NCPA - National Center for Policy Analysis

Replacing ObamaCare's Accountable Care Organization

October 18, 2013

The White House and Congress are inching closer to a conversation about serious entitlement reform. A good place to start would be how to replace the overhyped Medicare accountable care organization (ACO) concept, enacted in ObamaCare, with a reform idea that would actually work, says James Capretta, a visiting fellow at the American Enterprise Institute.

ObamaCare attempts to incentivize ACOs with a new bonus payment system. But the ObamaCare ACO concept suffers from a fatal flaw: the beneficiaries generally have no idea they are even enrolled in an ACO. This was by design. The authors of the law did not want the beneficiaries to be part of the ACO enrollment equation.

This "passive enrollment" system is the result of policy bias and political calculation. If costs are lowered from ObamaCare's ACOs, the only winners are the providers and the government, not the beneficiaries.

There are far better ways to encourage the spread of high-quality integrated care networks in Medicare. The fastest, surest way would be to create a level competitive playing field with Medicare's insurance system.

A first-step Medicare reform should focus on giving provider-run integrated care plans -- or Medicare Integrated Networks -- the ability to attract beneficiaries in an open enrollment process. 

  • The government would be assured of spending no more than it would without the new integrated care option (and potentially a lot less) because it would reduce the amounts paid for services rendered by the integrated plan's physicians, hospitals and other service providers to cover, at a minimum, the total amount of reduced premiums paid by the plan's enrollees.
  • The integrated plans could also elect to have the government's fee-for-service payments sent directly to the plans, and not the doctors and hospitals.
  • This would allow plans to design provider compensation programs without meddling from the Medicare program.

These reforms would jumpstart a genuine integrated care program in Medicare by harnessing the beneficiaries' interest in getting high quality, low cost care. A program built on accountability to patients and consumers will have far more success than one focused on pleasing the government.

Source: James C. Capretta, "Jumpstarting Entitlement Reform: Replace Obamacare's Flawed Medicare Acos with a Better Model," Economic Policies for the 21st Century, October 14, 2013.


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