Would all Medicare ACO beneficiaries please stand up?

by Ross White

Accountable Care Organizations (ACOs) remain a central piece of the ACA’s efforts to help improve the quality and reduce the costs of health care, but recent developments suggest more work is needed. As Mike highlighted a couple of months ago, first-year results from the Pioneer program are promising. They suggest that certain health care systems, particularly those that are highly integrated and have experience with advanced payments models—pay  for performance, capitation,  bundling, etc—can in fact meet the dual goal of improved outcomes and lower costs.  However, not all providers are ready for the full wave of accountable care and many challenges lay ahead, particularly for Medicare-sponsored ACOs that lack the flexibility of their commercial-payer counterparts.

Regardless of your perspective on the true promise of ACOs, it is hard not to acknowledge that provider and patient incentives often do not align. The provider perspective in an ACO is very akin to that of a managed care plan responsible for total patient care, costs, and quality. On the other hand, the patient perspective is more like traditional fee-for-service, since Medicare ACOs are by statute not allowed to limit what providers an attributed patient visits, thus leading individuals to seek care—some unnecessary—at  non-ACO providers. As a result, the ACO is held accountable for the cost and quality of care that they are not providing.  Jim Hinton, President and CEO of Presbyterian Healthcare Services, recently said this was a major reason that Presbyterian was one of two Pioneers ACOs that decided to completely leave the Medicare ACO program. Seven other Pioneers shifted to the less risky Shared Savings Program, some for similar reasons.  So, what can we do about this?

One approach is to give ACOs the power to limit attributed patient choice to a set of providers that may not perfectly align with patient needs. However, limiting patient choice and not allowing them to share in any of the savings generated from restricted networks could lead to serious disapproval. Alternatively, CMS could allow ACOs to use financial incentives in order to keep patients in their provider network. A number of recent proposals aim to do just that.

Last week, at the most recent MedPAC meeting, committee staff recommended creating, “Medicare Select supplemental plans” that encourage patients to seek care in a single ACO through lower cost-sharing when they stay within the ACO provider network.  These financial nudges could help to address tensions between providers and patients likely to arise as Medicare phases in penalties for ACOs that fail to meet quality and cost targets. The proposal would begin with only primary care providers, but specialty care is likely to be added. In addition, the MedPAC Chair, Glenn Hackbarth, suggested that CMS should consider letting senior share in savings from ACOs, in order to make patients more loyal to the ACO provider network and prevent a replay of the often-cited managed care backlash of the 90s.

A similar proposal was set forth by the Bipartisan Policy Center (BPC) in their April report, A Bipartisan Rx for Patient-Centered Care and System-wide Cost Containment. The joint report by Tom Daschle, Pete Domenici, Bill Frist and Alice M. Rivlin suggested the creation of Medicare Networks that allow enrolled beneficiaries to be guaranteed at least a $60 annual discount on their Medicare premiums for the first three years and adjusted in subsequent years. The proposal includes lower cost-sharing for services from providers within the network and higher cost-sharing for certain services outside of the network. When the Medicare Network meets quality goals and generates savings, some of the government’s share in the savings will be passed onto through reduced premiums for network enrollees. Unlike the existing Medicare ACO program, beneficiaries are given the freedom to decide if and what accountable care arrangement to enroll in and subsequently have personal responsibility to manage their care in a cost conscious way.


The most recent Brookings Institution’s Bending the Curve report, Person-Centered Health Care Reform, written by a host of highly-regarded health economists, former government officials, and other health policy scholars recommends a shift away from Medicare fee for service to Medicare Comprehensive Care (MCC), in which financing becomes more closely aligned with the goal of better, higher-value care for each beneficiary. Similar to MedPAC and BPC, the authors encourage Medicare to provide beneficiaries incentives to choose accountable care-like arrangements. Beneficiaries could choose to seek care from MCC providers, with the potential for reductions in Medicare premiums and co-pays if the MCCs demonstrate lower actuarial costs.

These reforms, intended to encourage more patient loyalty and buy-in to accountable care arrangements, will not be a panacea for all of the challenges facing ACOs and other evolving delivery and payment systems, but they recognize the power of having patients who understand and want to be a part of the changing health care landscape. Absent regulatory changes that keep patients within ACO provider networks, many Medicare ACOs may continue to experience patient leakage and struggle to meet financial and quality benchmarks.  MedPAC has a great opportunity to begin addressing these issues by taking seriously the recommendations of its staff. The time is ripe to pursue this path and consider including these regulatory changes in the next round of rulemaking, likely to occur next year.  The larger Medicare ACO experiment will ultimately fail if patients are not empowered and committed to the goals of an ACO.


Ross is a Project Manager in the Engelberg Center for Health Care Reform at The Brookings Institution. Follow him on Twitter at  @rossswhite or subscribe to the blog.


One thought on “Would all Medicare ACO beneficiaries please stand up?

  1. Aquifer says:

    Isn’t it amazing all the convoluted machinations one has to go through when one avoids the obvious solution – single payer ….

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