Dive Brief:
- The CMS is offering a new funding opportunity for states to implement an all-payer model to improve population health, the agency announced on Tuesday.
- The government will give eight states up to $12 million each under the new Medicare experiment, called the States Advancing All-Payer Health Equity Approaches and Development, or the AHEAD Model.
- The program, which will run for 11 years, includes fixed payments for hospitals called “hospital global budgets” to ameliorate fee-for-service incentives.
Dive Insight:
AHEAD — regulators’ latest attempt to change how the nation pays for healthcare — is similar to Maryland’s hospital payment system. The state has had an all-payer payment system for decades under a Medicare waiver that allows it to set prices hospitals can charge.
Maryland added a global budget provision for hospitals in 2014. The state’s program is projected to save Medicare more than $1 billion by the end of this year.
Under global hospital budgets, hospitals receive a fixed payment per year, encouraging them to eliminate unnecessary hospitalizations and work with primary care providers on population health management.
Proponents of the model say guaranteeing hospitals a certain amount of revenue frees them from fee-for-service incentives to increase the number of procedures or services performed, and eases financial stress around flagging volumes.
States that participate in AHEAD will take accountability for healthcare spending and partner with hospitals and primary care practices to improve population health and health equity, according to the CMS.
States are also responsible for recruiting hospitals into the program to receive the annual fixed payment and primary care practices to participate in multi-payer payment programs, which include increased investment from traditional Medicare.
The amount specific states receive in AHEAD will be based on historical Medicare and Medicaid spending, adjusted annually for inflation and changes in patient population.
Each state will have a Medicare total cost of care growth target determined by the CMS to incentivize them to control unnecessary spending. They’ll also have an all-payer cost growth benchmark set by the states to encourage them to align payer efforts to slow cost growth, the CMS said. States will also be required to develop a health equity plan.
AHEAD will fund care for traditional Medicare and Medicaid beneficiaries. Regulators encouraged other health insurers to use similar models for other enrolled populations or specific patient groups.
States can apply for the program starting this fall, and regulators plan to open another application period next spring.
The first cohort of states will begin implementing payment changes next summer, with the model performance period beginning either January 2026 or January 2027, depending on the cohort. The model will run through December 2034.
Rising health spending has proved a major fiscal burden on state governments.
From 2014 to 2019, state government health expenditures increased by an average of 3.1% each year to peak at $607 billion in 2019. Hospital spending alone makes up almost one-third of total health expenditures.
Meanwhile, every state except Vermont has some kind of balanced budget mandate that requires states to spend no more than what they collect in revenue in a year.
AHEAD is the next iteration of the CMS Innovation Center's multipayer total cost of care models, according to regulators. The CMMI launched a pilot program in 2019 for rural Pennsylvania hospitals that paid a fixed amount to cover hospital services.
