Chronic disease is the norm rather than the exception among Medicare beneficiaries, yet Medicare's benefit structure and reimbursement mechanisms are poorly aligned with high-quality chronic care. This disconnect is thought to undermine the quality of chronic care, thereby contributing to excess program spending and placing beneficiaries at risk for undesirable health outcomes. Despite widespread recognition of this mismatch, there is little compelling evidence to suggest that successful quality improvement initiatives would reduce the costs of the Medicare program. This paper describes state-of-the-art chronic care innovations to date, discusses ongoing and planned efforts by the Centers for Medicare & Medicaid Services to test related changes to Medicare's benefit structure and provider reimbursement, and suggests opportunities for future progress in this area.