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Medicare Shared Savings Program has increased federal spending instead of producing savings

Medicare Accountable Care Organizations Have Increased Federal Spending Contrary to Projections That They Would Produce Net Savings

By Josh Seidman, John Feore, Neil Rosacker
Avalere, March 29, 2018

New analysis from Avalere finds that the Medicare Shared Savings Program (MSSP) has performed considerably below the financial estimates from the Congressional Budget Office (CBO) made in 2010 when the MSSP was enacted as part of the Affordable Care Act. This has raised questions about the long-term financial success of Medicare’s largest alternative payment model (APM). The MSSP has grown from 27 ACO participants in 2012 to 561 in 2018. Most MSSP accountable care organizations (ACOs) continue to select the upside-only Track 1, which does not require participants to repay the Centers for Medicare & Medicaid Services (CMS) for spending above their target.

Avalere’s research shows that the actual ACO net savings have fallen short of initial CBO projections by more than $2 billion. In 2010, the CBO projected that the MSSP would produce $1.7 billion in net savings to the federal government from 2013 to 2016. However, the MSSP increased federal spending by $384 million over that same period, a difference of more than $2 billion.

While the MSSP overall was a net cost to CMS in 2016, there is evidence that individual ACO performance may improve as they gain years of experience with the program.

Avalere’s analysis also shows that the downside-risk models in the MSSP (Tracks 2 and 3) have experienced more positive financial results overall, indicating the potential for greater savings to CMS over time as the number of downside-risk ACOs increase. The upside-only model (MSSP Track 1) increased federal spending by $444 million compared to the downside-risk ACOs (MSSP Tracks 2 and 3) that reduced federal spending by $60 million over 5 years.

“While data do suggest that more experienced ACOs and those accepting two-sided risk may help the program to turn the corner in the future, the long-term sustainability of savings in the MSSP is unclear. ACOs continue to be measured against their past performance, which makes it harder for successful ACOs to continue to achieve savings over time,” said John Feore, director at Avalere Health.

http://avalere.com...

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How does the Affordable Care Act define ACOs?

Quote of the Day, October 28, 2010

Re: Shared Savings Program – New Section 1899 of Title XVIII (from CMS)

From the Comment by Don McCanne, M.D.

So how do ACOs achieve higher quality and lower cost?

The ACOs are not rewarded monetarily for meeting the quality standards. Their motivation to comply is to avoid being suspended from the program.

Costs are reduced by the shared savings program. A benchmark is established for each ACO “using the most recent available 3 years of per-beneficiary expenditures for parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO.” If the ACO can provide care for costs below the benchmark, the ACO then shares those savings with HHS. The benchmark is reset at the beginning of each 3 year agreement.

If the costs are above the benchmark, then the fees are still paid as usual, with no adjustments.

Think about this. The incentives continue to promote greater volume. There is no penalty for running the charges up. Is the reward for reducing the volume and intensity of services enough? Since fixed costs for the ACO are relatively unchanged, the reductions in marginal overhead expenses due to reduced volume must be greater than the amount of savings that HHS shares with the ACO in order to come out ahead. Since this is the opposite of “making it up in volume,” it is more likely that net income will be reduced. Further, since the benchmarks are reset every 3 years based on lower utilization, it is very unlikely that that the ACO could continue to ratchet down services to qualify for shared savings.

http://pnhp.org...

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Comment:

By Don McCanne, M.D.

The Medicare Shared Savings Program (MSSP) is Medicare's largest alternative payment model (APM). This report shows that the program increased federal spending instead of producing net savings. Yet CMS is insisting on moving forward with APMs.

It is not as if this result is a surprise. Even an amateur policy wonk like me saw problems with it as it was being set up in 2010 (see my comment above).

The optimism that this might turn around does not seem to be warranted. In 2010, I wrote, "since the benchmarks are reset every 3 years based on lower utilization, it is very unlikely that that the ACO could continue to ratchet down services to qualify for shared savings."

Now John Feore, director at Avalere Health, states, "ACOs continue to be measured against their past performance, which makes it harder for successful ACOs to continue to achieve savings over time."

How could any health care organization continue to increase savings year after year under these terms? Once the low hanging fruit is gone and cherry pickers are used to harvest the rest, they expect that moving to downside risk is going to increase the return for the ACOs while further reducing federal spending? What kind of accounting magic is this?

This does provide yet one more lesson on why it has been a mistake to continue to try to chase screwy business models of financing health care when the obvious solution would be government administered pricing through a single payer national health program - an improved Medicare for all. But the greater lesson here is that we must exercise much more diligence in selecting our government stewards. Both the Democrats and the Republicans have taken us down the wrong path.

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