Liberals’ Main Medicare Cost-Reduction Strategy Already Proves Ineffective

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Typically, demonstration programs exist to prove the effectiveness of a reform proposal before implementing it nationwide. This was apparently forgotten in the drafting of Obamacare, which relies heavily on accountable care organizations (ACOs) to curb runaway spending in Medicare and the health care system at large.

Supporters claim ACOs, a form of managed care run by hospitals and physicians, will reduce health care spending and improve quality of care by encouraging better coordination and communication among providers. But the results of a five-year demonstration program show this won’t necessarily be the case.

The demonstration included 10 leading health care systems, which were offered financial incentives to meet quality measures and reduce the cost of treating Medicare patients. Writing for The Washington Post, Amy Goldstein reports:

In 2010, the final year, just four of the 10 sites, all long-established groups run by doctors, slowed their Medicare spending enough to qualify for a bonus, according to an official evaluation not yet made public. Two sites saved enough to get bonuses in all five years, the evaluation shows, but three did not succeed even once.

Gail Wilensky, a former administrator of Medicare and Medicaid, said that as leaders in the field, the program’s participants “should have blown it out of the water.” She concludes, “If it was this tough for this group that I had just assumed would be hands-down winners, what does it say for groups that don’t have a long history of coming together?”

Unfortunately, the authors of Obamacare didn’t wait around to see how effective ACOs would actually be before including them as a main cost-reduction strategy in their health care overhaul. According to Goldstein, “Although important details differ, the basic contours of the experiment and new ACOs are the same: Medicare shares savings with health organizations if they can treat older Americans for less money and attain specific hallmarks of quality.”

As Congress considers spending reductions to accompany a raise in the debt ceiling, conservatives have offered proposals to transform Medicare—the main culprit behind long-term deficits—to an affordable, sustainable program. President Obama has been reluctant to offer a detailed strategy of his own, but as Goldstein points out, “Democrats counter that the 2010 health-care law contains important tools that will curb spending, citing ACOs as a prime example.”

Even if they were effective, the Administration expects ACOs to achieve maximum savings of $960 million, barely putting a dent in Medicare’s likely $36.8 trillion in long-term unfunded promises.

If liberals are serious about reforming Medicare to reduce the program’s cost and improve its quality, it might be time to look beyond strategies that have already proven ineffective. A good place to start would be Heritage’s “Saving the American Dream” plan.

Source material can be found at this site.

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