Accountable Care Organizations: ObamaCare’s Medicare Walmarts?


Walmart employs a business model which is widely regarded as greedy and evil by well-meaning liberals.  These same folks also support ObamaCare unquestioningly,  However, many ObamaCare programs, such as the Accountable Care Organization payment program, are just as focused as Walmart on their primary goal of cutting corners to lower expenses and help the bottom line.  The sad truth is that compared to ObamaCare, Walmart is harmless, because, while no one is forcing you to shop at Walmart, many Seniors may be unable to avoid ACOs for Medicare treatment.  In fact, unless the Affordable Care Act (ObamaCare) is overhauled, ACOs may become your best bet to find a doctor who will still take Medicare patients in the future.  More about this later.

To someone who understands just a little of Government double-speak, even the term “Accountable Care Organization” seems ominous – reminiscent of the “Ministry of Truth” – words fashioned to dupe the Citizen into thinking  that these new ObamaCare organizations might now operate under some increased “accountability”  to patients for patient outcomes.  Of course, that would be incorrect, because ACOs are actually “accountable” to DHHS under a contract that allows the ACO to be paid a bonus for reducing per patient expenditures, and calls for penalties after two years, if that goal is not met.  I wish I were kidding, but I’m not.

Basically, ACOs are economic and legal entities made up of doctors or hospitals that group together in an attempt to make economies of scale in treating Medicare patients. The heart of the program is contained in the law:

  • “…a percent (as determined appropriate by the Secretary) of the difference between such estimated average per capita Medicare expenditures in a year, adjusted for beneficiary characteristics, under the ACO and such benchmark for the ACO may be paid to the ACO as shared savings and the remainder of such difference shall be retained by the program under this title.”

Which means … the already paltry Medicare payment scheme will be pressured downwards for ACO’s, and they will be paid a per patient allotment plus a “shared savings” bonus both based on the ACO’s historically-based benchmark per capita annual expense (there are volumes on how the ACO should determine this). The further an ACO’s annual expenses fall below the benchmark amount, the more “shared savings” they will be allowed to keep, and the balance will be retained by the Centers for Medicare and Medicaid Services (CMS). In other words, the ACO and DHHS are partners in splitting the “savings” that are not spent on the patient, and the ACO actually has a contract with DHHS to fulfill their end of the deal.

“… Government, in its role as insurance company, has coopted your ACO doctors with financial incentives and turned them into instruments of Public Policy rather than advocates for your health care.”

There are a lot of caveats in the regulations that small practices will not be able to keep up – they will fail financially under this system. So DHHS is encouraging only large group ACO’s who can handle lots of patients quickly – think assembly line, pill-prescribing medicine. Besides, there are so many requirements for reporting, feedback, forms, financial and legal requirements etc. that only a large group could afford the non-medical support personnel it will take to sustain this system.

I am trying not to dismiss of the whole ACO concept – there may be parts of it that could be used – but overall, ACOs spell bad news for individual patients.  First of all, the ACO is basically encouraged to withhold access to care in order to stay below their DHHS-defined benchmark.  Thus the doctor-patient relationship is  superseded by the Government-ACO relationship – this is where all the “accountablility” lies, not to the patient.  Even when patient satisfaction and outcomes are a factor in this system, it is up to the Government to determine the acceptability criteria.  In the pilot program, although lip service was given to acceptable outcomes, and they were indeed measured, all of the decision-making regarding “shared savings” was solely based on whether the ACO could stay sufficiently below the benchmark.  The role of the quality metrics is not nearly as well-defined as for the financial metrics, and seems to be left to the discretion of the Secretary.  Essentially, the Government, in its role as insurance company, has coopted your ACO doctors with financial incentives, and turned them into instruments of Public Policy rather than advocates for your health care.

Most seniors won’t even know they have become part of an ACO until after the fact.  My friend, Manny, recently received a note from an ACO he had never heard of telling him that his primary care doctor had joined the ACO, and asking him to complete a  long questionnaire.  He finished about half of it before he gave up,   I checked the regulations for him and it’s true – if your primary care doctor joins an ACO, then you will be automatically assigned to that ACO by DHHS.   The famous line “if you like your doctor, you will be able to keep your doctor,” really pertains only to this “gateway,” primary provider.   Unless the specialists that you see also join the ACO, they will not be readily available to you, and you will need to use whatever specialists the ACO has on staff (the ACO will be penalized for referring you to an outside specialist).

ACO patients can expect to experience delays in scheduling appointments because the ACO receives some payment whether or not they “see” you, so there is reduced incentive for doing so in a timely fashion.  ACO patients can also expect delays in referrals to specialists since this drives up costs. For example, an ACO might be tempted to delay fourth quarter referrals to the next year to keep down the present year per capita cost . The quality of specialists may also  deteriorate as good specialists become discouraged by meager payments under this system, and abandon the ACO.  The amount of patient time spent with the doctors will necessarily shrink under the ACO system, because doctors will be required to see many more patients in order to maintain the ACO’s financial viability.

