Health care issues: Bundling payments

A look at key issues in the health care debate:

THE ISSUE: What can the government do to get doctors and hospitals to deliver cheaper medical services?

THE POLITICS: Medicare's fee-for-service structure means that doctors, hospitals and other providers have a greater financial incentive to provide large quantities of medical services than to provide high-quality medical services. Democrats and the Obama administration want to change that, and use the savings to help pay for their health overhaul legislation and bring down medical costs over the long term. One strategy they've considered is called "bundling." That's where a range of services - for example a hospital stay and post-discharge care - are grouped together for a single reimbursement, instead of being reimbursed separately. This could give hospitals, doctors and other providers an incentive to provide more efficient care and reduce unnecessary hospital readmissions, since they won't get paid for doing more. But doctors and hospitals have concerns about how any such program would be implemented, since it could mean lower payments to them.

WHAT IT MEANS: The Congressional Budget Office has estimated that the federal government could save nearly $19 billion over 10 years by giving hospitals a single bundled payment covering a hospital stay and any health care service initiated within 30 days of a patient's discharge. President Barack Obama sought savings near that level in his initial list of proposed Medicare cuts meant to pay for a 10-year health care overhaul bill. But after concerns raised by hospitals and others, Congress and the White House appear to be settling for weaker measures like demonstration projects that won't yield cost savings anytime soon.

- Erica Werner