A program created under Obamacare to reduce healthcare spending is actually costing the federal government millions of dollars, a new analysis finds.
The analysis released Thursday by consulting firm Avalere Health looked at the estimates for the Medicare Shared Savings Program, which gives hospitals and doctors incentives to reduce health spending. The program encourages the creation of accountable care organizations, which are healthcare providers that receive a percentage of any net savings caused by their efforts to reduce spending.
The Congressional Budget Office estimated in 2010 that the organizations would save the federal government $1.7 billion from 2013 to 2016. However, the program has increased spending by $384 million over the period, which means CBO’s estimate was off by more than $2 billion.
Currently, 561 ACOs exist, up from 27 in 2012.
The reason appears to be how the program was structured, Avalere said in the analysis, which was funded by the drugmaker lobby Pharmaceutical Research and Manufacturers of America.
An ACO can choose to participate through one of the three tracks. The first doesn’t require an organization to pay Medicare if it doesn’t reach targeted savings. The second and third tracks require organizations to repay Medicare for losses depending on performance, but the organizations receive a larger amount of the savings than in the first track.
Most ACOs selected the first track, which has contributed to the spending.
“The Medicare ACO program has not achieved the savings that the CBO predicted because most ACOs have chosen the bonus-only model,” said Josh Seidman, senior vice president at Avalere.
The data suggests that more experienced ACOs and those choosing the second or third tracks “may help the program to turn the corner in the future,” but the viability of long-term savings is not clear, according to John Feore, a director at the firm.
“ACOs continue to be measured against their past performance, which makes it harder for successful ACOs to continue to achieve savings over time,” he said.
Former President Barack Obama repeatedly touted ACOs and the healthcare law as a way to bring down costs for government programs such as Medicaid. Obama touted the ACO program and the Center for Medicare and Medicaid Innovation as ways to help reduce Medicare spending.
“The contribution of the [Affordable Care Act’s] reforms is likely to increase in the years ahead as its tools are used more fully and as the models already deployed under the ACA continue to mature,” Obama wrote in the Journal of the American Medical Association in August 2016.
