The Medicare Value-Based Care Strategy: Alignment, Growth, And Equity

As the nation’s largest health care payer, responsible for more than one in five dollars spent on health care within the United States, Medicare plays a key role in transitioning the health care system away from fee-for-service, which incentivizes quantity of care, and towards value-based care, which incentivizes high-quality care and smarter spending. The passage of the Affordable Care Act served as a catalyst for innovative payment and care delivery models that reward better care, smarter spending, and health in all facets of life. Over the past decade, Medicare has made significant progress in moving towards value and advancing accountable care.  

In Traditional Medicare, the Medicare Shared Savings Program brings together groups of doctors, hospitals, and other health care providers as Accountable Care Organizations (ACOs) to take responsibility for improving quality of care, care coordination, and health outcomes for groups of beneficiaries. The Shared Savings Program went from recruiting its first health care provider participants in 2011 to its current status as one of the largest value-based purchasing programs in the country, covering more than 11 million people with over 525,000 participating clinicians. Physician groups in the Shared Savings Program achieve higher quality ratings compared to their counterparts not in the program, and the program has saved the Medicare Part B Trust fund $6 billion dollars or more over the past five years.

The relationship between a Shared Savings Program Accountable Care Organization (ACOs) and their assigned beneficiaries is a good example of an accountable care relationship. In Medicare Advantage (MA), which makes up 45 percent of Medicare enrollment, an increasing percentage of payments to health care providers have also been made in advanced value-based arrangements.

Reflecting on the significant progress towards value-based care across the nation, CMS announced the ambitious goal of having all people with Traditional Medicare in an accountable care relationship with a health care provider by 2030 in its CMS Innovation Center strategy refresh and vision for Medicare. The agency is additionally working to ensure MA reflects these value goals. CMS also recently released the National Quality Strategy, with quality being an integral component of value. This article builds off of these recent publications to outline a cohesive Value-Based Care strategy for Medicare along three main pillars: alignment, growth, and equity.


From a health care provider perspective, alignment of value-based payment arrangements within Medicare and across multiple payers is critical, since providers often interface with a multitude of payers across Traditional Medicare, MA, Medicaid, the Marketplaces, and other commercial insurance. If value-based arrangements are not aligned, provider organizations face challenges focusing attention on the right quality metrics and making the investments necessary to improve care. Aligning key aspects of value-based arrangements across CMS can help set the stage for broader synchronization of our health system and move health care providers to higher levels of delivery system transformation.

First, CMS is exploring how to better leverage and align its programs to move toward more accountable care models and programs, which can help transform care delivery. The Merit-based Incentive Payment System (MIPS) is an important pay-for-performance program in Traditional Medicare, whereby clinicians get positive, neutral, or negative adjustments to their fee-for-service payments based on their performance in four categories: quality, cost, promoting interoperability, and improvement activities (improving care processes, enhancing patient engagement, and increasing access). MIPS and more advanced value-based arrangements operate on a continuum, with clinicians making decisions annually about whether to continue in MIPS or join more advanced payment models. MIPS should be the welcome mat, rather than the landing-pad, so that through participation in MIPS, clinicians are prepared to progress to the Shared Savings Program or other value-based arrangements.

Currently, MIPS is structured in such a way to accommodate as much clinician participation as possible. But allowing clinicians to select their own quality measures out of almost two hundred options means that they may identify the most financially favorable measures based on their current performance, rather than truly making the investments to improve care delivery that could be important stepping stones to accountable care. In contrast, MIPS Value Pathways (MVPs), which CMS has been developing and implementing over the past few years, are a discreet set of measures for each specialty, allowing for quality to be compared across clinicians within a specialty  and could help drive accountable care. For example, a primary care MVP that uses the same quality measures as those used in the Shared Savings Program and other advanced value-based arrangements could help clinicians develop familiarity with the quality measures used in these more advanced programs, thereby easing the transition to accountable care.

Second, also in Traditional Medicare, CMS is aligning value-based arrangements across the Center for Medicare and the Innovation Center. As one example, CMS’s recently published strategy for ACOs describes how this alignment is important to prevent selective participation by health care providers and to ensure that lessons learned lead to improvements and advancements in quality, equity, and value in the Shared Savings Program and other ACO models. 

