About the Author

James C. Capretta

James C. Capretta

New Atlantis Contributing Editor James C. Capretta is an expert on health care and entitlement policy, with years of experience in both the executive and legislative branches of government. E-mail: jcapretta@aei.org.


James C. Capretta’s Latest New Atlantis Articles

 Health Care with a Conscience” (Fall 2008) 

 Health Care 2008: A Political Primer” (Spring 2008) 

 The Clipboard of the Future” (Winter 2008)


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Monday, February 2, 2009

Accountable Care Organizations 

Last week, the journal Health Affairs published an important article calling for the creation of “Accountable Care Organizations” in the Medicare program.

Reform of how health care is actually delivered to patients is the Holy Grail of health policymaking. The delivery system can be broadly understood to be those processes by which physicians and institutions provide care to patients. (How do patients come into contact with care providers? What happens to them when they do?) Health care in the United States is costly because, in most instances, no one is in charge of making the delivery system patient-focused and cost-effective. Rather, there is a strong incentive for autonomous and unaffiliated small practices to maximize their revenue by providing ever-increasing numbers of services to patients.

The authors of the Health Affairs piece—Elliott Fisher, Mark McClellan, John Bertko, Steve Lieberman, Julie Lee, Julie Lewis, and Jonathan Skinner—have been studying the problems in the nation’s delivery system from a number of governmental and academic vantage points for years. They are truly the experts; their proposal deserves a careful review.

What they are suggesting is creative, although it raises a lot of questions. From experience, they know there is fierce political resistance to switching from fee-for-service financing to capitation (payment of a fixed amount per person). Seniors worry that HMO-style organizations have strong incentives to withhold needed care.

And so, the authors bypass the beneficiaries and go straight to the doctors and hospitals. They suggest allowing doctors and hospitals to voluntarily join up with others in “Accountable Care Organizations,” or ACOs. ACOs would have to be capable of accepting capitated payments for all Medicare-covered services—and willing to be held accountable for the results. The physicians and hospitals participating in an ACO would keep 80 percent of any savings that result from holding costs below baseline projections, and there is a presumption that a beneficiary would follow his primary care doctor into an ACO environment, if the doc signed up with one.

It is certainly an intriguing approach. It could be the catalyst for the creation, nationwide, of new, integrated, provider-owned legal structures. It would be voluntary all around, but physicians would likely find it attractive because of the potential financial rewards. And beneficiaries wouldn’t necessarily lose their rights under current Medicare.

But is it too good to be true? Would it really be possible to move millions of Medicare beneficiaries into a capitation-based system without their explicit consent? What would happen if a beneficiary wanted care inside and outside of an ACO? Could he get it? And shouldn’t competition play a role anyway, with beneficiaries getting to choose among competing ACOs based on price and quality? Otherwise, what would be the catalyst for ongoing improvement?

Still, despite these questions, the article deserves to be widely read. Certainly, its bottom-line message needs to be heard loud and clear by policymakers: The United States urgently needs delivery-system reform, and that requires a fundamental rethinking of Medicare’s reimbursement model.

posted by James C. Capretta | 6:01 pm
File As: Health Care