qotd: Medicare yet to save money through ACOs

Kaiser Health News
September 14, 2015
Medicare Yet To Save Money Through Heralded Medical Payment Model
By Jordan Rau and Jenny Gold

A high-profile Medicare experiment pushing doctors and hospitals to join
together to operate more efficiently has yet to save the government
money, with nearly half of the groups costing more than the government
estimated their patients would normally cost, federal records show.

The Centers for Medicare & Medicaid Services offers the lure of bonuses
to health care practitioners who band together as accountable care
organizations, or ACOs, to take care of patients. The financial
incentives are intended to encourage these doctors, hospitals, nursing
homes and other institutions to keep patients healthy rather than
primarily treat illnesses, which is what Medicare payments traditionally
have rewarded. ACOs that save a substantial amount get to keep a share
of the savings as a bonus.

The Obama administration touts ACOs as one of the most promising reforms
in the 2010 federal health care law. The administration set a goal that
by the end of 2018, half of Medicare spending currently based on the
volume of procedures a doctor or hospital performs will instead be
linked to quality and frugality. But so far the ACO program generally
has been a one-way street, with most doctors and hospitals happy to
accept bonuses while declining to be on the hook for a share of any
excessive costs run up by their patients.

Last year, Medicare paid $60 billion to 353 ACOs to take care of nearly
6 million Medicare beneficiaries. Some ACOs made significant strides in
reducing use of hospitals and other costly resources. But patients at 45
percent of groups cost Medicare more than the government had projected
based on their patients' historic costs, records show. After paying
bonuses to the strong performers, the ACO program resulted in a net loss
of nearly $3 million to the Medicare trust fund, government records show.

Last year, 196 ACOs saved Medicare money, while 157 ACOs cost more than
expected. Medicare ultimately did not realize any savings because it
paid out bonuses to 97 ACOs, but only three of the costly ACOs had to
repay Medicare for losses their patients incurred.

Jeff Goldsmith, a health industry analyst and professor at the
University of Virginia who is a longtime ACO critic, said the ACO model
is flawed. Consumers do not actively opt to participate in the ACOs and
do not share in any savings, so they lack financial incentives to help
keep costs down, he said. ACOs also have limited leverage to control the
costs incurred by highly paid specialists such as surgeons and
cardiologists. Patients in ACOS can still go to any doctor who accepts
Medicare's regular method of paying, in which they receive a set fee
based on the nature of the service without regard to its outcome.

"Faux managed care is actually harder to do than real managed care,"
Goldsmith said. The ACO program, he said, "has a bad enough reputation
in the provider community that is not going to grow sufficiently to
replace regular Medicare."

http://khn.org/news/medicare-yet-to-save-money-through-heralded-medical-payment-model/

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Comment by Don McCanne

Although the Obama administration continues to tout the successes of
Medicare accountable care organizations (ACOs), according to this
article using government data, the ACO program resulted in a net loss of
nearly $3 million to the Medicare trust fund. Thus their headline:
"Medicare Yet To Save Money Through Heralded Medical Payment Model"

Compared to what the nation spends on health care, $3 million is not a
significant loss. The real tragedy here is that the Centers for Medicare
& Medicaid Services (CMS) continues to move forward with this program as
the be-all and end-all when it has already been proven to be a miserable
failure as a means of significantly reducing health care spending.

Compare the $3 million loss with this program to the approximately $400
billion administrative savings that we could have under a single payer
national health program - savings that could be used to actually improve
quality and access in our health care system. In more visual numbers, we
are comparing an excess spending on the Medicare ACO program of
$3,000,000 with a single payer savings on administrative costs of about
$400,000,000,000.

We should continue to encourage the ongoing efforts of those dedicated
individuals in the health care delivery system who are improving quality
and efficiency. But regarding financing, we should quit wasting our time
and resources with the flawed Medicare ACO model and move forward with
financing reform that really does work - a single payer national health
program.