Special ACOs and Insurance Issues

Special Types of Accountable Care Organizations

About 30 ACOs are Pioneer ACOs (Phase 0 in list) with even stronger incentives to save money than the more common "Shared Savings." Differences include:

1. "The first two years of the Pioneer ACO Model are a shared savings payment arrangement with higher levels of savings and risk than in the Shared Savings Program.
2. "Starting in year three of the initiative, those organizations that have earned savings over the first two years will be eligible to move to a population-based payment arrangement and full risk arrangements that can continue through optional years four and five.
3. "Pioneer ACOs are required to develop similar outcomes-based payment arrangements with other payers by the end of the second year..." (Fact Sheet 9/12/2012 pp.6-7)  "50% of all revenues must be in ACO-like arrangement." This is significant only if Medicare less than 50% of their business. Medicare especially wants state Medicaid agencies to sign up (MedPAC 4/2013 p.11, details in Request for Application pp.13-14)
4. Pioneer ACOs do not have to exclude spending on patients above the 99th percentile, if they want to cut such spending among their patients. (Request for Application p.13)
   

Emphasis is added: cost-saving incentives are stronger in Pioneer ACOs than others, and non-Medicare patients will face the same pressures as Medicare patients for cheap care in these ACOs. The 30 Pioneer ACOs have 5 different payment structures (MedPAC 4/2013 p.10). Several were publicized initially, and ACOs could suggest others (Request for Application pp.8-10):

• Pioneer gets up to 50% of loss or gain, not to exceed 5% of baseline total Medicare cost
  

• Pioneer gets up to 60% of loss or gain, not to exceed 10% of baseline total Medicare cost
• Pioneer gets up to 70% of loss or gain, not to exceed 15% of baseline total Medicare cost

• Pioneer gets up to 75% of loss or gain, not to exceed 15% of baseline total Medicare cost
• Pioneer gets all of loss or gain, with flat payment per beneficiary per month, in years 3-5
• Actual percent up to 50%-75% depends on limited quality standards as in regular ACOs.
  

About 35 ACOs are Advance Payment ACOs ("a" in list) where Medicare lends money to start and operate the ACO.

• "If the ACO does not generate sufficient savings to repay the advance payments as of the first settlement for the Shared Savings Program, CMS will continue to offset shared savings in subsequent performance years and any future agreement periods, or pursue recoupment where appropriate." Advanced Payment ACO Model 1/10/2013 p.3
  

Once providers have received advance money, they will be very averse to giving it back, so pressure to generate savings will be even stronger than at the other Shared Savings ACOs, which do not have Advance Payments.

How Does Other Insurance Control Cost?

CIGNA health insurance has 66 ACOs, and Premier has 23. Blue Cross has them in New Jersey, and in an AQC program with 9 ACOs in Massachusetts. Aetna promotes the idea and has them in Arizona, San Diego, Maine, New Jersey (also here), Pennsylvania (also here), and Virginia (also here).

15% of people with health insurance from private employers have a flat fee per patient for each doctor, regardless of the amount of treatment provided (capitation).

Homeowners' insurance is like health insurance in that few people have big claims, and everyone wants low premiums. Companies frequently reword policies to avoid unexpected costs, and customers theoretically can compare policies, but often have gaps in coverage.

Many types of non-healthcare insurance have premiums based on experience or risk. These varying premiums (unlike Medicare) give incentives to reduce claims: car, workers' compensation, unemployment insurance, FDIC, etc.. The person buying the insurance thus chooses between higher risks, claims and premiums, or lower claims with lower premiums.

Some types of insurance collect property to reduce losses and provide a disincentive to claim: car, mortgage. Many claims are inherently unpleasant, so have incentives against overuse: sickness, death, car accidents, house damage, and theft.

Some insurance companies make it hard to collect: Social Security Disability Insurance initially  denies claims, and the disabled need to appeal. Car insurance is regularly rated by Consumer Reports on claims services. Private health insurance faces frequent complaints from patients and providers about difficulty getting payments. Long term care insurance has a risk of being similar, but there is too little experience to compare the insurers.

Moral hazard is the risk that an insured person or company will incur extra risks and losses because of having insurance. Banks are subject to moral hazard because of FDIC and bailout funds. However people rarely get sick or want more invasive tests voluntarily, so moral hazard rarely applies to health insurance.

How Do Other Entitlement Programs Control Costs?

Governments reduce budgets and cut services of entitlement programs overtly or covertly. Home health services and services for foster children are targeted and reduced.

Advocates limit cuts by asking voters or courts to insist on more money. Prisons are overcrowded until prisoners get courts to order improvements.

Medical care is subject to malpractice suits as an incentive against cost-cutting, though these are expensive with expert testimony, and many states restrict awards for suffering, so they are not as useful for elderly (Medicare) patients as they are for highly paid younger patients who can claim lost earnings. Class actions may be a way to aggregate enough awards to make legal enforcement worthwhile.

ERISA preempts many claims for damages against employer-provided health insurance, even HMOs, though not necessarily against independent doctors and hospitals (legal history to 2003).