reform efforts is the carve-out of hospice services, which results in poorly coordinated care and decreased use of palliative care.

Private Insurance

Not all individuals who need serious illness care are Medicare beneficiaries; millions are also covered by private insurance. One notable program is Aetna’s national Compassionate Care Program, which allows the seriously ill to enroll in hospice while still receiving curative treatment. Aetna’s program demonstrated savings of about $12,000 per patient while increasing use of palliative care and decreasing use of inpatient care.

Without continued engagement from CMS, progress on advancing serious illness care in the private sector may slow. Using CMMI’s authority, the Trump Administration could set up voluntary, multi-payer models that focus on the seriously ill. The Comprehensive Primary Care Plus (CPC+) model, a new CMMI model with nearly 3,000 sites nationwide, is a good example of a multi-payer approach. This type of model would bring promising private sector approaches to serious illness care into Medicare in an aligned manner. CMS can also continue to catalyze private sector innovation, as it has done through the Health Care Payment Learning and Action Network (HCP-LAN). In addition, Congress can take steps to increase flexibility for plans and affordability for seriously ill patients. One example is permitting deductible exemptions for high-value services for chronic conditions, as proposed in the bi-partisan Access to Better Care Act of 2016.


While Republicans and Democrats are at odds on most health policy issues, making serious illness care high quality, affordable, and community-based presents an opportunity for common ground. The Better Way plan includes proposals that could catalyze further innovation in serious illness care payment models within MA and the private sector. Serious illness care could be further enhanced by CMMI testing models defined through the PTAC process and multi-payer models that encourage alignment with the private sector and qualify physicians for AAPM enhanced payment.