ECONOMIC REPORT OF THE PRESIDENT

Percent of Payments
60
Figure 4-26
Percentage of Traditional Medicare Payments
Tied to Alternative Payment Models, 2010–2019
50
Administration Goals
40
30
20
Actual
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Note: The dates and percentages for the actual series are approximate.
Source: Centers for Medicare and Medicaid Services.
to developing new models that qualify as advanced APMs as well to revising
some existing models to meet the advanced APM criteria.
Engaging the Private Sector in Payment Reform
Reforming payment systems in Medicare is an important step, as
Medicare accounts for around a quarter of all health care spending in the
United States. However, more than half of Americans receive coverage
through private insurers, which have also historically relied upon fee-forservice
payment systems. Ensuring that all Americans receive efficient, highquality
care therefore requires improving private insurers’ provider payment
systems as well. In light of the substantial shortcomings of fee-for-service
payment systems, it may seem puzzling that private insurers had not already
done so. But insurers faced two major barriers: a serious collective action
problem and poor incentives created by the tax treatment of employersponsored
health insurance coverage.
A collective action problem exists because developing and deploying
new payment models is a costly endeavor, requiring significant investments
by both payers and providers, but, as described below, many of the benefits
of investments made by any individual actor accrue to its competitors. As a
result, each individual payer’s return to investing in new payment methods
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