NCPA - National Center for Policy Analysis

Accountable Care Organizations Don't Help ObamaCare

August 29, 2013

Proponents of the Patient Protection and Affordable Care Act (PPACA) have advocated for Medicare accountable care organizations (ACOs) (groups of doctors, hospitals and other health care providers that form new organizations to serve Medicare patients) as a way to supposedly transform how hospitals and physicians care for their patients and thus slow the rate of health spending while also improving the quality of care. But more than three years after enactment, it is clear that PPACA ACOs are fundamentally flawed because they prevent genuine consumer choice, says James C. Capretta, a visiting fellow with the American Enterprise Institute.

The populations the ACOs are supposed to manage are often unaware that they are enrolled in an ACO and therefore have little incentive to stay within the ACO care network. The ACOs are furthermore hamstrung by their reliance on cumbersome fee-for-service payment systems.

  • On the other hand, long-standing integrated care initiatives have shown potential for slowing cost growth and improving the quality of care.
  • Rather than seeking to repair the broken PPACA ACO model, reformers should create a new model that incorporates provider-driven managed care into a larger system of genuine consumer choice and marketplace competition.

There never was any evidence to back up grandiose claims about ACOs. Indeed, in its cost estimates for the legislation, the Congressional Budget Office never assigned anything more than relatively trivial savings to the ACO concept.

Moreover, critics noted during the law's consideration and shortly after its enactment that structural flaws would prevent ACOs (at least as conceived in the PPACA) from ever having a meaningful impact on the delivery system or on cost growth. But that did not stop the relentless hype by the law's advocates.

More than three years after enactment, it is clear that the ACOs of the PPACA variety will be, at best, minor blips in the nation's $2.7 trillion health system. This is not to suggest that the real accountable care organizations -- the many varied integrated care initiatives underway around the country -- are without merit. In fact, these initiatives have the potential to make some real headway toward slowing cost growth and improving quality. But they have absolutely nothing to do with the PPACA, were originated by private actors and very often predate the PPACA's passage (sometimes by decades).

Source: James C. Capretta, "Reforming Medicare Integrated Care: An Alternative to the Obama Administration's Accountable Care Organizations," American Enterprise Institute, August 21, 2013.


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