This policy brief from the Insure the Uninsured Project (ITUP) describes a vision for implementation of payment and delivery system reform in California, especially with the continued success of California’s health insurance marketplace and expanded Medicaid in decreasing the number of uninsured Californians.  In California, as of 2013, 78 percent of total state health expenditures were still paid using a fee-for-service (FFS) model, despite the significant presence of managed care health plans in the state health insurance market. Accordingly, improvements in cost, quality, and outcomes will require a systemwide shift from FFS to fee-for-value payment, which also will requires a coordinated effort across payers.

The policy brief begins with an overview of payment and delivery system reform initiatives nationally, many driven by the Centers for Medicare and Medicaid Services using authority and funding from the Affordable Care Act. Initiatives in Medicare, Medicaid, and the commercial market are examined, and there is additional analysis about the impact of such initiatives on safety net providers.

The policy brief then outlines six recommendations for payment and delivery system reforms in California:

  1. Transition from FFS towards global payments for providers that have the capabilities and infrastructure to coordinate care, manage financial risk, and meet clinical quality targets.
  2. Build on California’s history with the “delegated model” of placing greater financial risk on provider organizations and leverage these organizations’ infrastructure and expertise to implement integrated delivery systems and accountable care organizations;
  3. Utilize financial incentives and quality measures to improve the health of vulnerable populations with co-occurring physical and behavioral health conditions that require care coordination;
  4. Deploy the purchasing power of large employers, purchasing coalitions, and Covered California to drive significant changes in the market that reward value over volume and reduce costs.
  5. Advance consumer-driven health care to promote competition among providers and health plans by making cost and quality information easily available and meaningful.
  6. Implement regulatory oversight of anticompetitive behavior among providers, which drives prices upward without increasing the value.

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