Economists caution: ACOs may not end wasteful health spending

Two of the nations’ top health care economists have condensed many of the causes and challenges of America’s rising health care costs into one 29-page paper with a snappy title: “Aspirin, Angioplasty, and Proton Beam Therapy: The Economics of Smarter Health Care Spending.”

Harvard’s Katherine Baicker and Amitabh Chandra presented the paper last week at a Federal Reserve Bank of Kansas City symposium in Jackson Hole, Wyo. The paper has been getting attention for arguing that controlling the federal deficit requires clamping down on expensive, unproven technologies and encouraging cost-effective, cheaper ones.

Similar arguments are being made with some frequency these days as the political accusations of “death panels” have receded for the moment. But the paper has some provocative–and not altogether encouraging–things to say about “accountable care organizations” (ACOs).  These networks of doctors and hospitals are one of the health law’s mechanisms to replace Medicare’s current “fee for service” payment system, which is criticized for financially rewards providers for performing more procedures.

The authors warn that the success of ACOs may depend on whether they can rein in the use of expensive technologies, or whether ACO doctors and hospitals even will want to, since these treatments are often a major lure for patients.

They write:

[W]e do not know how well ACOs will sidestep cost-ineffective technologies, particularly if the latest shiny innovation increases market share. The viability of ACOs will depend on the receptiveness of physicians to capitated payments–some specialists will see their incomes fall and are unlikely to take these cuts quietly. While their concerns may not resonate with patients, they might if providers claim that valuable care is being withheld.  Designers of ACOs are therefore keenly interested in measuring ACO performance and patient satisfaction, but current quality measures only capture truly negligent care.

The authors also warn that even if ACOs do achieve savings by performing fewer procedures, “some of the savings from lower quantities may be offset with higher prices as ACOs exert market power” by charging more to private insurers.

Even if ACOs and other policy changes do curtail expensive medical technologies, the authors are skeptical it will be enough to deal with the country’s rising health care costs and deficit issues. Their paper concludes:

The U.S. has yet to wrestle with the question of public policy priorities in a world of scarce resources:  even with perfect productive efficiency, we cannot cover all services for all people. …  By first ensuring that health care resources are used more productively, we will be in a much better position to move towards spending the “right” amount on health.

–Jordan Rau, Kaiser Health News