Payment Reform: Bundled Episodes vs. Global Payments

There is widespread agreement that the current fee-for-service approach to paying for health care is problematic, since it incentivizes volume over value, but there is a lack of consensus on what should replace it.

One option, bundled episode payments, is about to be piloted nationally in the Medicare program as a way of paying for certain high-volume, high-cost procedures. Proponents like Francois de Brantes cheer such developments, and have been busy laying the technical groundwork for implementation. But other payment experts, such as Robert Berenson, worry that the current interest in bundled payments will distract policy-makers from moving more forcefully away from fee-for-service. At best, Dr. Berenson views bundled payments as a waypoint on the road to capitation, but at worst, he worries it could turn into a cul-de-sac from which we never emerge. Dr. Berenson would prefer to see more experimentation with global payments, or "capitation," which is currently used by health maintenance organizations (HMOs), including in Medicare Advantage plans, and gives providers a stronger incentive to reduce unnecessary care and bring spending under control.

This issue brief presents a frank assessment of the merits of these two payment models by Francois de Brantes and Robert Berenson, who will speak to the benefits and drawbacks of bundled payments and global capitation.