One of the core provisions for “bending the cost curve down” contained in the Patient Protection and Affordable Care Act (PPACA) are the Medicare accountable care organizations (ACO), which are intended to serve as integrated health plans that will be able to deliver health care more efficiently than the current Medicare fee for service model. But, as I argue in a new AEI research paper, these ACOs do not allow for genuine consumer choice, and because they continue to rely on the fee for service payment model, they are unlikely to deliver on the health care savings that they are supposed to provide.
Private-sector efforts to build high-performing health systems around the country are making real progress in some cases and should be given the room they need to succeed. But this is not the same as saying the ACO program under the PPACA is a success or that it will be successful down the road, which is very unlikely to be the case.
Fortunately, the shortcomings of the ACO model in the PPACA need not be the end of the story. It remains important to encourage the development of more integrated and cost-effective care within Medicare. And that goal can be achieved by replacing the flawed ACO model of the PPACA with a more workable approach based on incentivizing the formation of high-quality plans and on allowing the beneficiaries to share in the cost savings such plans would produce.
The rest of the paper can be read online here.