Implementation of the Affordable Care Act continues to deliver bad news to the Administration. President Obama argued for health care reform chiefly on the grounds that it would "bend the cost curve downward," i.e., save public money by making healthcare delivery less expensive. This was never a realistic promise. It requires an altogether unjustified optimism to think that the program can break even.
One of the ways the ACA is supposed to make money is by the creation of ACO's, Accountable Care Organizations. Here is a bit from Kaiser Health News back in March.
An ACO is a network of doctors and hospitals that shares responsibility for providing care to patients. In the new law, an ACO would agree to manage all of the health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years.
Yet the concept has been short on details. ACOs have been compared to the elusive unicorn: everyone seems to know what it looks like, but no one has actually seen one. But the health care industry has already embarked on a frenzied quest to create them as quickly as possible. Today, after many delays and false starts, the Obama administration proposed guidelines on how ACOs will work.
A Concept Short on Details would make a good title for a book on the Obama Administration. The idea seems to be to encourage institutions like the Mayo Clinic to become units in a national network of efficient healthcare organizations. The Mayo Clinic seems to be the best example of a system that not only delivers high quality care, but does so at relatively low cost. The ACO program would, in theory, encourage the Mayo model to be replicated all across the country.
There's only one problem (among thousands of others), the government will be running the program. Here is a bit from Kaiser Health News on Sept. 14th:
During the health care debate, the Mayo Clinic, the Cleveland Clinic, Geisinger Health System and Intermountain Healthcare were repeatedly touted as models for a new health care delivery system.
Now, they have something else in common: All four have declined to apply for the "Pioneer" program tailor-made by the Obama administration to reward such organizations.
When the poster children for this program refuse to show up for the group photo, there might be a problem. And it isn't only the poster children.
Hospital and doctor groups complained that the program created more financial risks than rewards and imposed onerous reporting requirements. The American Medical Group Association, which represents nearly 400 large provider organizations, responded with a letter to CMS warning that more than 90 percent of its members would not participate because of the reporting requirements and financial disincentives. In particular, the proposed rule would impose penalties for ACOs that do not achieve savings.
The American Hospital Association estimated that starting an ACO could cost a hospital $11 million to $26 million in the first year. The proposed regulation put the cost at $1.8 million.
The ACO program is supposed to save Medicare $430 over three years. Those are pretty meager savings by Medicare standards. It will cost each participating hospital a minimum of $11 million dollars in the first year. The first 40 hospitals that sign up, assuming any are foolish enough to do so, will eat up all the savings and then some.
I am guessing that every Rube Goldberg twist in the Affordable Care Act will work pretty much like this. A penny saved will be a penny taxed, plus $337 in reporting expenses. That, gentle readers, is what the Obama, Reid, and Pelosi mean by "affordable care."