Can CMS’ Proposed ACO Changes Really Help Medicare Beneficiaries?


Earlier this month, the Centers for Medicare and Medicaid Services Administrator Seema Verma proposed bold changes to Medicare’s Accountable Care Organizations (ACOs), with the goal of accelerating America’s progress toward a value-based healthcare system—that is, one in which providers are paid for the quality and cost-effectiveness of care delivered, rather than volume delivered.

CMS has created a number of ACO programs over the last six years in an effort to improve care quality and reduce care costs across its Fee-for-Service Medicare population. In a Medicare ACO, hospital systems, physician practices and other voluntarily band together and assume responsibility for the quality and cost of care for beneficiaries assigned to them by Medicare. All ACOs meeting quality targets at the end of a given year receive a share of any savings generated relative to a predetermined cost benchmark; and depending on the type of ACO, some incur a financial penalty if they exceed the benchmark.

According to CMS’ recent analyses, ACOs that take on higher financial risk are more successful in improving quality and reducing costs over time. So one important objective of CMS’ proposed changes is to increase the rate at which ACOs assume financial risk for their beneficiaries’ care.

Another is to promote beneficiaries’ engagement in health improvement, which CMS proposes to do mainly through two program changes. The first would require ACO providers to disclose to beneficiaries in writing that they are participating in an ACO, and explain how this impacts care. The second change would allow qualifying ACOs to pay beneficiaries up to $20 for receiving qualifying primary care services. Looking through the lens of our innovative research and theories, these changes could be good for beneficiaries, and not just for the reasons CMS may think.

For instance, CMS views the disclosure of a provider’s ACO status and its implications to Medicare beneficiaries as a transparency benefit—a tactic for arming them with more information that they can use to shop around for providers and plans that suit them best, whether in- or outside their assigned ACO. But in explicitly bringing up the topics of care, cost, and quality, the disclosure gives providers the opportunity not only to educate beneficiaries on the ACO’s care model and objectives but also to begin a conversation about what care “cost” and “quality” mean to them personally. As I’ve discussed before, understanding factors like these is an important step toward creating health solutions that people can fully embrace, given their unique values and circumstances.

And while payments to Medicare beneficiaries for receiving certain primary care services may indeed serve “as an incentive for taking steps to achieve and maintain good health,” as CMS’ hopes, in cases where beneficiaries’ motivation to do so already suffice, such payments could also reduce barriers they face in doing so.

To be clear, a few $20 payments in a year won’t help them overcome all barriers to better self-management. But they could defray gas or public transportation costs, child care expenses, health plan co-pays and other costs people often incur in obtaining primary care. And if combined with innovative providers’ increasing efforts to reduce others barriers people commonly face in managing their health, from social needs to competing priorities and more, such payments could be even more meaningful.

CMS’ proposed changes to Medicare ACO programs are welcome evidence of its ongoing commitment to value-based care, and acknowledgment of individuals’ significant potential to better manage their health and healthcare costs. If the proposed changes are approved, providers should take full advantage of the opportunities they afford to unleash this potential. 

Rebecca Fogg is a senior research fellow at the Clayton Christensen Institute, where she studies business model innovation in health care delivery, including new approaches to population health management and person-centered care.

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3 replies »

  1. Yikes, Rebecca you need to read Kip Sullivan’s articles on this website. This article reads like all the other ACO puffery language nonsense. ACOs have consistently proven to be a complete failure, with VERY tiny savings in only a small percentage of ACO setups. It doesn’t matter if they are 2 sided risk or not. Thats a red herring. And all you “value based” hangers-on folks, you never consider the costs of setting up and administering an ACO or these VBC models. With those costs added, its a complete failure. Its really time to stop demonizing fee for service and globbing on to “value based” failures, including ACO’s, medical homes, AAPMs, etc. This era of hyper metrics, forced data entry by MDs, quality/savings/value folly, will not end well. Its time to really take an honest look at what works and what does not.

  2. For years, the changes in Medicare reimbursement have not kept up with the costs underlying the capability to offer this service. Contact times are severely proscribed to compensate and in turn degrade the content of each encounter. The recent debacle that centered on the Medicare algorithms for defining a person’s Primary Physician is merely emblematic of the CMS paralysis underlying their participation in our nation’s healthcare reform. Until the role of Primary Healthcare is uniformly identified by the Federal government for the VA, Community Comprehensive Care Centers, Native American Health Services, Medicare, Medicaid, ACA 2010 and Medical education, the “Singularity” status of our nation’s healthcare will continue unresolved. One more band-aid for Medicare is really just an insult to each Primary Physician. These “Hawethorne Effect” gestures need to stop.

  3. I do hope the changes will make Medicare better but I’m very doubtful of the impact.