Much of the heated debate over President Obama’s Affordable Care Act in 2009 centered on the question of how the plan would save money.
The Centers for Medicare and Medicaid Services (CMS) issued a report this past week showing how it will save nearly $120 billion over the next five years.
The savings will come from reforms and initiatives the CMS has already implemented and lay the foundation for broad reform of the U.S. healthcare delivery system. In short the CMS believes the reforms will provide an array of quality improvements and efficiencies derived from preventive care benefits, tying payment to quality standards, improved patient safety, and incentives for providers.
The CMS outlined the savings it expects from reforming provider payments, changing from fee-for-service to rewarding quality and efficiency to be $55 billions by 2015. Reducing excessive Medicare payments to insurance companies will save another $50 billion by then. CMS expects to save another $10 billion by 2013 if they are successful in reducing Medicare readmissions and hospital-acquired conditions. They expect to save another $3.7 billion by cracking down on fraud and abuse and by getting better value from more durable medical equipment.
The total savings of $120 billion is encouraging news, and in anticipation of critics who may doubt the figures, the CMS provided details about how each of those categories of savings are to be achieved.
The $55 billion saved by payment reform has already begun with finalized payment rules to establish value-based purchasing program for inpatient hospital services that ties hospital payment to their performance on measures. In addition, Medicare payment rate increases for hospitals, nursing facilities, home health agencies, medical labs, clinics and ambulatory surgical and dialysis centers will be tied to the rate of growth in productivity in the economy at large. The CMS says these rules have the potential to achieve even greater savings through care improvements and greater efficiencies.
The patient safety program is under way with a $1 billion investment in the Partnership for Patients, which will support public-private partnerships to improve quality, safety and affordability by leveraging dissemination of innovative solutions developed in one area or by one group and quickly roll those out to national implementation. To date, CMS says more than 2,500 organizations, including 1,200 hospitals, have signed a pledge to become part of the Partnership for Patients.
In addition CMS has set a goal of reducing preventable hospital-acquired conditions by 40 percent, which will prevent 1.8 million injuries and avert 60,000 deaths of hospital inpatients over the next three years. In addition the CMS set a goal for eliminating 1.6 million unnecessary rehospitalizations. Taken together, achieving these two goals are expected to save up to $35 billion across the healthcare system over three years, including up to $10 billion for Medicare alone.
The biggest chuck of savings is expected to come from reducing the practice of paying substantially more to private insurers through Medicare Advantage plans that contract with Medicare, than it would cost Medicare to cover those individuals in traditional Medicare. Prior to the Affordable Care Act, these plans were paid about 14 percent more per patient than it would cost the program had the patient remained on Medicare. CMS started implementing these payment reductions on Jan.1, 2011 and is expected to save an estimated $50 billion over the next five years.
To reduce the waste, fraud and abuse, CMS began employing technologies similar to that used by credit card companies to rapidly identify fraudulent billing patterns, and networks of criminal organizations intending to steal from these programs.
Also on Jan. 1 CMS launched competitive bidding mechanisms for durable medical equipment and other supplies in nine metropolitan areas. Already, Medicare is paying an average of 32 percent less for such items as power wheelchairs and oxygen supplies. Over the next five years the Medicare Trust Fund is expected save more than $2.9 billion, and patients are expected to save more than $700 million in out-of-pocket costs. Over ten years, the Medicare Trust Fund expects to save more than $17 billion, with beneficiaries saving an additional $11 billion in out-of-pocket costs.
The CMS also outlined other initiatives that are expected to potentially save billions over the long-term. These include the Medicare-Medicaid Coordination Office, which will coordinate the care of 15 percent of the population that are eligible for both Medicare and Medicaid but account for 27 percent of Medicare costs and 39 percent of Medicaid spending.
The Center for Medicare and Medicaid Innovation is expected to produce savings through development of more efficient practice care models for both primary and chronic care and to develop more efficient payment models. Other programs move to simplify administration requirements and promoting health prevention practices.
Taking all of this into account, it appears that the Affordable Care Act is in fact allowing the Centers for Medicare and Medicaid Services to aggressively move to rein rising U.S. healthcare costs contrary to critics’ predictions. With these cost-containment initiatives in place, CMS appears to have made a good beginning. Now only time will tell if they can deliver the cost savings and healthcare improvements promised.
By Michael O’Leary, contributing writer, Health Imaging Hub
