What would you do if you were a member of the Medicare Payment Advisory Commission (MedPAC) and you were told Medicare Advantage and Medicare’s ACO programs are losing money and there’s no way to determine why they’re losing money? That is what happened over the course of two MedPAC meetings, one in October and another in November. At the morning session of the October 6, 2016 meeting, MedPAC staff reported data on the Pioneer and MSSP ACO programs indicating that the two programs together raised Medicare’s costs slightly in 2015. And at the morning session of the November 3, 2016 meeting, staff reported that Medicare Advantage (MA) raised Medicare costs by 5 percent in 2016 (which is down from 14 percent in 2009) and, moreover, that it’s extremely unlikely anyone will ever know why MA plans and ACOs are raising costs.
If you were a commission member, wouldn’t you at least inquire why the staff thinks it’s impossible to determine the causes of the MA and ACO programs’ failure to cut costs? And if you confirmed that it really is impossible to know why they’re failing, wouldn’t you say it’s high time to terminate those programs? Not one of the 16 commission members present at those meetings did that. Many of the commissioners expressed frustration with the poor performance of the ACO programs (for some reason they spared the MA program from similar criticism). But not one demanded to know why the commission knows so little about what goes on inside HMOs, PPOs and ACOs, nor why the staff thinks the information vacuum will go on forever. Surprisingly, two commissioners (Buto and Gradison) did suggest it was time to terminate the MSSP ACO program. But they received no support from any other commissioners or staff.
So what is MedPAC going to do? Just sit on the sidelines and watch Medicare go on losing money to zombie managed care programs that don’t work but can’t be terminated? That’s what I think is going to happen. But MedPAC won’t come right and say that’s what they’re doing. They’ll figure out a way to camouflage their passivity.
In this post I will review MedPAC’s discussion at the October and November meetings about the failure of the MA and ACO programs. In my next post I will examine the plan MedPAC is developing that will allow the commission to escape having to state the obvious: Managed care is not working.
MedPAC concedes Medicare Advantage and ACOs are raising costs
MedPAC staff member David Glass reported the latest bad news about CMS’s Pioneer and MSSP ACO programs at the commission’s October 6 meeting
The figures Glass reported indicated the two programs together lost $212 million for Medicare in 2015, or .3 percent of the $78.5 billion spent by the ACOs on Medicare recipients.  MedPAC staffer Jeff Stensland reported the latest bad news about the MA program at MedPAC’s November 3 meeting. “In 2016, Medicare paid MA plans on average about 5 percent more on a risk-adjusted basis than fee-for-service,” he stated. (p. 11) 
These reports about the ACO and MA programs provoked an unusually candid discussion among commission members and staff about why these programs are raising rather than lowering costs. Most commissioners either made statements expressing their disappointment or posed questions indicating they wanted to know why the programs were performing so poorly.
In the next section I review the discussion at the October 6 meeting that followed the bad news about ACOs. In the section after that I discuss the issues raised about both the MA and ACO programs at the November 3 meeting. We will see that the staff could not answer the commissioners’ questions and criticisms. Please note I am not blaming staff for the information vacuum MedPAC and the rest of us are operating in. The staff are in the impossible position of trying to explain why the MA and ACO programs – two evidence-free and poorly defined managed-care nostrums earlier commissions endorsed – are not working.
October 6: MedPAC concedes they don’t know why ACOs are failing
The excerpt below from the transcript of the October 6 meeting contains a typical question raised by commissioners about ACOs. In this excerpt, commissioner Jack Hoadley is trying to figure out what ACOs actually do. He asks whether the staff can point to any research demonstrating that ACOs that dropped out of CMS’s Pioneer and MSSP programs were doing something different from the ACOs that stayed in the programs. I quote his question at length because it illustrates how badly the commission is floundering in the great ACO information vacuum (I have described this vacuum elsewhere).
DR. HOADLEY: …. And then [my] second [question]…is [about] the dropouts, and not just the dropouts from Pioneer, but I think you talked about a fair number of dropouts out of MSSP…. [A]t some point in the past you looked at some of the early dropouts…. I don’t know if there’s been any literature looking at this or anything you’ve looked at, but it seems to me they could be responding to a variety of factors, including … designed benchmark kinds of things …, organizational failure, they just couldn’t figure out how to do it, how to change practice patterns in a way to get a response. Or they could be pure financial decisions. “We did not make money” …, whatever. And I don’t know if there’s been any literature yet, or if it is, again, too early … to do that.
