Strategic implications: The cost problem persists. What can be done about it?

The final post in our “Ten strategic considerations of the Supreme Court upholding PPACA” blog series looks at the perplexing question facing American healthcare: What do we do about increasing healthcare costs?

PPACA focuses on expanding coverage and insurance reform, and in some cases it shifts costs from one party to another, but it does not directly affect the unit costs and utilization that are among the major underlying drivers of healthcare costs.

Certain aspects of PPACA have the potential to affect costs. The option to implement an accountable care organization (ACO)13 reprises the managed care movement of the ’80s and ’90s, but with better technology and information, and by transferring the financial risk onto the provider to create an incentive for efficiency. With many potential ACOs already establishing the tools required to succeed,14 this reinvigorated movement is already in motion. The nuts and bolts of an ACO are still the parts needed for a more efficient system.

Most of PPACA’s explicit ACO efforts center on Medicare, and while the Medicare Shared Savings Program (MSSP) and Pioneer Programs will continue, the potential for commercial ACOs15 may prove just as significant.

Accountable care is not a solution to everything that ails the entire healthcare system, but it offers some hope and, to the extent it can meaningfully control unit costs and utilization, it just may work.

Rob Parke and Kate Fitch discuss accountable care organizations here. For more on ACOs, consider reading “ACOs Beyond Medicare” and “Nuts and Bolts of ACO Financial and Operational Success: Calculating and Managing to Actuarial Utilization Targets.” You may also be interested in the Milliman Medical Index.

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