You’re busy. You don’t have time to analyze the data, but you want to know if ACOs are working. My latest AcademyHealth post is for you.
My latest over at the AcademyHealth blog:
We’ve spent the last few years writing about changes to the health care system due to the ACA and other reforms. But most of those pieces have focused on how those changes have affected spending or care. Few have discussed how physicians feel about reform. A recent survey by The Commonwealth Fund and The Kaiser Family Foundation will change that.
Go read the whole thing!
Recent studies have credited Pioneer ACOs with some savings, though less to none accounting for program costs. How do those study results square with predictions? I actually don’t know, and I’m not sure anybody does. The Pioneer Program is a demonstration program within the Center for Medicare and Medicaid Innovation. Demos don’t get scored (I’m told).
I can, however, find* predictions of savings from Medicare’s Shared Savings Program, which is a larger and slightly different ACO program than Pioneer. (Learn about the differences here.) Those predictions are below.
When reading the following, keep in mind that today Medicare costs over $500 billion per year. So, when discussing 10-year budget savings, compare figures below to something on the order of $5 trillion. In other words, $5 billion savings over 10 years is roughly 0.1 percent of total Medicare spending.
 In December 2008, the Congressional Budget Office (CBO) provided some clues to its thinking about ACOs (which, at the time, it called Bonus Eligible Organizations, or BEOs). Under the assumption that 20 percent of beneficiaries participated in such an organization by 2014 and 40 percent by 2019, CBO scored $5.3 billion in savings over 2010-2019. Today, only 7 million beneficiaries are associated with ACOs, or about 14 percent. The savings would decline over that span for several reasons, one of which is that as organizations became more efficient, bonus payments would grow. CBO warned that their prediction was highly uncertain because it was not clear precisely how organizations would respond to financial incentives and due to the voluntary nature of the program. Regulations are evolving to attract and retain more organizations, which often means paying them more.
 In scoring the ACA in March 2010, the Congressional Budget Office (CBO) predicted savings of about $5 billion over the original 10-year window from the Shared Savings Program.
 In 2010, the CMS actuary credited the Shared Savings Program, among many others, with zero savings for every year through 2019.
 For what it’s worth, prior attempts at care coordination programs tended not to produce savings. Researchers have found modest savings for the Physician Group Practice Demo and savings from private-sector ACO-like contracts.
My guesses: the CMS actuary is probably wrong on the low side, but possibly not by much. CBO’s estimate could be close to right, but possibly too high. We already see some savings from Pioneer ACOs, for example, but fewer beneficiaries are associated with ACOs than expected and modifications of regulations may increase program costs.
People who think ACOs will definitely turn the tide of health care spending once and for all are overconfident. Maybe ACO savings can grow over future decades, but it’d have to do some significant compounding to reach a substantial portion of total Medicare spending this century. One way it could compound is if ACOs succeeded in controlling the diffusion of expensive, new health care technology.** I am unaware of anyone making an explicit argument that they will do so.
* By “find” I mean that I asked Loren Adler, and he emailed me links.
** If I’m doing the math right, with 0.1% savings relative to all of Medicare spending in the first decade, even if that doubled every decade, we’d only see about 0.8% savings by 2100.
I’m at the 36th Annual Health Law Professors’ Conference, a wonky meeting that’s the highlight of my conference year. I plan to blog some of the highlights each day.
The first plenary on the ACA featured Tim Jost (W&L), Sara Rosenbaum (GW) & Vicki Robinson (OIG).
Jost focused on private market reforms. The Exchanges open on October 1st, with daunting HIT issues as we attempt to enroll millions more Americans. Jost discounted fears about employers dropping coverage, primarily due to the employer mandates and the generous tax subsidies for all employer-based private coverage. As for predictions of “rate shock” in the Exchanges, individual and small group markets, Jost reasons that groups with increased premiums will get more press coverage than those whose premiums will decline. The prototype will be the young, healthy male. But with the elimination of gender discrimination under the ACA, young healthy women should save money [but see the contraception mandate litigation]. Jost also noted the individual clawbacks: the tax subsidies in the Exchanges are paid real-time, based on expected annual income. But of course, many people who will qualify (income between 138 – 400% FPL) don’t have the sort of jobs that allow precise predictions of annual income. The individual clawbacks will retrospectively adjust subsidies and cost-sharing once the actual income is known. That will be quite a shock for poor people who exceeded their expected 2014 income.
