The Trump Administration Is Proposing Changes to Medicare Pay For Accountable Care Organization (ACO) Models

Medicare ACOs began in 2012 and have enrolled more than 10 million beneficiaries so far. If they provide care for less than certain cost targets — while meeting quality of care standards — then they get to share in any of the savings. Commercial insurers and Medicaid have also adopted ACOs in the past decade. About 82% of the 561 Medicare ACOs are set up so that they are not at risk of losing money from Medicare. They can share in any savings they achieve. The rest can gain a higher share of savings, but also risk paying back money to Medicare if they do not meet their savings targets. The latter ACOs have been more successful in saving money. The Medicare program said it would phase out its no-risk model beginning in 2020. Existing ACOs will have one year to switch to a model accepting financial risk. New ACOs will have two years. Currently, ACOs have up to six years to shift to a model where they share in financial Centers for Medicare & Medicaid Services estimated that its new policy would save Medicare $2.2 b over the next decade and lead to a drop of about 100 ACOs by 2027.

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