Obamacare Savings Experiment Yields Modest Results in Study

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An ambitious Obamacare experiment in cutting health-care costs led to a reduction of about 1.2 percent in spending on Medicare patients in its first year, researchers said, calling the savings a promising start.

Still, the government may need to make changes to keep hospitals and doctors in the program, known as Pioneer, Harvard University researchers said in a paper published by the New England Journal of Medicine. Since Pioneer started in 2012, 13 of 32 organizations that initially joined have exited.

Opponents of the Patient Protection and Affordable Care Act often criticize it for focusing on expansions of insurance coverage instead of cost reduction. The Pioneer program seeks efficiencies by better managing care for patients with chronic diseases. While savings in its first year were modest, it is significant that spending fell at all, said J. Michael McWilliams, an associate professor of health-care policy and medicine at the Harvard Medical School who led the study.

“It would be far less promising if we found no effect on Medicare spending,” McWilliams said in a phone interview.

Pioneer is one of the Affordable Care Act’s experiments in so-called “accountable care,” in which hospitals and doctors are asked to closely monitor their sickest patients and better coordinate their care to reduce wasteful spending. In exchange, the health providers share in any savings.

Joe Antos, a health economist at the American Enterprise Institute who is critical of the Affordable Care Act, called the first-year savings for the Pioneer program unimpressive. “One has every reason to be skeptical about what the future holds if you only get 1.2 percent savings in the first year, when everyone’s paying attention,” he said.

Seeking Improvement

“Is this a model that’s going to improve? If it does improve, can you expect savings on a more continuous basis or are these savings sort of flashes in a pan?”

The 32 Pioneer participants produced a total of $118 million in savings for Medicare, McWilliams and his colleagues found. They claimed about $76 million in bonuses.

However, more than a third of the bonuses went to just two organizations. Montefiore Medical Center in New York produced $23 million in savings and got $14 million in bonuses, according to the U.S. Centers for Medicare and Medicaid Services. Banner Health, based in Phoenix, had $19 million in total savings and kept more than $13 million.

McWilliams’ study found that savings were greater at hospital systems that had higher spending to begin with, or that are located in areas with relatively high health-care costs, like New York City and Phoenix.

New York, Phoenix

Nine organizations that didn’t earn bonuses in the first year dropped out of Pioneer, and four more have joined them since. McWilliams and his colleagues said that Medicare should consider giving participants an even greater share of any savings they produce. The government should also consider judging the Pioneer programs based on how much they can save compared to medical spending growth in their local area, an easier standard than measuring them against their own prior results of cost-cutting.

“These guys are saying, ‘Try to build in a little more real-world economics into this,’ which is not bad advice,” Antos said.

Medicare is considering changes to the Pioneer program in line with many of the study’s findings, McWilliams said.

The agency will “make appropriate refinements” to the Pioneer program and other accountable-care initiatives “so that we can continue to build a health care system that delivers better care, spends our health care dollars more wisely, and results in healthier people,” Patrick Conway, acting principal deputy administrator of the agency, said in a statement.

Participants in the Pioneer program saved an estimated $96 million in 2013, and qualified for an estimated $68 million in bonuses, the agency said. The second-year figures are subject to revision, it said.

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