Consensus is building that episode-based bundled payments can produce substantial Medicare savings, and the Center for Medicare & Medicaid Innovation's Bundled Payment Initiative endorses this concept. The program generates potential cost savings by reducing the historic cost of time-defined episodes of care, provided through a discount. Although bundled payments can reduce waste primarily in the postacute care setting, concerns arise that, in an effort to maintain income levels that are necessary to cover fixed costs, providers may change their behaviors to increase the volume of episodes. Such actions would mitigate the savings that Medicare might have accrued and may perpetuate the fee-for-service payment mechanism, with episodes of care becoming the new service. Although bundled payments have some advantages over the current reimbursement system, true cost-savings to Medicare will be realized only when the federal government addresses the use issue that underlies much of the waste inherent in the system and provides ample incentives to eliminate capacity and move toward capitation.