[ STAFF MEMBER] DR. [JEFF] STENSLAND: I think the last one is the dominant. If you look who drops out, it’s they didn’t make money. If you made money, even if you don’t know why, you stay in. (pp. 40-41 of the morning session, October 6 transcript; quote marks added)
Here is a second example (from the same meeting) of a commissioner seeking information on what ACOs do:
MS. [KATHY] BUTO: …. I wonder if you could remind us if there are good comparisons of how well ACOs are doing … managing chronic disease or complex patients…. Do we have good measures … of what the ACOs are supposed to be doing? (p. 22)
DR. STENSLAND: …. I don’t think we had the data right now that are lined up well enough to determine that…. [W]e don’t have any really clear evidence that says, oh, you know, this is now our example where care management is really working great. (p. 24)
Here is a third example:
DR. [RITA] REDBERG:…. I wanted to get at, I guess, operating cost…. Like what you had to do to start the ACO…. I’m interested if we have any data on how much those costs were and how much they varied…. And were they related to … savings? (pp. 43-44)
DR. STENSLAND:…. We don’t have data on all the individual ACOs’ internal costs of operation, and sometimes when we talk to them, they’re not exactly sure either what their internal costs of operation are, because, you know, “oh, we have some people, they work part-time on the ACO, they work part-time on something else.” (p. 44; quotation marks added)
Now I ask you, are these not sad questions and answers? Ten years after MedPAC and Elliot Fisher invented the ACO concept at a MedPAC meeting, and nearly five years after CMS began the Pioneer ACO program, MedPAC commissioners have to ask these questions, and all the poor staff can say is, “We don’t know.” 
November 3: MedPAC can’t explain why managed care fails to cut costs
Jeff Stensland opened the morning session of MedPAC’s November 3 meeting by telling the commissioners managed care does not cut costs and, to make matters worse, no one knows why. Here is how he presented the bad news: “We now look to see how integration of insurance risk and provision of care in MA plans and ACOs has affected outcomes and costs…. HMOs can reduce use of services, but it is not clear that reduction in the number of services will offset the plans’ higher administrative costs on average.” He went on to say MA plans raised Medicare costs by 5 percent in 2016 above what those costs would have been had MA enrollees remained in the fee-for-service program, and that ACOs are not cutting Medicare’s costs. (pp. 10-11 of the morning session, November 3 transcript) A minute later he added: “[I]t is not always clear that the legal and financial integration will lead to true clinical integration or to efficiencies. The research indicates that it’s hard, but not impossible, to generate efficiencies from these integrated models.” (p. 13)
As was the case with the bad news about ACOs at the October 6 meeting, this dismal news about not just ACOs but HMOs, the granddaddy of managed care fads, triggered requests for more information from commission members about what it is HMOs and ACOs actually do. As was the case at the October 6 meeting, staff stated the information wasn’t available or didn’t react, and in no instance did they promise to find the requested information.
The most significant portion of the discussion occurred shortly after Stensland reported that financial integration doesn’t lead to “true clinical integration” (whatever that means). Dr. William Hall suggested the staff bring them more information about that issue. “[T]his is an area we might want to take a look at,” he said. “[W]e’re constantly talking about improving population health in Medicare, and I don’t think we know the answers to these questions right now.” (p.32)
Commission member Warner Thomas then posed the identical question. “Did you look at or can we look at actual integration and clinical integration of services?” he asked Stensland. (p. 37)
At that point, Stensland decided to stop mincing words. He said it’s impossible to know when “integration” is doing something good and when it isn’t. I quote his entire reply:
It’s very difficult to distinguish from a truly integrated entity, where people are really talking to each other and cooperating and improving care, and an entity that just looks, on the surface, like they taught to the test to make it look like they’re doing this, but they really aren’t doing it
underneath. And I think that is – that difficulty of distinguishing between truly good integrated entities that are coordinating care and reducing costs and improving quality and integrated entities that say they’re doing that but really aren’t… — almost impossible to distinguish between those two.(p.38)
The obvious follow-up question to Stensland’s comment is, Why is it so difficult to distinguish clinical from financial integration? But no one on the commission asked that question. The answer is: Because the term “clinical integration” is impossibly flabby and vacuous, just as “health maintenance organization” and “accountable care organization” are impossibly vacuous. Because these terms have no definition (the “definition” offered for them is always a list of aspirations), it is not possible to distinguish a “true” HMO, ACO, or “clinically integrated” whatnot from an entity that merely pretends to be an HMO, ACO or “clinically integrated” whatnot.
