Public programs cover the populations with the most to gain from better-coordinated care. Medicare and Medicaid are both moving from volume to value, but along different paths and against different headwinds.
The federal and state governments are the largest purchasers of health care in the country, which makes Medicare and Medicaid the most consequential testing grounds for value-based care. Both are shifting away from paying for volume, but they start from different places and face different obstacles.
Medicare: a structured push
The Medicare Access and CHIP Reauthorization Act of 2015 created the Quality Payment Program and, with it, a fork in the road for clinicians. Most chose the Merit-Based Incentive Payment System (MIPS), which keeps traditional fee-for-service payment but adjusts it based on performance across quality, cost, improvement activities, and the use of health IT. MIPS is a modest lever: the rewards and penalties are limited, and a multi-year lag separates performance from payment. It is a step in the right direction more than a destination.
The more ambitious path runs through Advanced Alternative Payment Models, which fueled the growth of accountable care organizations (ACOs), groups of providers that voluntarily take responsibility for the cost and quality of a defined population. When an ACO delivers good care and spends wisely, it shares in the savings; more advanced tracks add downside risk. Progression along these tracks trades greater flexibility for greater accountability.
A persistent challenge is attribution: when a provider is responsible for a population, the program must first decide who belongs to that population. Traditional Medicare lets beneficiaries see any willing provider, which can blur the panel a clinician is accountable for, an ambiguity that managed-care designs handle more cleanly.
Medicare Advantage: faster traction
Value-based arrangements have grown faster and more successfully in Medicare Advantage than in traditional Medicare. The reasons are structural: clearer attribution, benefit designs that channel members to accountable primary care, and plans that share clinical and risk-adjustment data with the provider groups bearing risk. Primary care organizations skilled in population health have been the natural partners in that shift.
Medicaid: the largest opportunity, the hardest terrain
Medicaid covers tens of millions of lower-income and disabled Americans, precisely the populations whose needs extend beyond conventional medical services and who stand to benefit most from coordinated, whole-person care. States are experimenting accordingly, not only with ACOs but with accountable communities of health and varied medical-home models.
The headwinds are real. Medicaid has long paid providers less than Medicare, leaving thinner margins from which to generate shareable savings. And the provider groups most experienced in value-based care are not always those serving Medicaid’s communities. Even so, value-based care may be the most promising strategy available for narrowing the health disparities these populations face, which is exactly why getting the design right in Medicaid matters most.
What it adds up to
Across both programs, the direction is consistent even where the pace is not: away from rewarding activity, toward rewarding outcomes. The open questions are practical ones, attribution, adequate payment, data sharing, and fair risk adjustment, and they are where the real work of reform now lives.