What’s in a Name: A Primer on Global Budget Models

What’s in a Name: A Primer on Global Budget Models

The term “global budget” has been used to describe several different health care payment models. Commercial payers have referred to payment arrangements like the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract (AQC) as a global budget since the early 2000s. At the federal level, the Center for Medicare and Medicaid Innovation (CMMI) has used the term in reference to three models: (1) the Pennsylvania Rural Hospital model; (2) the Maryland All-Payer model; and, (3) the Maryland Total Cost of Care model. Most recently, the term global budget has been used in the “Medicare for All” bills introduced by Senator Sanders (I-VT) and Representative Jayapal (D-WA) to describe the payment approach for institutional health care service providers.

While the term global budget has been used as a common descriptor for all of these payment models, the underlying model designs and goals vary greatly. Consequently, simply referring to a payment model as a global budget fails to adequately communicate the model concept and parameters. In short, “global budget” has become an often used, but inconsistently defined term.

In this paper, the Health Care Transformation Task Force (HCTTF or Task Force) addresses this issue by identifying a set of common characteristics for global budget models, outlining different model types and detailing their common elements. This paper also includes descriptions of several existing global budget models. This work builds on an earlier Task Force white paper that described the range of financial models used by ACOs. It is intended to serve as a resource for policymakers, regulators, and members of the health care industry to assist them in more precisely defining and communicating the relevant features of proposed legislation, regulations, or payment model contracts.

Common Characteristics of a Global Budget:

A payment arrangement that sets a budget to fund the delivery of care to a population over a specified time period, allows for budget adjustments to reflect factors such as market and population changes, includes incentives based on the quality of care and patient experience outcomes, and incorporates financial accountability for the facility or provider.

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