The plan announced Monday reflects the increased desire in the health-care system to tie payments to patients' outcomes and not to the medical services provided to people.  The so-called fee-for-service model that has long prevailed in the U.S. health-care system has been blamed for medical costs that have continually outpaced normal inflation and on worse health outcomes for Americans compared to their counterparts in other industrialized countries.  Read MoreSicker Seniors: U.S. lags on elder health vs. other nations  HHS Secretary Sylvia Burwell said, "Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a health-care system that delivers better care, spends health-care dollars more wisely and results in healthier people."  "Today's announcement is about improving the quality of care we receive when we are sick, while at the same time spending out health-care dollars more wisely," Burwell said. "We believe these goals can drive transformative change, help us manage and track progress and create accountability for measurable improvement."  Under the plan, HHS said it has has set of goal of tying 30 percent of "traditional, or fee-for-service Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016," according to the press release.  Both models are based on the idea of giving lump sums to providers for taking care of patients, as opposed to making payments for individual services.  By 2018, HHS wants to tie 50 percent of traditional fee-for-service Medicare payments to such alternative payment models.  Currently, about 20 percent of the $362 billion in Medicare fee-for-service payments are made through alternative payment models, according to HHS, which noted that Medicare had "made almost no" such payments as recently as 2011. Under the plan announced Monday, there would be a 50 percent increase in that level by the end of 2016.  Read MoreCost concerns keep insured out of doctor's office  "HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction programs," the release said.  Those targets are less ambitious than the ones tied to payment models. A senior HHS official, speaking on background, said that currently less than 20 percent of such Medicare payments don't have a link to quality or value.  Burwell said that her department is creating the "Health Care Payment Learning and Action Network" to help private payers, employers, consumers, providers, states, Medicaid partners and others involved in the Medicare program "expand alternative payment models into their programs."  "HHS will intensify its work with states and private payers to support adoption of alternative payments models through their own aligned work, sometimes even exceeding the goals set for Medicare," the department said.
The Obama administration said more Medicare payments will be linked to the value given patients, as opposed to a fee for services.