One of the goals of health reform was to change the way doctors practice medicine. Under Medicares fee-for-service payment system, we were told, physicians have an incentive to perform too many of the wrong kinds of services. As a result, the cost is too high and the quality of care is too low. Instead, we should pay for value rather than quantity, said the reformers.

So how well is all that working? Not well at all it turns out.

And here is something really surprising. The Obama administration experimentation with payment systems only applies to Medicare. Yet the only place in all of Medicare where reform ideas appear to be working are in the Medicare Advantage plans. (See my discussion at the Health Affairs Blog.) You may remember that candidate Obama actually campaigned against these plans in the 2018 election and the Obamacare legislation will reduce the governments payments to these plans and discourage further enrollment.

The Obama administrations vehicle for change was to be the Accountable Care Organization, which you can think of as a new generation HMO. In The New York Times yesterday, an editorial by Bob Kochner and Farzad Mostashari claimed that their ACO in McAllen Texas has saved millions of dollars and raised the quality of care for the patients. They go on to say:

Today, more than 5.3 million Medicare beneficiaries nationwide are served by more than 360 A.C.O.s, which have helped hold spending hundreds of millions of dollars below Medicare targets for this period.

They may be right about their own ACO, but a study in the Journal of the American Medical Association finds generally that the experience of the pilot ACO projects has been fairly dismal. In their first year, only 29 percentof the physician-led ACOs and only 20 percentof the hospital-sponsored ACOs turned a profit. And among those that did so, the results were fairly mediocre.

Further, to help the ACOs perform better the Obama administration has spent tens of millions of dollars on demonstration programs and pilot projects, investigating coordinated care, integrated care, managed care, pay-for-performance medicine, electronic medical records systems, etc. The result? Three separate Congressional Budget office reports have concluded that none of this is working, or at least not working very well. (See here, here and here.)

So whats wrong with ACOs? What follows is taken mainly from my Health Affairs post. (And be sure to look at the comments as well.)

For starters, there is a 427 page book of rules, describing what an ACO has to do in order to be an ACO. The administrative burdens are so large that the average ACO spends $2.2 million on startup costs alone. From that point forward, the ACO functions like a (highly) regulated utility.

Medicare patients do not choose an ACO. They are assigned to one. The ACOs are forbidden to market to prospective customers, and seniors dont even know they are in one until they are contacted by the ACO they are assigned to. Even then, the communication is tightly regulated. Any letter from the ACO to a new member must be approved by CMS and all introductory letters essentially look alike. In general, no ACO is able to have a better promotional piece than a competitor.

Go here to read the rest:

Is Obamacare Changing The Way Doctors Practice Medicine?