Rosenbaum started with the federalism ironies in Medicaid – a program designed as cooperative federalism has driven so much conflict. She discussed Medicaid problems in the “nullification states” after SCOTUS “weaponized” the coercion doctrine. (Long BU Law Review article here) In the months after the NFIB decision, she said, some states talked about “partial expansions” and the Administration didn’t push back until after the election. (Prior TIE coverage here) Now it is clear that NFIB allows states a binary choice to either accept or reject the Title II ACA Medicaid expansion. Rosenbaum fears for the millions of poor people who will not gain coverage in nullification states. Heavy pressure will fall on community health centers and free clinics in those states, largely in the south. Her preferred solution is a federal fallback plan for Medicaid expansion, akin to the federal fallback for the Exchanges.
Robinson led the OIG effort to modify the fraud and abuse laws to the new world of ACOs, particularly the the Medicare Shared Savings Program. She described the “heavy lift” of getting multiple federal agencies to work together to issue consistent ACO guidance, including the IRS, FTC, DOJ, OIG and CMS. (Prior TIE coverage of these rules here and ACOs generally here). She had no updates for how these rules might apply in the commercial market, which is a major concern.
There are three Viewpoints worth your time this month in JAMA Pediatrics. The first is by Charles Horner and Kavita Patel, and discusses ACOs and children. Pediatric care accounts for a relatively small part of national health care expenditures, and almost none of it comes from Medicare. So how much do ACOs matter for kids? “Accountable Care Organizations in Pediatrics: Irrelevant or a Game Changer for Children?”
The term accountable care organization (ACO) is the new buzzword in health care. Enshrined in the Affordable Care Act as well as being advanced by private payers, ACOs are becoming real in adult health care systems and are starting to appear in pediatrics. (Indeed, the Affordable Care Act calls for the establishment of a pediatric demonstration project, although the specified starting time for the project [June 2012] has passed without any guidance from the US Department of Health and Human Services.) But, what is an ACO? What does it intend to accomplish? Is it relevant for child health and health care? What concerns need to be addressed for ACOs to benefit children?
The second is by Lisa Simpson, and discusses the state of children’s health services research. I’m biased here, but it’s a must-read. “The Adolescence of Child Health Services Research“:
It has been 15 years since child health services research (CHSR) began emerging as a distinct field, living at the intersection of the greater health services research (HSR) community and the pediatric research world.1 In 1999, an invitational conference explored the state of the science in CHSR, including public and private funding opportunities, networks for conducting research, and uses of research in policy and practice. Since that time, CHSR has become listed as a distinct topic in the National Library of Medicine’s HSR resource center, and child health is an annual theme at the Annual Research Meeting of AcademyHealth. We have also learned much about the care that children and adolescents receive—its safety, quality, and effectiveness—and about which children are most at risk for poor health outcomes. Health policy has been successfully informed by CHSR, most notably in the reauthorization of the Children’s Health Insurance Program. Finally, a decade of quality efforts is resulting in care improvements, albeit modest ones and not for all children.
The third is by health care policy wonks Aaron Carroll and Austin Frakt. “Medicaid Expansion: Good for Children, Their Parents, and Providers“. Obviously, I’m even more biased with this one:
Public insurance makes a real difference in the health of children. Those who are covered are significantly more likely to have a usual source of care than those who are uninsured, which is strongly associated with better outcomes. Insurance also makes care more affordable, and insured children are significantly less likely to forego care because of cost. Public insurance has reduced disparities in health care related to race, ethnicity, and unmet health care needs.
But things are far from optimal. Many of the still uninsured are parents. Although Medicaid and SCHIP do a reasonably good job of covering children and pregnant women, the programs have not been nearly as universal when it comes to adults. This is important because the insurance status of a parent can significantly effect the health of his or her child. Children with uninsured parents are significantly less likely to receive recommended health services, even if they themselves are covered.
The Medicaid expansion is intended to reduce the percentage of uninsured in the adult population. At the moment, Medicaid is a universal program for children in families making less than 100% of the federal poverty line; its coverage of parents is far less robust. The Affordable Care Act (ACA) changes Medicaid into a universal program for all people, children and adults alike, in families with incomes below 138% of the federal poverty line. This is not an insignificant change. About half of the more than 30 million currently uninsured who are expected to get coverage under the ACA will do so through the Medicaid expansion. Many of the people who will get coverage are parents.
