Medicare Shared Savings Program Not Producing Net Savings

by Demian Brady / /

A new study casts doubt on yet another Affordable Care Act (ACA) program that was supposed to lead to budgetary savings. The Medicare Shared Savings Program allows for the creation of Accountable Care Organizations (ACO) to opt into an alternative payment model to coordinate care and services, promote accountability, and encourage development of “high quality and efficient services.” Participants can share in savings if they are able to hold down costs. However, Avalere Health reviewed the data and found that instead of producing savings as originally forecast by the Congressional Budget Office (CBO), the program has experienced a net cost.

In 2010, CBO projected that the MSSP would save $1.7 billion over its first four years through 2016, and an additional $3.1 billion from 2017-19. Analyzing the program data from 2013 through 2016, Avalere Health found that MSSP actually increased spending by $384 million.

An ACO can choose among three different payment tracks: an “upside-only” model where an ACO does not assume downside risk (shared losses) if it does not lower growth in Medicare expenditures, and two tracks in which the ACOs can take on greater risk or reward: they either get to keep a greater share of savings or have to pay back to Medicare a greater share of losses. Most ACOs opt for the first track where they get a bonus for achieving savings yet take on no risk. Unsurprisingly, the ACOs that took on more risk yielded better performance results: the upside-only model increased federal spending by $444 million while the ACOs in Tracks 2 and 3 produced savings of $60 million. CBO’s analysis of the ACA provided no explanation of the basis of their estimate for the MSSP so it is unclear what assumptions were used to lead to an overstatement of savings.

This is just the latest example of ACA programs originally scored on paper as savings that failed to perform to expectations. As detailed in a recent NTUF paper, CBO ascribes savings to the Center for Medicare and Medicaid Innovation despite being unable to account for any actual results. CBO’s score of the ACA also included offsets from the CLASS Act (which was quickly scrapped after it was determined the long-term care program had no path to sustainability) and the Independent Payment Advisory Board (which was scrapped this year) despite uncertainty about when or whether its authority to cut outlays would be triggered.

Ultimately, these programs helped disguise the price tag of the ACA. Moreover, as long as the flawed scores are factored into CBO’s projected baseline, legislation to reform those programs are scored as spending increases. These dual problems are indicative of the necessity of an official process to evaluate the effectiveness of federal programs and provide greater accountability over Congress’s scorekeeping agency.