The Affordable Care Act (ACA) launched potentially groundbreaking changes in how health care is paid for and delivered in the United States. In the second of two health policy reports for the New England Journal of Medicine, the Commonwealth Fund’s David Blumenthal, M.D., and Melinda Abrams reviewed the ACA’s major reforms in payment and delivery systems, as well as results from some of the law’s most notable initiatives. The first report examined the law’s coverage and access provisions.
Experience from the ACA’s Accountable Care Organization program indicates that holding providers broadly accountable for the cost and quality of patients’ care, rather than incentivizing very specific behaviors, may be more effective in increasing the value of services.
What the Report Found
- Payment reductions. The ACA reduced the annual increases in payments to hospitals under the traditional Medicare program. It also reduced payments to Medicare Advantage plans. Partly because of these measures, increases in Medicare expenditures have been 20 percent lower than projected since the law was enacted.
- Value-based payments for hospitals. The ACA took several steps to reward or penalize certain behaviors by providers in the traditional fee-for-service program. This includes initiatives such as the Hospital Readmission Reduction Program, the Hospital-Acquired Condition Reduction Program, and the Hospital Value-Based Purchasing Program. While initial studies of some of these programs showed success, subsequent research suggested that the results were mixed or could not be directly attributed to the ACA’s enactment.
- Accountable Care Organizations (ACO). An ACO is a voluntary organization formed by health care providers that agree to take responsibility for the quality and costs of care for a population of patients. Multiple studies suggest that ACOs have generated modest net savings of up to 2 percent for Medicare while maintaining or improving quality.
- Bundled payments. Although there are several variations of Bundled Payments for Care Improvement, all have given providers a single, prospective payment for treatment of a surgical or medical condition. The BPCI program appeared to reduce spending for surgical procedures such as hip and knee replacements, but savings may not have exceeded administrative costs. The program was less promising for other conditions. A new iteration of the program, BPCI Advanced, is scheduled to run through at least 2023.
- Primary care. The ACA launched a number of experiments to strengthen the nation’s primary care infrastructure. While most of these experiments produced mixed results, the Independence at Home Demonstration, which provides intensive primary care for homebound patients, had the most promising results. Evaluations showed a significant decrease in emergency department visits and hospitalizations, increased patient and caregiver satisfaction, and a decrease in Medicare expenditures.
- Trends in cost and quality. From 2010 to 2017, annual average national per capita health care spending increased by 3.6 percent, a relatively modest amount by historical standards. Medicare spending also fell from 2010 to 2018. Although the ACA did not specifically target private sector spending, premiums for employer-sponsored insurance increased at a relatively modest annual average rate. Meanwhile, there were improvements on more than half of the measures that track quality of care. However, linking developments in the cost and quality of care to specific provisions of the ACA is challenging.
The Big Picture
While evidence for the impact of the ACA’s payment and delivery system reforms is far from robust, some of the best evidence concerns the relationship between prices and costs throughout the health care system. The effectiveness of payment reductions in Medicare, for example, suggests that private payers could see similar savings if they are able to reduce prices.
Meanwhile, experience from the ACA’s Accountable Care Organization program — which has had some modest success — indicates that holding providers broadly accountable for the cost and quality of patients’ care, rather than incentivizing very specific behaviors, may be more effective in increasing the value of services.
The institutionalization of research and development at CMS through the Center for Medicare and Medicaid Innovation has been another positive outcome of the ACA. The program offers hope that CMS can learn from experiments in payment and delivery system reform.
The Bottom Line
Lasting improvements in payment and delivery systems will require persistent effort on the part of public and private stakeholders. To this point, the ACA has yet to identify any single remedy for the high costs and quality issues prevalent in the U.S. health care system.