Several commission members made it clear they were unwilling to accept the news that it’s impossible to peer under the corporate roof of “integrated” entities to determine what, if anything, the doctors and hospitals are doing differently from “un-integrated” providers. Those commissioners continued to insist that staff help them do that – to divine when “integration” is good (or “clinical”) and when it is bad (or merely “financial”). Vice Chairman Jon Christianson asked whether “anybody in their evaluations of ACOs” has asked whether ACOs lower spending merely by reducing provider fees as opposed to reducing volume of services (p. 40). Kathy Buto said she would like to see MedPAC comment on what distinguishes “bad consolidation” from “good consolidation,” and to do that, she said, the commission would have to ask, “What is it we think is desirable?” (p. 59) Commissioner Brian DeBusk said, “What I’d also like to do is hope that we can separate the concept of financial integration and clinical integration.” (p. 63) Similarly, Dr. Craig Sammitt insisted, “[W]e need to go deeper to understand what good consolidation or healthy consolidation looks like….” (p. 65)
Hear no evil, see no evil
I repeat the question I posed at the outset. If you were a member of MedPAC and your staff told you ACOs and HMOs are raising Medicare’s costs and that it’s not possible to determine why, would you let this dismal statement pass? Wouldn’t you demand to know whether it really is impossible to open the ACO and HMO black boxes and determine what goes on inside? And if you satisfied yourself that the black boxes can’t be opened, wouldn’t you then say it’s time to remove ACOs and HMOs from Medicare?
No commissioner demanded to know whether it really is impossible to shine some light into the ACO and HMO black boxes and determine whether “good integration” or “bad integration” is going on. Not one demanded to remove ACOs and managed care plans from Medicare.
I predict the unusually candid discussion among commissioners and staff at the October 6 and November 3 meetings will be for naught. I predict all the commissioners’ requests for more information on what the “integrated” entities in the MA and ACO programs are actually doing will be ignored by the staff and the commission’s chairman, Dr. Francis Crosson. And I predict commission members will allow them to get away with it.
In my next post I’ll present the evidence supporting my belief that the commission will find a way to avoid telling Congress managed care doesn’t work.
 The .3 percent loss figure for CMS’s two ACO programs together is my calculation based on the figures Glass reported to MedPAC at its October 6 meeting. Glass said CMS’s Pioneer ACO program saved Medicare $5 million in 2015 while the much larger MSPP ACO program cost Medicare $216 million. Here are excerpts from Glass’s statement:
[T]he 12 Pioneer ACOs had aggregate Medicare spending of about $5.5 billion [in 2015]. The actual spending for their attributed beneficiaries was slightly less, so there was an aggregate savings of $37 million. Medicare paid the ACOs that had savings $34 million in shared savings, and because this is a two-sided risk model, ACOs that had losses returned $2 million to the program. This all yields a net savings to the program of about $5 million, which is 0.1 percent of spending, about breakeven.
In the MSSP column, many more ACOs, thus a much larger aggregate benchmark and spending almost $73 billion. Savings were $429 million, which is similar as a percentage to the Pioneer at about 0.6 percent. The big difference is that MSSP was almost exclusively a one-sided model in 2015, so although the aggregate savings were $429 million, the program paid ACOs that had savings $646 million and collected nothing from the ACOs that had losses. So, in net, MSSP cost the program $216 million or negative 0.3 percent. (pp. 7-8 of the morning session, October 6 transcript).
 Medicare’s 5-percent overpayment to MA plans in 2016 is an improvement over previous years. According to MedPAC’s March 2009 report to congress , the overpayment was 14 percent in 2009 and 13 percent in 2008 (p. 252). These overpayment figures fail to take into account the administrative costs MA plans force clinics and hospitals to incur. Similarly, the data on ACOs reported by staff to the commission consisted only of Medicare medical spending data. It did not take into account start-up and operating costs incurred by ACOs, nor the cost to CMS of administering the ACO programs.
 Here are other questions posed and comments made by commissioners at the October 6 meeting indicating commissioners want to know what ACOs do.
MR. GRADISON: Does the length of time that an ACO has been in business [matter]…? (p. 18)
DR. NERENZ: …. I agree to … moving to two-sided [risk] models [for MSSP ACOs]…. But given everything we’ve heard this morning, I have no idea how that’s ever going to happen. ACOs – the majority of ACOs, by everything we’ve seen – are losing money now in one-sided models…. How in the world they would be attracted to two-sided models escapes me. (pp. 63-64)
DR. HALL:… So what’s in it for the provider? …. I think we need to look at that …. I think we could learn a lot [by]really looking again at the super ACOs, the ones that seem to work really well, particularly the physician-based ones, and see exactly why they are successful…. (pp. 75-76)
DR. SAMITT: …. I must say, though, that I found the results incredibly unsatisfying…. (p. 76) We need to be going deeper to understand what are the real attributes that are determining the winners and the losers [among ACOs]. (p. 78)