Over at the Daily Beast, Einer Elhague offers a column that promises the “best way to reform health care and cut the deficit.” It’s the “least painful way to lower health care costs” and bipartisan to boot.
Imagine my surprise when the idea is to issue more aggressive regulations supporting ACOs and IPAB, both in service of defragmentation.
Don’t get me wrong. I’m cautiously optimistic on ACOs in the long term, and a big fan of IPAB and defragmentation, but these aren’t new ideas. Both are found in the PPACA. And while ACOs have bipartisan support, the IPAB is one of the provisions Republicans hate most (which is saying a lot). One of the first actions taken by the House Republicans in the 113th Congress was to specifically promise not to follow the IPAB procedures. Health policy wonks like Tim Jost have worried whether any of the 15 IPAB members will ever be confirmed by the Senate, which dims hopes for recruiting good people. Doesn’t get much less bipartisan than that.
As for ACOs, after a false start in March 2011, the feds issued a remarkable series of regulatory waivers in May 2011. These rules jumpstarted a surge in ACO development. But remember that early results from ACOs are more mixed than proponents would have liked, i.e., the empirical data on ACOs are still not clear, which gives me reason for caution, not doubling down. See our ACO tag for more.
So, I’d like to hear more details on:
- Precisely which pro-ACO regulations are needed, but have not been issued yet; and
- How IPAB will ever get Republican support.
From Lawton Burns and Mark Pauly in Health Affairs:
The evidence reviewed above suggests that components of accountable care organizations have limited and uncertain impact, especially on cost savings, and thus provide little support for the two postulates mentioned above: that better care coordination will improve quality at any given cost, and that the organizations will lower Medicare’s rate of spending growth. If the organizations increase “value” (quality or outcome divided by cost), at best they raise the numerator but do not lower the denominator. […]
We ought to have realistic expectations about our ability to deliver on the Triple Aim [of improving care for individuals and populations and controlling costs]. Prior to the publication of an article by Donald Berwick and coauthors in this journal, economists and others commonly referred to inevitable tradeoffs between cost, quality, and access—what was then labeled the “iron triangle.” There is still no firm evidence that anyone knows how to achieve the Triple Aim. Recent evidence illustrates one crucial point: Improving quality for some conditions often increases costs.
Much more in their paper.
Earlier this week, my paper with Rick Mayes on 1990s capitation contracts and modern ACOs appeared in Health Affairs. As this post hits the blog, I am making some brief remarks about the paper at a Health Affairs forum held at the National Press Club. You can watch me and the other speakers, plus the Q&A, at the Health Affairs events website next week. Meanwhile, the text of my remarks is posted on the AcademyHealth blog. Spoiler alert: I mention second derivatives. Nevertheless, go read!
Some say ACOs cannot work because they are too much like certain, failed managed care contracts of the 1990s. Some say ACOs cannot work because they are not enough like those managed care contracts of the 1990s. Some people are a little bit right even if everyone is a little bit wrong.
Rick Mayes and I sort it out in a new paper that appears in Health Affairs today. Below is the abstract. I’m preparing a longer summary of it as part of the remarks I’ll make at a Health Affairs forum held at the National Press Club this Friday. My remarks will also appear around 10AM on Friday on the AcademyHealth blog.
Abstract: A key issue in the decades-long struggle over US health care spending is how to distribute liability for expenses across all market participants, from insurers to providers. The rise and abandonment in the 1990s of capitation payments—lump-sum, per person payments to health care providers to provide all care for a specified individual or group—offers a stark example of how difficult it is for providers to assume meaningful financial responsibility for patient care. This article chronicles the expansion and decline of the capitation model in the 1990s. We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the “sweet spot,” or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb.
The full paper is gated, but please read it if you have access.
There is, however, another reason to be skeptical about these mergers, not so much because they will reduce competition in today’s insurance market, but because they foreclose potential competition in an evolving health-care market in which one organization will provide both health care and insurance.
In the old days we called these health maintenance organizations, such as Kaiser Permanente. Under the new health reform law, they are called accountable care organizations, or ACOs. The principle is the same: A group of doctors and hospitals and other providers agree in advance to provide most of the medical care that a person requires for x-dollars a year. Such “capitation” gives the providers the incentive to keep people healthy and provide all the really necessary care, or risk losing the patient during the next open enrollment. But it also gives the providers the incentive to keep costs down and eliminate unnecessary or marginal care just to run up the bill, which is what often happens under the current system.