In January, the Centers for Medicare & Medicaid Services (CMS) selected an additional 106 accountable care organizations (ACOs) to participate in the Medicare shared savings program. (Health Lawyers Weekly, January 11, 2013)
CMS noted that about half of the new ACOs are physician-led organizations that serve fewer than 10,000 beneficiaries. Approximately 20 percent are community health centers, rural health centers or critical access hospitals serving low-income and rural communities. Fifteen of the 106 new ACOs have opted for the advance payment model where some payments are provided upfront to help defray start-up costs.
The shared savings program, mandated by the Affordable Care Act, now has 205 ACOs serving about four million beneficiaries. Federal savings from the shared savings program could approach $940 million over four years, according to CMS. (Health Lawyers Weekly, January 11, 2013)
The Department of Health and Human Services (HHS) also released a report in January detailing Medicare cost per beneficiary in 2012. The report noted that “Medicare spending per beneficiary grew just 0.4% per capita in FY 2012, continuing a pattern of very low growth in 2010 and 2011 . . . Over the three year period from 2010-2012, Medicare spending per beneficiary grew an average of 1.9% annually—more than one percentage point more slowly than the average annual growth of 3.2% in per capita GDP.” (“Growth in Medicare Spending per Beneficiary Continues to Hit Historic Lows,” ASPE Issue Brief, DHHS, January 7, 2013)
The Congressional Budget Office projects growth of GDP minus 0.3 percentage points over the period 2013 to 2022, assuming an adjustment to the physician payment formula. Compare that to Medicare spending from 1970 to 2010, when per beneficiary cost grew at approximately GDP plus 2.7 percentage points.
HHS conceded in its report that the economic recession may have contributed to the 2010-2012 decrease in growth in per beneficiary spending, but noted that “it seems unlikely that consumer behavior alone is responsible for the slow growth in Medicare spending.” It also noted that changing demography contributed to the slowing growth trends for Medicare: the average age of Medicare beneficiaries is beginning to decline and this will continue over the coming decade. However, according to HHS, “this marginal difference does not account for the very large difference between projected annual spending growth over the next decade of approximately GDP+0 and the historical experience of GDP+2.7.”
The slow growth in spending per beneficiary from 2010 to 2012 is unprecedented in the history of the Medicare program, according to HHS. It credits the Affordable Care Act as an important factor contributing to slow growth in Medicare spending, noting that ACA:
- Restrains the rate of growth of payments to Medicare Advantage plans
- Restrains the rate of growth in unit payments to hospitals and other providers
- Promotes value-based payment systems
- Makes major investments to reduce fraud and abuse
- Provides CMS the flexibility to implement a wide range of innovations to transform the delivery system by paying for value not volume (e.g., ACOs, primary care medical homes, bundled payments, reducing the frequency of readmissions and reducing hospital acquired infections)
(Read the full report from HHS, “Growth in Medicare Spending Per Beneficiary Continues to Hit Historic Lows,” here.)
Cuts in Medicare spending necessarily mean cuts in hospital reimbursement for Medicare patients. In the iProtean advanced course, Value-Based Purchasing & Accountable Care Organizations, Dan Grauman and Nate Kaufman discuss effective approaches for hospitals/health systems when implementing the delivery system changes mandated by the Affordable Care Act. iProtean subscribers can access this new course in their library.
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