American Enterprise Institute describes how it would fix ACOs

A researcher at the conservative American Enterprise Institute has cast doubt on the future of accountable care organizations and offered reform ideas to improve the pay model.

The ACO model is flawed because it does not achieve buy-in from patients, who are assigned to participate in the new programs, and relies on fee-for-service payments, visiting scholar James Capretta wrote in the August AEI Health Policy Outlook. ACOs receive incentive payments for holding costs below spending targets and successfully reporting quality measures. Some models include risk sharing, and members could be penalized for excessive spending on patients assigned to the group.

About 10% of Medicare beneficiaries participate in these arrangements. In July, the Centers for Medicare & Medicaid Services reported that costs for 670,000 patients in the pioneer ACO program grew by only 0.3% in 2012, while overall spending grew at a 1.7% rate.

But with nine of the 32 pioneer ACOs dropping out, Capretta said there is little reason to believe the Obama administration’s ACO effort will succeed. He offered three reforms to improve the program.

Patients should be given the chance to enroll in a new integrated care option to replace the ACO program, Capretta said. The plans then would compete with each other and with private Medicare Advantage plans on price and quality of care.

“They would be required to provide to Medicare’s administrators estimated cost-reduction amounts that would be shared with the beneficiaries in the form of reduced Medicare premiums,” Capretta wrote. “The reduced premiums paid by these beneficiaries when they enrolled in an integrated plan would not result in a financial loss for the government.”

Capretta also recommended a ban on supplemental insurance plans from covering patient cost sharing, except for beneficiaries enrolled in the integrated care options. This would encourage patients to seek those integrated arrangements over unmanaged fee for service.