Strengthening Original Medicare
By Center for Medicare
The Center for Medicare oversees the $1.2 trillion Medicare program that cares for roughly 70 million Americans and influences the healthcare system for everyone. Our work has traditionally been divided among Original Medicare (OM), which encompasses Parts A and B, and our work managing Parts C and D, or Medicare Advantage (MA) and prescription drug plans, respectively. In recent years, increased MA enrollment has made it a particularly prominent part of the Medicare program. Even so, we are committed to strengthening and supporting both MA and OM and ensuring that OM remains a robust coverage option for Medicare beneficiaries. Our goals are to promote choice while improving access and affordability for the Medicare beneficiary and to be good stewards for the American taxpayer, our two most important stakeholders.
Within OM, there is a distinction between the part of the program accountable for the quality and cost of care, particularly through beneficiary alignment to accountable care organizations (ACOs), and those outside these programs and models. The latter “unmanaged” portion of OM has historically been defined by fragmentation, fee-for-service payment, and administrative price-setting that has proven slow to respond to innovation or encourage long-term care coordination. This program design has been a major obstacle to driving affordability and quality for hardworking Americans and their families. As a Center, we are interested in ensuring that OM can establish better incentives to invest in high-value care. We are implementing a three-part policy strategy while transforming our operations to strengthen OM:
- Aligning Spending and Value in OM: Flawed payment policies can negatively impact access to care, drive up costs for beneficiaries, and undermine incentives for care coordination. As a leading payer, we also understand that CMS’ payment policies for Medicare — and their shortcomings — are often adopted in the broader healthcare system. We are focused on removing distorted pricing and refining payment methodologies to encourage high-value care that meets the patient’s needs at the right place, at the right time, and in the right way. We hope to do this by using more empiric data sources and incorporating best practices from the private sector, curbing unwarranted payment differentials across care sites, broadening use of episode and population-based payment, and examining innovative pricing approaches that consider the adoption of new technology, including but not limited to clinical artificial intelligence (AI), to drive down costs for beneficiaries.
- Empower Beneficiaries to Make Informed Choices: Outdated technology, siloed information, and hidden fees make it harder for beneficiaries to find the best care and increase the administrative burden for clinicians. We are doubling down on promoting price and quality transparency so that beneficiaries can make informed choices about the providers they choose to see. We consider these the first steps to improving the value of benefit design in Original Medicare. As a first step we are proposing to give ACOs in the Medicare Shared Savings Program (Shared Savings Program), that apply and are approved, the option to reduce or eliminate specific cost sharing for certain Part B services for beneficiaries assigned to their ACO starting in April 2027. Our goal is to reduce potential cost barriers for beneficiaries to receive high value care. We may take further steps in the future.
- Accelerate Accountability: We know that healthcare providers perform better when they are held accountable for their care’s cost and quality. Increased participation in ACOs helps this effort, and we believe we can go even further. To that end, we aim to effectively manage the continued growth of Medicare’s ACO programs, including the Shared Savings Program, given its demonstrated higher-quality care for its beneficiaries.
As we move forward in these endeavors, we acknowledge that outdated technology, siloed information, and hidden fees make it harder for beneficiaries to find the best care. And they increase administrative burden for clinicians. We are working to make healthcare data interoperability a reality so that healthcare providers and patients have access to people-specific longitudinal data sets that should improve care coordination and delivery. We view interoperability as a necessary foundation to realizing some of our objectives above. Finally, but perhaps most transformative, we intend to modernize Medicare’s claims processing system to support real-time claims processing, which will more easily support innovative payment structures and enhanced program integrity.
The remainder of this blog post describes our principal CY 2027 policy proposals in the Physician Fee Schedule (PFS) and Outpatient Prospective Payment System (OPPS) across our strategic pillars of aligning spending and value, empowering beneficiaries to make informed choices, and accelerating accountability in Original Medicare. Our work to transform our health plan operations may be a subject for future publications. For each policy focus, we describe proposals and highlight areas where we are seeking comments on future strategic directions for Original Medicare.
