Medicare yet to save money through ACOs

Medicare Yet To Save Money Through Heralded Medical Payment Model

By Jordan Rau and Jenny Gold
Kaiser Health News, September 14, 2015

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.”



By Don McCanne, MD

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.