Third, CMS is exploring ways to align MA with value-based efforts in Traditional Medicare, including the Shared Savings Program and Innovation Center models. Currently, CMS has limited insight into the types and quality of value-based arrangements between plans and health care providers in MA.  The evaluation of the Innovation Center’s MA Value-based Insurance Design (VBID) model has not focused on the effect of each individual benefit design change being tested in the model, which means that the model has not driven decision-making by plans, provider partners, and CMS in the MA program to the extent it could. Working across centers, CMS intends to better identify MA policy improvements that are core to alignment, so that policies that drive value can be aligned across MA and Traditional Medicare.

Finally, CMS intends to further align our Medicare value-based efforts with Medicaid. Alignment between Medicare and Medicaid, the two largest public purchasers of health care, would amplify health system transformation. Since Medicaid movement towards value-based care occurs differently across each state, the Health Care Payment Learning and Action Network recently launched State Transformation Collaboratives in Arkansas, California, Colorado, and North Carolina to provide an opportunity for multi-payer alignment between Medicare and Medicaid at the state level.


Growth of accountable care relationships in both Traditional Medicare and MA can improve quality and increase savings for Medicare beneficiaries by promoting innovative care delivery that better provides whole-person care. However, over the past several years, the number of beneficiaries assigned to ACOs participating in the Shared Savings Program has plateaued. Barriers to entry for small physician group practices and health care providers with less capital, who tend to predominantly serve underserved communities, represent limitations to growth. The use of regional expenditures to adjust ACO benchmarks may also provide a limited business case for participation amongst health care providers who are less efficient.

In the recent Calendar Year 2023 Physician Fee Schedule proposed rule, CMS proposed a number of changes to address these barriers in the Shared Savings Program. First, the agency proposed creation of new incentive payments for smaller ACOs to provide upfront capital to build the infrastructure necessary to succeed in the program and better address the social- determinants-of-health needs of underserved people with Medicare. These changes are based on the CMS Innovation Center’s ACO Investment Model, tested from 2016-2018 and successful at bringing ACOs treating rural and underserved communities into the Shared Savings Program. Additionally, CMS is proposing that smaller ACOs that are inexperienced with performance-based risk be allowed to remain in upside-only arrangements for their initial five-year participation agreement with Medicare, so that they can gradually develop familiarity with the shift towards value and recruit additional health care providers that might be reticent to quickly adopt downside risk. Finally, CMS has proposed financial benchmarking changes, such as updating benchmarks based in part on projections of per capita cost growth, and is seeking comment on further movement towards administrative benchmarks in the future. The expectation is that these benchmarking proposals would provide a better business case for participation for all different types of health care providers and fuel further growth in ACOs. 

There are also opportunities to grow the specialty footprint in value-based care. CMS is encouraging specialists to report the specialty MVP that is most relevant for their practice, which would help develop a set of comparable quality metrics that could be aligned with the quality metrics in specialist-focused value-based arrangements. CMS is further exploring how to best facilitate the intersection between specialist- and primary-care-focused models, with the goal of growing specialist involvement in accountable care and driving improvements in quality, cost, and patient experience through better coordinated care.

In MA, though progress has been made in moving towards value, we are eager to see more aligned growth in value-based arrangements to deliver better care to beneficiaries. The progress towards advanced value-based arrangements that has been reported in MA offers little insight into aspects of payment such as risk sharing, benchmarking, quality rewards, alignment with other value-based programs, and these mechanisms’ overall impact on patient outcomes. There is a great opportunity to gain knowledge on the relative successes of these types of arrangements in MA and build off of them, which becomes even more pressing as enrollment in MA grows. Thus, even as we encourage growth in accountable models, we are also striving to improve oversight and transparency so that we know the impact of these accountable care arrangements on people enrolled in MA plans.