Aligning Spending and Value in Original Medicare
Improving relative pricing accuracy by increasing use of empiric data sources
CMS is continually working to set accurate prices for services, but a major challenge is access to the best data available. To better reflect the value of healthcare services, we are employing additional novel empiric data sources to help set payments. For example, a 2025 RAND study that uses the actual time patients spend under anesthesia found that on average CMS overestimates times for the associated surgeries by about 20%.1 We acted based on this, and in the CY 2026 PFS final rule (90 FR 49334 through 49345), we finalized an efficiency adjustment to automatically account for more efficient services over time. We will continue to improve our pricing accuracy, and CMS welcomes further empiric data submission to assist with setting accurate service prices. We are seeking comments on additional data sources that may help us set prices for surgical global periods:
Request for Information: “Strategies to Improve Global Surgery Payment Accuracy”
Improving relative pricing accuracy by leveraging market-based pricing data
Even empirical data can only go so far to help with administrative pricing by the federal government. Negotiated or competitive prices can offer better insights into the value of items and services to patients. Therefore, CMS is actively seeking to understand how prices are set under market conditions and how we can deploy that information to set the most accurate rates. We also want to encourage more active negotiations between private payers and providers that properly balance low costs with adequate access to care, rather than simply having these actors defer to Medicare-set prices. This market-based pricing strategy is exemplified by a few key actions. For example, we are currently collecting (through July 31, 2026) data on private payor rates for clinical laboratory services used in Medicare rate-setting, under direction from Congress.2 We are also implementing the next bidding round of our Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) competitive bidding program, which requires Medicare suppliers to submit bids to win contracts.3 Finally, wehave begun to incorporate data from hospitals about the rates they negotiate with Medicare Advantage plans to potentially inform future payment policy decisions for inpatient services.4
Removing unreasonable payment differentials
We are committed to addressing unwarranted differences in payment rates among care settings, such as off-campus hospital outpatient departments and physician offices. We have observed how the financial incentives from these differences contribute to unnecessary growth in outpatient services volume, including through hospital consolidation, which drives up costs for patients. To that end, starting this year, Medicare has begun to pay for drug administration services at a PFS-equivalent rate in off-campus outpatient hospital settings. This change is expected to save Medicare patients nearly $3 billion in premiums and $3 billion in cost sharing over 10 years.5 We are actively exploring other ways to remove policies that discourage use of proper care sites as well. In post-acute care, we observe payment differences across skilled nursing facilities (SNFs), home health agencies, and inpatient rehabilitation facilities (IRFs). We are taking early steps to move to a more unified payment framework across settings and support episode-based care.6 More broadly, we are seeking comment on how the valuation and payment methodologies under the Physician Fee Schedule can better reflect the relative resources involved in furnishing the services, both across care settings and within an evolving ecosystem of care models and business arrangements:
Request for Information: “Updates to Practice Expense (PE) Methodology — Site of Service Payment Differential”
Deploying more episode- and population-based payments
In Medicare’s Physician Fee Schedule (PFS), payments for services are set based on estimated typical resource costs, including physician work. As a result, the PFS encourages more care, not necessarily the best care (including exposing patients to harms associated with overmedicalization). We are interested in how to better align the value of services delivered to their payment by minimizing incentives for unnecessary services. In the Calendar Year 2027 PFS proposed rule, we are proposing to more appropriately pay for unbundled office visits and procedures. Previously CMS paid for both an office visit (E/M) and a procedure separately when they occur on the same day, despite the procedure payment including valuation for additional office visit time (E/M). As we look for ways to deliver value for the American people, we are considering additional opportunities to bundle and unbundle services that promote efficiency and quality, and align payment with the best care. We are seeking comments on broadly reimagining our approach to primary care payment in the Physician Fee Schedule as part of the Trump administration priority to Make America Healthy Again, which may result in more primary care service bundling. As another example, we have proposed bundling drugs supporting lost kidney function (phosphate binders) for patients receiving hemodialysis into our bundled payment and no longer paid for them separately. Here are the current opportunities for comment:
Request for Information: “Redesigning Primary Care to Make America Healthy Again”
Supporting technology-enabled care
In the CY 2027 PFS proposed rule, we are proposing updates to the payment rates for remote therapeutic monitoring and remote physiologic monitoring services (RTM/RPM) as we understand the devices may be less expensive than in our initial estimates. In addition, in the CY 2027 OPPS proposed rule, we are recognizing “Software as a Medical Service,” or SaMS, as software-based technologies that support clinical decision making through algorithmic analysis, including those that provide clinical or diagnostic functionality. We seek to better understand the potential incremental value of these technologies. This is a first step to establish pricing approaches around new technologies. In addition, we are seeking comment through our reimagining primary care RFI on developing technology-enabled care. Opportunities for comment below:
Request for Information: “Payment Implications of Technology Enablement of Primary Care”
We expect to build on each element of our overall strategy to align spending and value in Original Medicare. The new way forward will be informed by the responses to RFIs, and we encourage both comments and, ideally, data to support the perspectives shared.
