The Future of Alternative Payment Models in Healthcare: A Strategic Perspective

In 2019, total health spending reached a staggering $3.8 trillion. The Congressional Budget Office projects spending will increase 5.4% annually through 2028 to $6.0 trillion, representing 19.7% of gross domestic product by the end of the period. Notably, price growth for medical goods and services is projected to accelerate 2.4%/year while Medicare spending will increase 7.6 %/year due to enrollment growth. In the same period, the insured share of the population is expected to fall from 90.6% in 2018 to 89.4%.

To reduce the rate of annual health spending, policymakers have recognized and begun to make changes to the flawed incentives that currently exist in provider reimbursement: largely that fee-for-service reimbursement lends to unnecessary utilization and costs. This effort has led to increased use of value-based payments, which, by contrast, reward desired results—better outcomes at lower costs.