Rising Medicaid Costs Lead States to Adopt Accountable Care Organizations

As the burden of Medicaid expenditures on state budgets continues to grow, states are looking to new payment models to help reduce health-care costs and improve health outcomes for patients. One solution, accountable care organizations (ACO), has been implemented in 12 states so far, with 10 more developing ACO plans.

ACOs are designed to provide better health care by focusing on underlying health and social conditions – including homelessness, poor nutrition, addiction, and mental health issues – that can cause or worsen health problems. In these systems, health-care workers assist patients in applying for additional benefits, including housing, transportation, and Social Security; providers also offer medical care away from a hospital setting, improving many patients’ access to treatment.

Proactively addressing these underlying problems could potentially improve use of preventive-care services, reduce emergency room visits, and lower health-care costs. In turn, the states redistribute a portion of their Medicaid savings to the providers with the best outcomes.

Data on the effectiveness of these programs thus far are mixed. Minnesota, which introduced ACOs in 2013, claims to have saved $213 million, returning $70 million directly to providers in its health systems. However, a study conducted for the Centers for Medicare and Medicaid Services found that, in most states, the programs did not reduce hospital visits or health-care costs. Other health-care providers, including managed-care companies, also are skeptical, arguing that the states are merely shifting resources from traditional providers to ACOs, rather than providing more cost-effective care.

Source: Kaiser Health News, June 15, 2018.