The ACO model never fooled the CBO, which estimated that in 2010 they would only save $4.9 billion through 2019 – just 11 percent of the total cuts to Medicare incorporated within Obamacare. ACOs are complicated contracts whereby the government and provider organizations agree to share the gains the provider organization wrings out of Medicare costs.
Although we only have two years of Medicare ACO experience, their supporters are already starting to panic that ACOs are “at risk,” according to the title of a recent paper by scholars from Dartmouth College, Dartmouth-Hitchcock Health, and the Campaign to Fix The Debt. Total savings for Medicare ACOs last year were $417 million, less than one percent of Medicare spending.
At the risk of over simplifying: Benchmarks (from which savings are determined) are based on three-year trends in national spending. This means that the least efficient and most expensive provider organizations have the most opportunity to profit from an ACO contract. However, once the first three-year period is finished, each ACO’s benchmark will ratchet up, so that it ends up “chasing its own tail,” as the Dartmouth scholars put it. The low-hanging fruit will be gone in a year or two. No wonder over two-thirds of executives of ACOs have indicated they will not sign up for the next three-year round of ACOs.