Taxpayers And Medicare Patients Can’t Afford Obamacare’s ‘Savings’

Administration officials just unveiled an Orwellian new strategy for masking ObamaCare’s mounting costs — rebrand them as “savings.”

The Centers for Medicare and Medicaid Services recently announced that Medicare saved $466 million last year thanks to the Affordable Care Act’s “Accountable Care Organizations” — groups of doctors, hospitals, and other health care providers that promise to work together to coordinate care for Medicare patients in order to reduce costs. To reward those ACOs that do so, the federal government paid out $683 million in bonuses last year.

That’s right. The administration’s “savings” came at a net cost of $217 million. Only ObamaCare could create a program that encourages health care providers to ration care and adds to the federal deficit — and then declare that program a success.

ObamaCare’s framers created Accountable Care Organizations to lower Medicare spending. Instead of receiving reimbursement for each test and procedure, the roughly 400 participating hospital systems receive lump-sum payments from the federal government.

In theory, these ACOs are supposed to make infrastructure and personnel upgrades that reduce the overall cost of care. If they can treat patients for less than the lump sum, they get to keep the difference — and might even earn a bonus. If they fail to curb spending, they shoulder the losses and may pay a penalty.

For patients, the dangers of this model are obvious. Any program that relies on lump-sum payments is bound to lead to the rationing of care — no matter how much its proponents protest. Sure, ACOs may be able to deliver early savings by cutting out obvious waste and inefficiencies. But after that, the only way to cut spending is to restrict access to needed medical services.

Hospitals get a bad deal, too. Only half of ACOs booked any savings at all last year, according to the latest data from the Centers for Medicare and Medicaid Services. Fewer than one-third of these organizations saved enough money to qualify for a bonus.

Most of the bonuses are going to just a few hospitals. Of 12 “Pioneer” ACOs — now rebranded as “Next Generation ACOS” — just one earned two-thirds of all bonus money in 2015. Many of the others receiving bonuses are spending millions on infrastructure overhauls that actually result in net losses.

So it’s no surprise that hospitals are abandoning the ACO model en masse. Of the 32 providers hand-picked by the Obama Administration to start the more aggressive “Pioneer” ACO model four years ago, only nine remain.

Earlier this month, Dartmouth-Hitchcock health system announced that it would leave ObamaCare’s ACO program. It was reducing spending and meeting the government’s goals for quality of care — and yet it still faced federal penalties because the spending reductions weren’t big enough.

The loss of Dartmouth-Hitchcock is a significant blow to the Obama administration. After all, it was Dartmouth professors who invented the very concept of an ACO.

Even in the less ambitious model, the Medicare Shared Savings Program, “there are still too many defects in the program requirements to achieve long term stability and success,” according to the National Association of ACOs.

Taxpayers aren’t faring any better. Medicare has taken net losses on the program in each of the last two years, after factoring in the bonuses it pays out.

Nevertheless, the Obama Administration remains undeterred in its efforts to foist this defective arrangement on American seniors and their health care providers. By the end of this year, the Department of Health and Human Services promises that alternative payment models like ACOs will account for 30% of all Medicare payments. That number will rise to 50% by 2018.

The Administration can engage in doublespeak all it wants. That doesn’t change the fact that the ACO model is a terrible deal for patients, providers, and taxpayers. It’s time to nix the model before its “savings” yield any more negative effects, including rationed or denied care.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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