NCPA - National Center for Policy Analysis

Accountable Care Organization Experiment Fails to Save Money in Medicare

June 8, 2011

A key government experiment that set out to lower costs and coordinate care for Medicare patients -- now the blueprint for an innovation the Obama administration is trying to move to a national scale -- has failed to save a substantial amount of money, says the Washington Post.

  • The five-year test enlisted 10 leading health systems around the country and offered financial bonuses if they could save enough by treating older patients more efficiently while providing high-quality care.
  • In 2010, the final year, just four of the 10 sites, all long-established groups run by doctors, slowed their Medicare spending enough to qualify for a bonus.
  • Two sites saved enough to get bonuses in all five years, the evaluation shows, but three did not succeed even once.

The uneven progress is significant because the experiment involves "accountable care organizations" (ACOs), one of the hottest trends in health policy and an idea included in the year-old federal law intended to overhaul the nation's health care system.

Recent studies have shown that when a medical group becomes an ACO, the financial investments it must make in record-keeping and other changes have been higher than the government has predicted, causing it to lose money for at least the first few years.

Source: Amy Goldstein, "Experiment to Lower Medicare Costs Did Not Save Much Money," Washington Post, June 1, 2011.

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