Empowering Beneficiaries to Make Informed Choices
Supporting beneficiaries in choosing an ACO in Original Medicare
As beneficiaries choose between Original Medicare (OM) and Medicare Advantage, and then may choose to align to an OM ACO, CMS provides information in our Medicare & You Handbook to help beneficiaries choose the best program for their needs. In addition to choosing Original Medicare or Medicare Advantage, Medicare beneficiaries can choose to name their primary care provider on Medicare.gov, which can align them to an ACO if their healthcare provider participates in one. In practice, patients and clinicians aren’t always aware of their relationship with an ACO, and patients are largely assigned to an ACO later based on where they get primary care. ACO attribution has real benefits for care coordination and quality of care, and we are making the benefits even clearer to both beneficiaries and clinicians.
To support beneficiary access to the high-value services they can receive through ACO options in Original Medicare, we are proposing that approved ACOs can reduce cost sharing for select Part B services that clearly benefit beneficiaries. To support clinician ACO participation, we are proposing to recognize the additional time and resource requirements for ACO clinicians that serve as the “quarterback” or the focal point for coordinating ACO patient care by paying these clinicians more for certain office visits that represent longitudinal care.
Improving hospital price transparency
A prerequisite for robust competition is transparent information that helps beneficiaries (and all consumers) choose care sites at a price that works for them and their families. We require hospitals operating in the United States to provide clear, accessible pricing information about the items and services they deliver. We are looking to enhance price transparency through comments on how to improve standardization for both the machine-readable format and the consumer-friendly display. This work may include re-examining the deemed compliance of hospital price estimator tools, updating the required list of shoppable services, and clarifying what’s included or excluded in displayed prices. We invite comments on these topics:
Request for Information (OPPS): “Strengthening the Standardization and Comparability of Hospital Price Transparency Data”
Accelerating Accountability in Original Medicare
The Center for Medicare leads the Medicare Shared Savings Program, the largest value-based payment program in Medicare with more than 500 ACOs collectively coordinating care for more than 12 million Original Medicare beneficiaries. The CMS Innovation Center also tests ACO models, which if successful can be expanded into a permanent program. We seek to improve accountability both within and outside our ACO programs.
Expanding accountability in the Physician Fee Schedule
As part of our reimagining primary care RFI, we are seeking broad comments on how to reinvent primary care services in the Physician Fee Schedule and on how to approach alternative payment models, including outcomes-based payment and prospective primary care payment both within and outside the Shared Savings Program. We are particularly interested in how to use CMS reporting mechanisms to understand the impact of primary care services delivered as part of the Physician Fee Schedule:
Request for Information: Developing Prospective Payment in the Shared Savings Program”
Smoothing the ACO risk corridor to drive participation/savings
Shared Savings Program ACOs enter five-year agreements in one of two tracks (BASIC or ENHANCED), in which the BASIC track includes a glide-path from one-sided to two-sided risk/reward. ACOs participating under one-sided risk may be eligible for a shared savings payment from CMS whereas ACOs participating under two-sided risk may be eligible for a shared savings payment from CMS or may owe a shared losses payment to CMS. The ENHANCED track has the maximum risk/reward designed for experienced participants in the Shared Savings Program. Our risk tracks in the Shared Savings Program should not just reward the most sophisticated incumbent organizations but should appropriately encourage participation by healthcare providers new to value-based care. We are proposing changes to the Shared Savings Program benchmark methodology and risk-sharing options that would encourage participation across tracks and directly spur growth through a benchmark adjustment for ACOs that bring in beneficiaries and healthcare providers new to accountable care. We have a proposal to address the impact of rebasing that makes it harder for previously successful ACOs to continue to earn shared savings, a “ratchet effect” that hinders long-term investment in care transformation. Finally, we’re proposing guardrails for our accountable care prospective trend (ACPT) to ensure that we are offering a reasonable comparison between ACO performance and broader growth trends in the healthcare system as well as to provide program stability. We believe these policies would provide needed improvements and incentivize participation in the Shared Savings Program.
