Medicare's Step Back from Global Payments

Many experts believe that the U.S. health care system's continued dependence on fee-for-service payments is a key driver of excessive health care spending. Bundled payment, or payment of predetermined amounts for sets of related services, is one potential solution. In theory, bundled payments create incentives to reduce the use of unnecessary care while preserving treatment flexibility and reducing the administrative burden for provider organizations and payers. Research suggests that bundling payments leads to modest reductions in spending without negatively affecting the quality of care. In the long term, Medicare could limit the unintended consequences of global surgical packages by creating larger surgery bundles that include care delivered by all providers, not just the physician performing the surgery. In the short term, however, Medicare's elimination of global surgical packages will improve payment accuracy but will have a major effect on how surgeons are paid.