SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIVERY SYSTEM REFORM.

[a] In General- For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to determine payments for items and services under the public health insurance option. The payment mechanisms and policies under this section may include patient-centered medical home and other care management payments, accountable care organizations, value-based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.

[b] Requirements for Innovative Payments- The Secretary shall design and implement the payment mechanisms and policies under this section in a manner that--

[1] seeks to--

[A] improve health outcomes;

[B] reduce health disparities [including racial, ethnic, and other disparities];

[C] provide efficent and affordable care;

[D] address geographic variation in the provision of health services; or

[E] prevent or manage chronic illness; and

[2] promotes care that is integrated, patient-centered, quality, and efficient.

[c] Encouraging the Use of High Value Services- To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost sharing and payment rates to encourage the use of services that promote health and value.

[d] Non-uniformity Permitted- Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models [such as accountable care organizations and medical homes] under the public health insurance option for different geographic areas.