Health Care Reform Progress: ACO Regulations Drop
Want to know whether health care reform will really reduce health care spending? Then pay close attention to what’s happening with a new regulation designed to reconfigure the way we pay doctors and hospitals.
As any card-carrying health care wonk can tell you, the root of all evil (or at least a lot of evil) in our health care system is “fee-for-service” reimbursement. That’s the most common way that we pay for medical care in this country: By paying the provider of that care for every service rendered. So an office visit is one charge. A test or procedure is another. It happens that way in the doctor’s office and it happens that way at the hospital.
The problem with that system is that it gives providers financial incentive to keep providing more care, which is not only expensive but also, frequently, unnecessary (or even counter-productive). The Affordable Care Act tries to rectify that by introducing a new payment model: It encourages providers to organize into “Accountable Care Organizations,” which Medicare (and, hopefully, other insurers) would pay with lump sum payments – no matter how many services were delivered.
The hope is to offer incentives for quality, not quantity: If the providers offer quality care that costs less than the value of the target sum, then the payer and the providers get to split the savings. But it’s up to the administration to come up with the specifics for this arrangement, through the regulatory process. And when the administration released its first draft of those rules in April, it was promptly met with widespread criticism . While providers didn’t necessarily dispute the theory behind ACOs, they hated the fine print of the program. And that was a big problem. The program is voluntary: If providers don’t buy into the program, it won’t work.
So the administration went back to the drawing, in the hopes of mollifying providers’ concerns. Last Thursday, it released a revised set of regulations. How do the revised rules stack up—and will they actually make the health care system more efficient?
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