Medicare Savings Found in Promising Health Care Model

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The chief actuary for the Centers for Medicare and Medicaid Services (CMS) recently certified that an important pilot project that came out of the Affordable Care Act saved $400 million in its first two years.

The Pioneer Accountable Care Organization (ACO) model was designed to encourage hospital systems to save Medicare money by allowing them to keep 70 percent of the savings from their cost-reducing measures, with the rest going back to the government. They are also at risk for any cost overruns.

While the savings are small relative to Medicare spending as a whole, the actuary’s finding allows CMS to expand the Pioneer model, providing another tool to help shift Medicare payments away from costly, inefficient fee-for-service medicine.

Independent research has also demonstrated savings through some Pioneer organizations. Patient satisfaction seems to be the same as in traditional Medicare, and there is a greater reported access to doctors. This suggests the savings do not come from skimping on care.

However, other ACO pilots have not shown similar degrees of savings — especially those where hospitals and physicians were able to share in savings but were not on the hook for cost overruns.

External links:
CMS Actuary’s Study
Targets to Move Medicare Away From Fee-for-Service (Concord)
Some Perspective on ACO Savings from The Incidental Economist
Pioneer ACO Model vs. Traditional Medicare Fee-for-Service Medicare (JAMA)

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