Provisions of the new Affordable Care Act, coupled with other payment changes, will save Medicare nearly $8 billion over 2 years and extend the solvency of the Medicare Trust Funds by 12 years, according to a report from the Centers for Medicare and Medicaid Services.
The immediate savings come from cuts to Medicare Advantage payments, competitive bidding for durable medical equipment, changes to how Medicare pays for advanced imaging services, productivity improvements in the hospital, and efforts to reduce waste, fraud, and abuse. These changes are expected to save $7.8 billion for the Medicare program by the end of next year.
The report analyzes cost-cutting provisions that the CMS has already implemented or will be implementing soon.
“For too long, we've paid too much for health care, gotten too little in return, and watched the situation get worse each and every year,” Health and Human Services Secretary Kathleen Sebelius said at a press conference to release the report. “The Affordable Care Act is already putting our health care system on a new course, bringing down costs while improving the quality of care and giving all Americans more value for their dollars.”
Ms. Sebelius noted that the new law will protect Medicare beneficiaries by maintaining current benefits and adding new ones such as free preventive care and the eventual closing of the Medicare Part D prescription drug doughnut hole.
Over the long-term, CMS officials estimate that Medicare savings will exceed $418 billion by 2019. Some of those savings will come from reducing hospital readmissions and hospital-acquired infections, bundling payments for end-stage renal disease care, promoting Accountable Care Organizations, and improving quality reporting by physicians. The CMS also expects the establishment of the Independent Payment Advisory Board (IPAB), which will recommend payment changes aimed at slowing growth in Medicare spending, to contribute to those savings by cutting Medicare costs by about $23 billion by 2019. The IPAB may pose problems for physicians down the road, Robert Doherty, senior vice president for governmental affairs and public policy at the American College of Physicians, said in an interview. Many physician groups have been critical of the IPAB, saying that Congress has placed too much authority in the hands of an unelected body. Under the Affordable Care Act, the IPAB's recommendations will take effect unless Congress passes legislation that meets the same budgetary targets.
However, the payment changes being touted by Medicare could be good news for office-based physicians, Mr. Doherty said. For example, under new models such as bundled payments and accountable care organizations, office-based physicians who help to reduce preventable hospital readmissions could see a share of the savings from that improved care.
“Right now under Medicare, Part B is Part B and Part A is Part A, and never the twain shall meet,” Mr. Doherty said. “No matter what physicians do to reduce Part A expenses by managing care more effectively, there's no mechanism under the existing Medicare payment system for physicians to benefit from that.”
The current payment system misaligns the financial incentives, paying for volume rather than quality of care, Dr. Lori Heim, president of the American Academy of Family Physicians, said in an interview. Concepts such as accountable care organizations, which are still in their infancy, could benefit physicians by paying them to coordinate care and reimbursing them for work that keeps costs down for the health care system as a whole, she said.
“We know that to really coordinate the care, to work with the patient's family, to create the community environment and really help to manage these patients, a lot of that is not in the face-to-face visit that we're currently being paid for,” Dr. Heim said.