Insurance coverage of contraceptive services has been the focus of policy attention by state and federal policy makers as well as in the courts over the past two decades. In 2012, all new private plans were required to cover, without cost-sharing, the full range of contraceptives and services approved by the Food and Drug Administration (FDA) as prescribed for women.¹  For the first time, federal standards created a minimum set of benefits for most health plans regulated by the federal government (self-insured plans, federal employee plans) and states (individual, small and large group plans), including contraceptive coverage for women with no cost-sharing. This new requirement, however, has been at the center of a heated policy debate that culminated in the Supreme Court ruling on the religious rights of employers that object to contraception. At this time, the issue has not yet been resolved as additional cases are working their way through the courts, and may end up, yet again, at the Supreme Court. This issue brief explains the rules for private insurance coverage of contraceptives at the federal and state level and discusses key issues regarding the provision and coverage of contraception by private insurance plans.

Background

Access to contraception is a key element in shaping women’s health and well-being. Contraception is most notably used for family planning, but also to control symptoms associated with menstruation, endometriosis, and acne.²  Nearly all women (99%) have used contraceptives at some point in their lives and 62% of women are currently using at least one method.³  Of the more than 60 million women in their childbearing years (ages 15 to 44), 7 in 10 are sexually active and do not want to become pregnant.⁴  The most common form of contraception among women currently using contraception is the pill (26.7%) followed by female sterilization (25.1%) and male condoms (22.8%) (Figure 1).⁵  Use of long acting reversible contraception (LARCs) has been increasing over recent decades with the introduction of new intrauterine devices (IUDs) and implants.⁶  Efficacy of various methods ranges from greater than 99% effective with IUDs, to 91% with oral contraceptive pills, and 82% with condoms.⁷  According to the CDC, 6.9% of women of reproductive age are sexually active but are not using contraception, placing them at increased risk for unintended pregnancy.⁸ 

Unintended pregnancies account for almost half of all pregnancies in the US.⁹  Women who use contraception incorrectly, experience gaps in contraceptive use, or do not use contraception are at particular risk for experiencing an unintended pregnancy, but no method is 100% effective. Approximately one quarter (23%) of women using contraception had a period of at least 1 month in the prior year when they were not using a contraceptive method.¹⁰  Insurance coverage of contraception has been shown to increase utilization of contraception, increase use of more effective methods, and decrease out-of-pocket costs for women.

The ACA’s Contraceptive Coverage Requirement

The ACA is the first law to set coverage requirement for health insurance across all markets – individual, small group, large group and self-insured plans. Individual, small and large group plans are regulated by the state, whereas self-insured plans are regulated by the federal government under the Employee Retirement Income Security Act (ERISA).

Before the ACA, coverage for prescription contraceptives was generally widespread in the private and public sectors, but not universal. Unless a state had a contraceptive coverage mandate, insurers and employers could choose whether or not to provide coverage for contraception. In 2000, a ruling by the Employment Equal Opportunity Commission found that employers that covered preventive prescription drugs and services, but did not cover prescription contraceptives were in violation of the Civil Rights Act.¹¹  Currently, 28 states require insurance plans to cover contraceptives, with a wide range of coverage and cost-sharing requirements, and exemptions among these mandates.¹²  State laws, however, fell short of universal coverage as they only applied to state regulated plans, but not self-funded plans where 61% of covered workers are insured.¹³  In addition, they did not place contraceptives in a special class that was protected from cost-sharing.

More than half of women in the United States are insured through an employer-sponsored plan, either as the primary beneficiary or as a spouse or dependent. The 2010 Kaiser/HRET survey of employers reported that 85% of large firms covered prescription contraceptives in their largest health plans¹⁴ , although they may have charged cost-sharing, the amount of which can vary greatly by employer and type of plan. Only a small share of women has historically purchased insurance directly from an insurance company on the individual market, but this share is growing as previously uninsured women can now purchase coverage through ACA Marketplaces.

The ACA made contraceptive coverage a national policy, by requiring most private health insurance plans to provide coverage for a broad range of preventive services including FDA-approved prescription contraceptives¹⁵  and services for women without cost-sharing. Since the implementation of the ACA’s  contraceptive coverage provision, fewer women are paying out of pocket for contraceptives.¹⁶  For example, the share of reproductive age women experiencing out-of-pocket spending on oral contraceptive pills declined from 20.9% in 2012 to 3.6% in 2014. This decline accounts for nearly two-thirds (63%) of the drop in out-of-pocket spending on retail drugs during this time period.

While most health plans are now required to provide contraceptive methods and counseling to women with reproductive capacity with no out-of-pocket costs, there are certain conditions that must be met. Women must be enrolled in a non-grandfathered plan¹⁷  and they must get services from an in-network provider. ¹⁸ 

In addition, the federal regulations implementing the preventive services coverage requirement explicitly permit plans and issuers to use reasonable medical management to control cost and promote efficient delivery of care.¹⁹  This applies to coverage of all preventive services, not just contraceptive care, but contraceptive services in particular had been documented as being unevenly covered by some plans because of how medical management was being interpreted by insurers.²⁰  Examples of medical management tactics include, but are not limited to, categorizing brand and generic drugs and devices in tiers based on either cost, type and or mode of delivery; steering consumers to generic equivalent drug options; requiring provider authorization to acquire a preferred brand drug; requiring a consumer to first try a lower tier formulary drug or therapy to treat a medical condition before they will pay for an alternative drug or therapy for that condition (step therapy); and limiting quantity and or supply.

