Yet More Evidence That ObamaCare's Cost Reforms Won't Work


Credit: National Institutes of Health Library / Foter.com / CC BY-NC-SA

During the debate over ObamaCare, the law's backers talked a lot about the promise of "delivery system reform"—health policy changes, mostly to the way providers are paid, that they hoped would reduce costs while increasing quality. You hear the phrase less often these days, but President Obama invokes the same concept when he talks about making "modest reforms" to Medicare: Rather than slashing benefits, Obama wants to tweak the incentives in the health system in order to produce savings.  The problem, though, is that these reforms turn out to rather difficult to implement successfully.

Here's just one recent example: In today's Wall Street Journal, Elliot Fisher, Stephen Shortell, and Mark McClellan, a trio of health policy scholars from Dartmouth, University of California, Berkeley, and the Brookings Institution, respectively, defend what is arguably the most prominent of ObamaCare's delivery system reforms: the Accountable Care Organization (ACO), which is intended to create financial incentives for health providers to better coordinate care, hopefully saving money and improving patient outcomes in the process.

Critics have compared ACOs to 1990s-style Health Maintenance Organizations (HMOs), which they say only held down costs by being stingy with care and access, and which were deeply unpopular with the public. But the authors of the WSJ piece argue that health providers will have to hit new quality measures—quality measures that didn't exist in the 1990s.

But the quality measures built into ObamaCare's ACOs aren't working so well yet either. Indeed, last week, virtually all of the health providers that Medicare has dubbed "Pioneer ACOs"—the program's leaders and examples—sent a letter to Medicare officials overseeing the program in which they threatened to drop out. The reason is that the Pioneers feel that the performance and quality metrics aren't up to snuff—and the data doesn't yet exist to determine what the metrics should look like. As Inside Health Policy, which first obtained the letter, notes, "The Pioneer ACOs were supposed to be the few shining examples of organizations that could handle outcomes-based pay." Instead, they're threatening a revolt.

Health reformers had high hopes for ACOs, but so far the results just aren't promising. Yes, the ACO model seems to work quite well inside a small number of high-quality medical systems—highly coordinated institutions like the Mayo Clinic, Intermountain Health, Geisinger Health System, and the Cleveland Clinic that provide fantastic care and hold down costs. These health systems were the models for the larger reform. But like so many successful localized health policy reforms, it's proving very difficult to scale. Indeed, ObamaCare's ACO rules were so poorly written that the model ACOs—the poster children for why ACOs would work—declined to participate in the Pioneer program, citing over-prescriptive rules and an excessively bureaucratic approach overall. This is what federally run delivery system reform actually looks like: a lot of failure and frustration. And it's why we should be skeptical that modest reforms will ever be enough.