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Are You Affected by Medicare Reforms?

Kimberley Fowler
By Kimberley FowlerJune 30, 2016

Did you know that the Center for Medicare and Medicaid Services (CMS) is considering changing the way it pays health care providers? Though these changes won’t affect families directly, it is important to understand how health care providers are being paid. 

Learn more about how seniors will be affected by medicare reforms.

Center for Medicare and Medicaid Service Changes to Health Care

Medicare is a social insurance program providing coverage to more than 55 million Americans age 65 and older, as well as young adults with permanent disabilities. To help ease the high costs associated with traditional Medicare and other healthcare related spending, the government enacted the Affordable Care Act in 2009. Since its launch, ACA has reduced Medicare payments by $335 billion. ACA also has major plans to close the Medicare Part D coverage gap, also called the “doughnut hole,” by 2020.

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Paid for by the federal government, the ACA was implemented to address a variety of underlying health care problems, including:

  • Affordability
  • Inefficient spending
  • Quality of care
  • Rising costs

The ACA’s New Payment Approach

Before the ACA, the traditional health care system lacked consistency and was often ineffective, leading to high costs and generally low-quality service. To combat this, the ACA identified three health care payment models that might better serve the American people:

  • Accountable care organizations (ACOs)
  • Bundled payments
  • Medical homes

According to the authors of the report Payments and Delivery System Reform in Medicare, these Medicare reforms focus on “shifting a portion of traditional Medicare payments from fee-for-service (FFS) (which reimburses based on the number of services provided) to payment systems that incorporate some link to the ‘value’ of care as determined by selected metrics, such as patient outcomes and Medicare spending.”

Together, these new models were designed to incentivize health care professionals to provide higher quality care at a lower cost to approximately 10 million Medicare beneficiaries. In 2015, the U.S. Secretary of Health and Human Services announced that its goal was to have at least 90% of traditional Medicare payments linked to one of these three models. Because of this deadline, it’s more important than ever to understand these payment models and how they affect beneficiaries.

Accountable Care Organizations (ACOs)

What Are They?

ACOs are groups of doctors, hospitals and other healthcare providers who voluntarily come together to share collective accountability for quality and cost of care with the goal of coordinating effective, helpful care.

  • Examples: Advance Payment ACO (subset of MSSP, Medicare Shared Savings Program (MSSP) and Pioneer ACO

Payment Structure

In the form of shared savings or losses — or bonuses and penalties — ACOs receive an advance on expected savings. In its first year, ACOs generated $700 million in total savings.

Bundled Payments

What Are They?

The Bundled Payments for Care Improvement (BPCI) establishes an overall budget for a specific course of treatment for a given clinical condition. This payment approach is a single reimbursement for all services to incentivize providers to work better together.

  • Examples: Inpatient hospital, inpatient hospital services, physician services and post-acute services

Payment Structure

Bundled payments provide incentives for providers to come in ‘under budget’ for episodes of care and may lead to higher quality, more coordinated care at a lower cost.

Medical Homes

What Are They?

Medical homes deliver comprehensive patient-centered preventive and primary care. They rely heavily on primary care practice to provide health, illness and wellness care for Medicare beneficiaries.

  • Examples: Advanced Primary Care Practice, Comprehensive Primary Care (CPC), Federally-Qualified Health Center (FQHC), Independence at Home (IAH) and Multi-Payer Advanced Primary Care Practice (MAPCP).

Payment Structure

Health insurers that cover medical homes provide monthly care management fees and other payments in addition to fee-for-service reimbursement.

Which Model is Best?

Not enough information has been gathered for policymakers to determine the performance of each of these new models. However, according to Medicare’s Payments and Delivery System Reform, initial observations show that the ACO model is performing better in these three areas:

  1. Participation:According to the CMS, health care provider participation of ACOs doubled in growth and grew in three of the four bundled payment models. For medical homes, participation by health care providers remained relatively the same.
  2. Quality: The CMS reports that to date, ACOs have shown the greatest improvement in quality service to beneficiaries. In comparison, medical homes showed small improvements in quality and bundled payments found no notable differences in quality.
  3. Savings: ACOs have reported the most savings to date — approximately $465 million dollars in total. In comparison, medical homes savings total $25 millionwhile the CMS has yet to produce reports detailing the total savings of the bundled payments model.

Ways the Models Impact Families and Seniors

Does it matter which of these incentive models your health care provider participates in? At the moment it’s unclear as to how families will be impacted, if at all.

To date, the CMS reports that “for the most part, Medicare beneficiaries in these models do not experience any changes in their Medicare benefits, as they are not required to see certain providers and do not experience differences in their levels of cost-sharing.”

However, Payments and Delivery System Reform in Medicare did note,

“Beneficiaries whose primary care provider is transforming their practice into a medical home may notice differences in the delivery of their care — for example, greater reliance on clinical teams and electronic health records — but for the ACO and bundled payment models, beneficiaries would not necessarily notice changes in care practices.”

If the reforms have not impacted your health care coverage to your standards, you might want to research the benefits of Medicare Supplement Insurance.

Have you noticed an impact in the care of yourself or a loved one whose provider is using one of these Medicare models? Share your experiences with us in the comments below.

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Kimberley Fowler
Kimberley Fowler
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