In response to reports about gaps in contraceptive coverage attributable to medical management policies,²¹  the Department of Health and Human Services (HHS) issued new guidance in May 2015 which clarifies that at least one form of all 18 FDA-approved methods of birth control must be covered without cost-sharing. If a provider recommends a specific option or product, plans must cover it without cost-sharing as well. Insurers may use reasonable medical management, however, to limit coverage to generic drugs when a generic version exists, and can impose cost-sharing for equivalent branded drugs. Plans are required to have a “waiver” process for women who have a medical need for contraceptives otherwise subject to cost-sharing or not covered.²² 

Exemptions and Accommodations

As mentioned above, women enrolled in “grandfathered” plans may not be covered for the full range of contraceptives without cost-sharing. In order to be classified as “grandfathered,” plans must have been in existence prior to March 23, 2010, and cannot make significant changes to their coverage (for example, increasing patient cost-sharing, cutting benefits, or reducing employer contributions). In 2014, 26% of workers covered in employer sponsored plans were still in grandfathered plans,²³  and it is expected that over time almost all plans will lose their grandfathered status.

Certain religious employers have a religious objection to some or all contraceptive methods and may be “exempt” from the ACA contraceptive coverage mandate. Specifically “religious employers”, primarily churches and other institutions of worship are exempt. Exempt employers do not have to include contraceptive coverage for their workers and their dependents in their health plan.

There is also an “accommodation” available to nonprofit religiously-affiliated organizations and closely held²⁴  for-profit corporations that object to contraceptive coverage on religious grounds²⁵  Under the accommodation, an eligible employer does not have to contract, arrange, pay or refer their employees for contraceptive coverage. The health carrier used by the nonprofit employer or closely held for-profit employer must notify the policyholders, and provide separate coverage of contraceptives, at no cost, to the policyholders. Unlike an exemption, female employees and the female dependents covered by the plans of a nonprofit or closely held for-profit employer choosing an accommodation are entitled to the full contraceptive coverage from their insurance carrier.

Looking Forward

Today, millions of women now have coverage for the full range of contraceptive methods without cost-sharing; however, some women will continue to experience gaps in coverage. Federal and state regulators have an important role to play in ensuring the federal standards are applied accurately and fairly, meaning all women can access contraceptive services. In May 2016, the Supreme Court remanded Zubik v. Burwell, sending 7 cases brought by religious nonprofits objecting to the contraceptive coverage accommodation back to the respective Courts of Appeal. The Court instructed the parties to work together to “arrive at an approach going forward that accommodates petitioners’ religious exercise while at the same time ensuring that women covered by petitioners’ health plans “receive full and equal health coverage, including contraceptive coverage.”²⁶  It is not clear whether the Trump Administration will maintain the contraceptive coverage policy.

Awareness of the Federal Standard Among Women and Providers

A recent HHS study estimates that 55 million women have private insurance coverage that includes no-cost coverage for contraceptive services and supplies.²⁷  While the number of individuals who have gained coverage for no-cost preventive services is large, public awareness of the preventive services requirement is relatively low. In March 2014, three and half years after the rule took effect, less than half the population (43%) reported they were aware that the ACA eliminated out-of-pocket expenses for preventive services.²⁸  A Kaiser Family Foundation study on plan coverage of contraceptives identified that some providers may not know how to correctly code all visits related to contraceptive services as a preventive service so the patient is not billed for the service.²⁹  For the contraceptive coverage requirement to reach all women enrolled in private plans, additional public and provider education is needed.

Role of States in Expanding Coverage

States have historically regulated insurance and many have mandated minimum benefits for decades. Contraceptive coverage is no exception. Since the passage of the ACA, some states have looked to strengthening and expanding the federal contraceptive coverage requirement. For example, in 2014 California passed the Contraceptive Coverage Equity Act of 2014 which requires plans to cover prescribed FDA-approved contraceptives for women without cost-sharing. The law specifies that a plan does not have to cover more than one therapeutic equivalent of a contraceptive drug, device, or product, as long as at least one is covered without cost-sharing. Contraceptives with the same chemical formulation and delivery mechanism are therapeutically equivalent. Starting in January 2016, plans in California will be required to cover the cooper IUD (Paragard) and all three hormonal IUDs (Mirena, Skyla and Liletta), because none of the IUDs are therapeutically equivalent. The ACA requires plans to cover Pargard, and only one hormonal IUD.

In 2015, Oregon passed a law that requires insurers to pay for a 3 month supply of contraceptives when first prescribed, followed by a 12 month supply of contraceptives regardless of whether the woman was insured by the same plan at the time of the first dispensing.³⁰  This law applies to oral contraceptive pills, the patch and the vaginal ring. In June 2015, the D.C. mayor signed a similar measure which would require health insurers that offer coverage of prescription birth control pills to cover a 12-month supply dispensed at one time. Congress has 30 days to review this bill.