Health equity is fundamental to high-quality care for all people. For far too long, profound inequities have existed across our health care system that are often rooted in intersecting social determinants of health. The design of value-based arrangements in Medicare can be an important tool for advancing health equity by encouraging the movement of care upstream to address the health-related social needs and disparities that can lead to or exacerbate poor health outcomes. There have been proposals (described above) within the Shared Savings Program to bring the benefits of accountable care to the communities that need them most by increasing participation among ACOs treating rural, underserved, higher cost, or more clinically complex populations.

Additionally, CMS recently proposed to adopt a health equity adjustment to quality performance scores in the Shared Savings Program, which would reward ACOs that provide high-quality care to people who are dually eligible for Medicare and Medicaid or who live in underserved communities. This proposed adjustment avoids possible pitfalls of pay-for-equity approaches, in that it does not risk-adjust away disparities in care and does not set lower standards for underserved populations. And through the ACO REACH Model, the Innovation Center is testing a novel benchmark adjustment that rewards ACOs that serve a higher proportion of underserved beneficiaries. If this approach proves successful in addressing health disparities, it may inform future policy in the Shared Savings Program.

CMS is also seeking comment on ways to promote health equity across Medicare through its value-based programs. For example, for hospitals subject to hospital readmission reduction program (HRRP), researchers have identified that patients’ poverty, disability, housing instability, and residence in a disadvantaged neighborhood were associated with higher readmission rates, and safety net institutions are disproportionately penalized as a result. Accounting for social risk factors can reduce negative unintended consequences of the HRRP, so Medicare requested comment on the concept in a recently proposed rule.

Equity also presents further opportunity for alignment across programs. In MA and Medicare Part D, the Star Ratings system currently rewards insurance plans for high performance on quality measures; these quality measures, in turn, are often incorporated into the value-based contracts between plans and health care providers. However, Star Ratings have not historically considered equity beyond individual measure case-mix adjustments. CMS solicited comments on a health equity index that would—similar to the approach described above in the Shared Savings Program—reward plans that perform well for those beneficiaries who are dually eligible for Medicare and Medicaid, receive low-income subsidies, or who are persons with disabilities. CMS is committed to ensuring the highest-quality care for underserved communities served by MA and Part D plans and will take comments submitted on the health equity index discussion into consideration for future efforts.

Finally, CMS is identifying how our nation’s health care infrastructure can better address social needs for people with Medicare. CMS is newly requiring that special needs plans screen for housing, food, and transportation through an annual health risk assessment. CMS has also proposed adoption of social-determinants-of-health quality measures in the Hospital Inpatient Quality Reporting (IQR) Program to assess whether health care providers are appropriately screening for health-related social needs; CMS has also solicited comment on a similar measure for MA Star Ratings.

However, screening for health-related social needs, in and of itself, may not be sufficient if local community-based organizations— the organizations that most often address such needs—do not have the capacity to handle increased referrals. As such, Medicare has proposed that the new advanced incentive payments in the Shared Savings Program discussed above can be used to address health related social needs in collaboration with local community-based organizations, one of the first times Traditional Medicare payments would be permitted for such use. CMS will also partner with other federal agencies, such as the Administration for Children and Families and the Administration for Community Living, to link community-based organizations with ACOs, and with the Office of the National Coordinator for Health IT on ways that the health information technology infrastructure can further facilitate a team-based approach to care for people across the health care and social service sectors.

Summing Up

These three strategic priorities of alignment, growth, and equity are interrelated and reinforce each other. Alignment and growth are connected: When value-based models are aligned it becomes easier for health care providers to understand how they can succeed and provide high quality care, which lowers barriers to participation and accelerates adoption of value-based arrangements. Growth and equity are also connected: When value-based models and programs are intentionally designed with equity in mind, it can improve participation by health care providers in underserved communities and increasingly drive growth towards value-based care. Finally, equity and alignment are intertwined: As strategies to advance equity are developed and advanced across all programs and initiatives within CMS, it sends a signal to our partners that we are working together to advance equity across our nation’s health care system.

To achieve these objectives, CMS is looking forward to close partnerships with health care providers, payers, people with Medicare, and stakeholders across our health care system. CMS remains committed to advancing value-based care in a way that best meets the needs of people with Medicare, who deserve high-quality, equitable care.