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The Affordable Care Act At Three: Paying For Quality Saves Health Care Dollars

March 20th, 2013

For decades before the passage of the Affordable Care Act, health care costs outstripped inflation, without corresponding improvements in health care quality.  Our system didn’t incentivize quality or efficiency.  We paid providers for the quantity of care, not the quality of care.  And we were not using technology to deliver smarter care.

The Affordable Care Act includes steps to improve the quality of health care and lower costs for you and for our nation as a whole.  This means avoiding costly mistakes and readmissions, keeping patients healthy, rewarding quality instead of quantity, and creating the health information technology infrastructure that enables new payment and delivery models to work.

Here are just a few ways that the health care law builds a smarter health care system and incentivizes quality of care – not quantity of care – to drive down costs and save you money.

We’re Shifting the Focus to Quality, Not Quantity

The health care law creates new Accountable Care Organizations (ACOs) that incentivize doctors and other providers to work together to provide more coordinated care to their patients.  ACOs agree to take responsibility for the cost and quality of their patients’ care, to improve care coordination and safety, and to promote appropriate use of preventive health services.  And when this new care model saves the Medicare program money, that savings is shared with the ACO. Over 250 organizations are participating in Medicare ACOs, giving more than 4 million Medicare beneficiaries access to high-quality coordinated care throughout the nation.  ACOs are estimated to save the Medicare program up to $940 million in the first four years.

The Affordable Care Act also ties Medicare Advantage bonus payments to the quality of coverage these private plans offer.  This gives seniors a broader range of higher-quality Medicare Advantage plans from which to choose.  As a result, in 2013, the 14 million Medicare beneficiaries currently enrolled in Medicare Advantage have access to 127 four- and five-star plans, which is 21 more high-quality plans than were available in the previous year.

Keeping You Out of The Hospital

Every year, about 2.6 million seniors – or nearly one in five hospitalized Medicare enrollees – are readmitted within 30 days of discharge, at a cost of more than $26 billion to the Medicare program.  Many of these readmissions stem from preventable problems. These rates can be drastically reduced if we do a better job coordinating care and support.  The health care law’s Hospital Readmissions Reduction Program reduces Medicare payments to hospitals with relatively high rates of potentially preventable readmissions to encourage them to focus on this key indicator of patient safety and care quality.

We’re starting to see results.  Medicare readmissions rates have remained stuck near 19 percent over the five years that the data has been collected (and likely for decades prior to that), but in 2012 the nationwide rate of hospital readmissions of Medicare patients declined to about 17.8 percent.  This translates to over 70,000 fewer preventable hospital readmissions.

Lowering Costs

Taken together, these improvements are providing more value for your health care dollar and helping to fuel historically low cost growth rates in Medicare and Medicaid.  Last year, per-beneficiary Medicare costs increased by only 0.4 percent, continuing the historically low Medicare growth we saw in 2011 and 2010. Per-beneficiary spending in Medicaid actually decreased 1.9 percent from 2011 to 2012.

And a recent report found that health care price inflation in January dropped to 1.5 percent, one of the smallest increases on record.

As the nation’s largest insurer, Medicare can lead the way in effective practices like this that deliver better care and drive down costs.  Our goal is that these reforms and investments build a health care system that will ensure quality care for generations to come.

Learn more about the key features of the Affordable Care Act here.  Follow Secretary Sebelius on Twitter at @Sebelius.

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3 Responses to “The Affordable Care Act At Three: Paying For Quality Saves Health Care Dollars”

  1. tharlow Says:

    Sometimes a good indicator of success is “are people buying what you are selling”? With respect, I do not see nor hear many providers and non-providers buying what the Secretary or the Administration are selling. According to the Secretary, Accountable Care Organizations (ACO’s) are the “golden ring” for reducing costs for healthcare and bending the curve long-term. As we are now beginning to witness, the financial and other estimates associated with Obamacare are crumbling under the realities of real accounting practices and not those “fuzzy numbers” so typical of Washington DC.

    Perhaps part of the answer lies at the opposite end of the spectrum that is so clearly out of focus for the Secretary and her boss. I think there is some property for sale in Florida and a bridge in Brooklyn that might be available. Anyone interested?

  2. Bradley Flansbaum Says:

    You quote 6.2% for Mcare growth. Using growth per beneficiary the better measurement–and indeed much lower than the six percent you site.

    That aside, I cant quibble with non-ACA influences in reducing expenditures.

    Additionally, the increase in observation status, while on a relative basis increased significantly, still comes up from a smaller absolute baseline. I dont think obs approach accounts for major portion of change, only a fraction of many.


  3. Jeff Goldsmith Says:

    The Secretary is certainly correct that the Affordable Care Act contains many promising potential innovations that may someday lower the cost of healthcare. But to argue as she seems to in this posting that the ACA is responsible for the nearly ten year trend of subsiding health costs is, to put it gently, a stretch. As the Altarum article she cites makes clear, the record pharmaceutical patent expirations in 2012, which resulted in an actual shrinkage in US drug sales last year, was the biggest contributor.

    Perhaps the most significant federal contribution to reduced health spending is something she did not cite, and which bears no relationship to the ACA: the sustained pressure from Medicare Administrative Contractors (MAC’s) to compel hospitals to screen acute care admissions in observation beds in emergency departments before certifying them for hospital admission. This has certainly contributed to fewer hospital admissions under Medicare and a measurable impact on program costs.

    However, in the latest year for which her department has published data, 2011, Medicare costs rose at 6.2%, compared to 3.8% for private insurance. This is a significant acceleration in Medicare’s 4.3% cost growth in 2010, the base year for ACA. The Secretary should be careful about claiming victory over health costs. The hard work hasn’t even begun. . .

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