The Medicare pay-for-performance program for qualified Accountable Care Organizations (ACO) is designed to reward ACOs for decreasing Medicare fee-for-service costs of their assigned members. If the ACOs meet certain quality benchmarks, then the ACO and Medicare will share in the savings as a sort of “performance bonus.”
In an excellent New York Times article last week, reporter Robert Pear quotes an experience antitrust lawyer, J. Thomas Rosch, as stating that “there will be a real risk that the savings accruing to Medicare will just come at the expense of private insurers.”
Is this really a major risk, though? The answer is … not really, but it depends.
In an article to be published in Milbank Quarterly next month, researcher Austin Frakt, Ph.D. examines the existing literature on cost shifting. He writes that “cost shifting can and has occurred, but usually at a relatively low rate.” He writes that “it is likely to be at a rate closer to 20 cents on the dollar than the dollar-for-dollar one suggested by industry-funded reports (PWC 2009) and by Cutler’s (1998) estimate using data from the 1985-1990 period.”
While ACO Shared Savings programs may lead to some cost shifting, the effect should not be over stated. Other factors are important in the evaluation of cost-shifting, such as the hospitals’ ability to cut costs, public/private payer mix, hospital competition, and health plan market power.
Dr. Frakt states that the debate about cost shifting amongst policymakers “provides a false impression that cost shifting is a large and pervasive phenomenon.” This conventional wisdom should be “taken with a grain of salt.” Good stuff ... check out his blog, the Incidental Economist.
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