Medicare, Accountable Care Organizations & Medical Homes: Experimental, Potential or "Essential?"

Time to measure some
new Medicare office drapes?

One major and longstanding criticism of CMS' numerous innovation and demonstration projects is that they seldom lead to any meaningful reform of the core Medicare program.  In response, the Affordable Care Act created an "Innovation Center."  Despite legions of lobbyists, a 'third rail' dread afflicting our political class and a powerful Medicare voting bloc, the intrepid folks in the Center promise to deliver insights that will advance quality, lower costs, increase access and spare all sacred cows.

Naturally, the thousands of health care experts who regularly read the Disease Management Care Blog have their doubts.  As a result, they're unlikely to be moved by Karen Davis and colleagues' "Medicare Essential" proposal appearing in the May issue of Health Affairs.

Assuming that the most wildly optimistic Accountable Care Organization (ACO) and medical home pilot programs projections are fulfilled, Dr. Davis et al propose the creation of a new "Medicare Essential" program that would co-exist with standard Medicare and Medicare Advantage.

"Essential's" essential purpose would be to finance ACOs and medical homes.  Given the authors' enthusiasm, the DMCB is surprised that their Health Affairs paper isn't also recommending measuring drapes for the program's new offices.
 
In "Medicare Essential," Parts A (hospital), B (providers) and D (drugs) would be combined. There would be a single overall deductible, followed by low co-pays for primary care and higher co-pays for specialty and emergency room care Preventive care would have first dollar coverage. Pharmaceuticals would be governed by a single national formulary with low co-pays for generics as well as for preferred brands and condition-specific/value-based drugs. Persons in the "Essential" program who are receiving care in ACOs or medical homes (financed with capitation, bonuses, gain sharing and monthly fees) would naturally have even lower co-pays.
 
Using "modeling by the Actuarial Research Corporation" and, as the DMCB understands it, transferring all savings back to the beneficiary, monthly out-of-pocket costs for the average Medicare enrollee could be reduced from the currently level of $427 to $354.  As an added bonus, if the patient used an ACO/Medical Home, the out of pocket would be further reduced to $254.

Case closed, right?

The DMCB isn't too sure.

Don't Measure Those "Essential" Medicare Program Office Drapes Quite Yet: While Davis et al should be commended for sending the savings back to the patient instead of Uncle Sam, their optimistic actuarial "research" projections can't be based on any consistent, statistically significant and real-world published proof.  That's because there is no consistent, statistically significant and real-world published proof that ACOs and medical homes save money.  Come back, says the DMCB, when you have an analysis based on some real numbers.

Behavioral Economics: Furthermore, we don't know if monthly beneficiary savings of $73 to $173 are enough to move market share away from Medicare and Medicare Advantage to "Essential."  That's doubly true if ACOs and medical homes, despite their quality, are viewed by patients as another way to impose a restricted network.

Disease Management Playbook: Advocates for the earliest versions of disease management likewise used official sounding projections to confidently project huge benefits for the Medicare program. When reality rudely intruded, the industry's fall was spectacular and almost fatal.  With friends like Dr. Davis similarly doubling down with huge ACO and medical home promises, who needs enemies?

Reinventing A 3rd Wheel? Many Advantage plans have similar co-pay arrangements and are already investing in ACO-like and medical home programs in their networks. They are likewise more than able to leverage out-of-pocket expenses to incent beneficiary behavior.

Suppose You Gave An ACO Party and Nobody Came? The last time the DMCB looked, many parts of the country lacked fully functional ACOs and medical homes. Dr. Davis says beneficiaries will respond by demanding local access to the Essential program and therefore turbocharge additional health reform. The DMCB is unaware of any published data that supports that notion and, furthermore, wonders if the local lack of these programs will translate into even more variation in the U.S. health care system.