RELEASE: New CAP Report Outlines Short-Term and Long-Term Strategies for Medicare Payment Reform

Washington, D.C. — A new report published by the Center for American Progress evaluates the performance and effectiveness of alternative payment models for Medicare. CAP’s analysis argues that when it comes to Medicare payment reform, a one-size-fits all approach is not the best one to take. Rather, expanding bundled payments in the short term can support the expansion of accountable care organizations, or ACOs, in the long term. Medicare is the nation’s largest insurer yet still operates largely on a fee-for-service payment model. But that is changing. Alternative payment models such as ACOs and bundled payments are being piloted across the country to help lower costs and improve the quality of care for patients.

The report, “A Strategy for Medicare Payment Reform,” takes a closer look at the nation’s first ACO model, the Pioneer ACO Model. Using reported data from the Centers for Medicare & Medicaid Services, or CMS, CAP calculated the net federal savings by comparing each Pioneer ACO’s spending with its benchmark. CAP health care policy analysts then used CMS’ guidance on the quality measures to calculate the overall quality score for each ACO. The data reveal modest results for the Pioneer ACO Model so far. In the second year, net federal savings were only 0.67 percent of the ACOs’ benchmark targets. Savings were also concentrated in a few Pioneer ACOs. The data show that, overall, Pioneer ACOs generally provide quality care and improved their quality scores from Year 1 to Year 2.

“Accountable care organizations will remain an important part of Medicare’s payment reform efforts, and CMS should continue to improve programs such as the Pioneer ACO Model and allow more organizations to achieve success over time,” said Topher Spiro, Vice President for Health Policy at the Center for American Progress and co-author of the report. “But if Medicare is going to achieve its goal of moving away from fee-for-service payments, it must focus greater attention on bundled payment models.”

The report offers recommendations to improve the Pioneer ACO Model. The report also urges CMS to dramatically expand the use of bundled payments, including an expansion of the successful Medicare Acute Care Episode demonstration and greater participation in the Bundled Payments for Care Improvement initiative. Bundled payments are targeted at specific services, so they can be adopted more widely and can yield immediate savings. They also do not require the same extensive infrastructure of ACOs, making implementation of bundles less costly and easier to administrate.

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