Additionally, there are incentives for ACOs to use technology to monitor patients remotely via telephone, computer, remote sensors etc. in order to keep patients far away from the doctors as much as possible. These remote technologies may be the only ones that are incentivized under the ACO system.  Studies indicate that ACO patients receive fewer diagnostic tests, especially imaging tests, and new technologies and medical devices tend to be avoided out of cost considerations.  No wonder economists have noted that automatic enrollment in ACOs is necessary because there is no reason why a patient would voluntarily join an ACO.

Of course, these reductions in access to health care are welcomed by ObamaCare proponents, who view what I have called “coopting” doctors away from being advocates for their patients, as absolutely essential for the good of Society (i.e. Government).  They will unblinkingly tell you that we must refrain from using too many resources on individual patients, regardless of their needs.  To put it in a form you may recognize: we must prevent patients from getting more than “their fair share” of health care.  In fact this concept undergirds almost all of ObamaCare’s many patchwork programs and initiatives.  For example, why on Earth would a rational program impose taxes on health insurance policies with higher premiums than a certain cap for individual and family plans?  Isn’t this adding insult to injury for folks that may be stretching to make those payments?  Not all those folks are millionaires who can easily afford such a tax  – many just happen to have good insurance through their union contracts. And besides, why do we care?  The reason for these penalties and the incentivized payment schemes, and all the rest is because those folks are viewed, through the ObamaCare optic, as getting more than their share of health care.

Unfortunately, for all its cost reduction measures, the ACO system could lose as much or more than the current system to fraud.  Without going into details, or giving folks ideas, ACOs who are able to meet their benchmark can misrepresent their actual per capita costs and game the system.  To prevent this, look for even more reporting and recordkeeping requirements that will further reduce the thin ACO margin, while succeeding only in “keeping the honest man honest.”

How do Medicare patients survive this crunch that they are faced with?  The Independent Advisory Payment Board (IPAB) is like the top-down “hammer” reducing Medicare payments to doctors in order to shape their behavior.   The ACOs, by contrast, are the bottom up “anvil” co-opting your doctor with financial bonuses to look after the Government’s cost-saving interest rather than your health.  Caught between this hammer and anvil what chance do you have?

Right now there is a bill under consideration in the House called H.R. 351 which would reduce the power of the IPAB and allow for reasonable payments to doctors for services rendered.   This bill would restore the power of your doctor to act in your best interest and still receive adequate compensation to keep you as a patient.  This bill has some bipartisan support, and I would urge you to call or write your congressional representatives and tell them to finally do the promised “Doctor Fix” and vote for this common sense approach to reigning in the power of a remote, detached, bean-counting bureaucracy that sees you as an expense, not as a Citizen-patient.

An UPDATE on 11/21/ 2014 because I am now linking to this post from the Gruber video: 

Honestly, I am so gullible – I actually believed this when I wrote it- even talked to my congressperson- but HR 351 was gutted of all solutions, except temporary deferrals etc., and the problem was kicked down the road to future doctors and future Congresses. I despair that politicians can ever face the consequences of their own actions and fix them.  At this point, the only thing they will hear is if we go back to a hardline demand for repeal.

Sad but true – the Sceptic

If this resolution, or one like it, does not pass, then the IPAB will proceed to cut Medicare payments to doctors to fulfill the spending reduction targets that are built into the ACA.  Understand, as written in current ACA, the decisions of this board as to where and how much to cut are virtually unchallengeable by Congress, and will change how Medicine is practiced. For example, if the IPAB sets the payment amount for a knee replacement to only a meager amount that doesn’t cover the cost, while at the same time coverage for pain killers and payments for peptalk visits ( “r u taking ur meds?”) are generous, then doctors will tend to stop the knee replacements.

The Medicare actuary has projected that, if the IPAB meets all the ObamaCare spending cut targets, then the payment to a doctor to treat a Medicare patient will fall below the payment to treat a similar Medicaid patient in the not too distant future.  At that point, and even now, many doctors may just refuse to accept Medicare patients.  Notable casualties already are the Mayo Clinic and the Cleveland Clinic.  I have nothing against Medicaid patients, but I do feel Medicare patients were made a solemn promise, and sacrificed heavily to pay into the system over their lifetimes for coverage that is now being quietly dismantled to redistribute the health care to other patients deemed more worthy.  That breach of trust is, quite simply, unacceptable, which is why many of us have been fighting this ObamaCare monstrosity from the beginning, understanding where it will lead.

If there is no H.R. 351 – no relief from the arbitrary power of the IPAB – then, as mentioned at the beginning of this post, your best strategy may well be to join an ACO.  At least these organizations may still honor your Medicare coverage and accept you for health care, and their lean-and-mean approach may give them a chance of surviving under the payment starvation strategy of the ObamaCare bureaucrats.

I will write more in another post.

The Sceptic


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