Modernizing technology and fixing broken quality reporting for ACOs
The Shared Savings Program encourages accountability not just for cost but also for quality of care and takes steps to measure quality performance. CMS is committed to transitioning quality reporting to digital quality measures (dQMs) across our programs to improve measurement and reduce burden. We are seeking comments on incorporating requirements for electronic prior authorization (ePA or “prior auth”) in future years. To support ACOs for quality-of-care reporting for their beneficiaries, we continue to improve Medicare CQM reporting option. Because ACOs can be multi-site, multi-EHR organizations, it’s important to recognize the flexibility needed for quality reporting completeness. Finally, we are proposing to halt additional measures to the Alternative Payment Model (APM) Performance Pathway Plus (APP Plus) measure set, as the current measure set adequately ascertains quality performance. We’d like to focus on improving reporting for the current measure set before adding additional burdensome reporting for marginal gain. We believe these improvements would reduce the level of effort for reporting while maintaining excellent ascertainment of quality performance for our primary care focused ACOs in the Shared Savings Program, thereby liberalizing resources for improving care.
Request for Information: “Applying Electronic Prior Authorization Measures to Shared Savings Program ACOs”
In addition to these proposals, we are seeking comments on how to encourage ACOs to engage and manage principally inpatient or procedurally focused specialists on quality reporting and more broadly in our Shared Savings Program. We have included a series of questions across the spectrum of engagement for specialty care in an additional request for information:
Request for Information: “Specialty Care in the Shared Savings Program”
As we continue to grow accountability in CMS ACO programs and models, including the Shared Savings Program, we look forward to reviewing comments and, if possible, data to support the perspectives commenters share.
Summary
As leaders of the Center for Medicare, we’re dedicated to aligning spending and value across our Original Medicare payment rules to protect both Medicare beneficiaries and the taxpayer. Over the next three years, the Center for Medicare will continue to focus on payment accuracy as we align spending and value across our payment rules, empower beneficiaries to make informed choices to support their care, and more fulsomely embed accountability within the payment systems. We welcome data, comments, and active partnership as we work to drive affordability and value for the American people across every care site in Original Medicare.
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Reid, Rachel O., Anthony Yu, Peter S. Hussey, Joachim O. Hero, Cameron Klig, Daniel J. Crespin, Gretchen Swabe, and Lane F. Burgette, Surgical Procedure Time Comparisons: Comparing Physician Fee Schedule Intraservice Times with Real-World Times as Observed in National Surgical Quality Improvement Program Intraoperative Times and Anesthesia Claims. Santa Monica, CA: RAND Corporation, 2025. https://www.rand.org/pubs/research_reports/RRA3470-1.html.
“CLFS & PAMA Reporting and Resources.” Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services, 4 May 2026, https://www.cms.gov/medicare/payment/fee-schedules/clinical-laboratory-fee-schedule/clfs-pama-reporting-resources. Accessed 6 May 2026.
“DMEPOS Competitive Bidding.” Centers for Medicare & Medicaid Services, https://www.cms.gov/medicare/payment/fee-schedules/dmepos-competitive-bidding. Accessed 7 May 2026.
“Calendar Year 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (CMS-1834-FC).” Centers for Medicare & Medicaid Services, 21 Nov. 2025, https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center. Accessed 7 May 2026.
“Calendar Year 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (CMS-1834-FC).” Centers for Medicare & Medicaid Services, 21 Nov. 2025, https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center. Accessed 7 May 2026.
Centers for Medicare & Medicaid Services. (2026, April 6). Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2027 and Updates to the IRF Quality Reporting Program (CMS-1845-P), 91 Fed. Reg. 17216–17218.