Confidentiality and Consent for Minors and Young Adults

Prior to the ACA, young adults had the highest rates of uninsurance among all age groups.³¹  A provision of the law allows young adults to remain covered through their parents’ health insurance through age 26. While this expansion in coverage benefits young adults, young women and teens may face additional barriers to contraceptive services as a result. Confidentiality is a priority for teens and young adults. In a national survey, 71% of women 18 to 25 rated confidentiality about use of health care such as family planning or mental health services as “important.” Despite the importance of confidentiality, awareness of this practice was low among this age group, as only 37% of women knew that private insurers typically send an EOB to primary policy holders, often a parent. Awareness is even lower among teens ages 15 to 18, where only 24% reported knowing that EOBs were typically sent to the home.³²  Confidentiality also remains an issue for adult women who may be insured as a dependent through their spouse’s insurance Concerns over confidentiality may prompt some women to not use their private insurance to cover the cost of contraception and instead seek contraceptive services from publicly funded clinics, or forgo their preferred contraceptive methods.³³  This creates additional barriers for women seeking contraception, placing them at increased risk for unintended pregnancy.

Some states have enacted laws aimed at protecting confidentiality for women and girls insured as dependents but they are limited to plans that are regulated by the state (small and large group and individual plans and not self-funded plans).³⁴  In 2013 California passed a law, effective January 2015, requiring insurance companies to honor requests for confidential communications when individuals receive sensitive health care services, including contraception, or when disclosure could lead to danger. Similarly, in 2013, Washington amended regulations that prohibit insurers from disclosing EOBs to policyholders for all services for which minor patients may consent, unless the patient expressly authorizes disclosure. Colorado also amended regulations effective in 2014 to require insurers to protect the privacy of adult dependents, but not minors. Insurers in Colorado must communicate directly with the adult child or adult dependent so that protected health information is not sent to the policyholder in the form of an EOB without prior consent. Other states have developed other strategies to try to protect the privacy of dependents insured by a primary policyholder.

State laws regarding minors’ consent to contraceptive services pose another barrier.³⁵  Half the states (26 states and the District of Columbia) explicitly allow all minors ages 12 and older to consent to contraceptive services. An additional 20 states explicitly allow only certain categories of minors to consent to contraceptive services and 4 states have no relevant policy or case law. Private clinics and doctors need to abide by any state laws regarding parental notification or minor consent. However, federal Title X protections take precedence over state requirements for parental consent or notification, allowing minors to receive family planning services at Title X clinics without parental involvement.³⁶  So minors enrolled in plans that include Title X clinics in the network will be able to use their insurance and receive confidential services.

Access to Over the Counter Contraceptives without Doctor’s Prescription

The ACA only requires insurance plans to cover prescribed female contraceptives without cost-sharing and has no requirement for plans to cover over the counter methods including condoms, spermicide, and progestin-based emergency contraception (which is only covered with a prescription). Proposals to extend over the counter (OTC) status for oral contraceptives to expand women’s access to contraception, beyond progestin-based emergency contraceptive pills, have been gaining attention. FDA approval, however, is required to move more contraceptives over the counter, and members of Congress have introduced legislation addressing this issue.³⁷  One bill seeks to waive fees and give priority FDA review specifically for manufactures seeing over the counter status for oral contraceptives to women 18 and older. A different bill specifies that if the FDA approves oral contraceptive for OTC, the ACA would be amended to include insurance coverage with no cost-sharing for these pills.

In addition, there have been efforts at the state level to broaden access to hormonal contraceptive. In 2013, California passed a law that allows pharmacists to prescribe pills, vaginal ring, and the patch for women. While this law does not change the OTC status for contraceptives, it allows women to access some prescription contraceptives without a doctor visit and still receive insurance coverage free of cost-sharing for these contraceptives. The law is expected to be fully implemented by the end of 2015. Oregon passed a similar law in July 2015 which allows pharmacists to prescribe hormonal oral contraceptives and the patch.

Coverage of Contraception for Men

While the ACA requires private insurance plans to cover FDA-approved contraceptives as prescribed for women without cost-sharing, this requirement does not include methods used by men: vasectomy and male condoms.³⁸   Because the ACA provisions on contraceptive coverage only address services for women, tubal ligation and tubal implant are covered without cost-sharing, but there is no equivalent requirement to cover vasectomies without cost-sharing.  In their recommendations for the provision of high quality family planning service, the CDC and the Office of Population Affairs have clearly stated that offering women and men the full range of FDA-approved contraceptive methods is a critical element of high quality care and emphasize the importance of contraceptive choice in reducing couple’s risk of unintended pregnancy.³⁹  In addition, for many women, condoms or a vasectomy may be their preferred method. Over 22% of women report that male condoms were their primary contraceptive method and 9% of women report relying on their partner’s vasectomy.⁴⁰  (Figure 1) Furthermore, condoms are the only method that protect against STDs, including HIV. Federal or state legislation, or action by insurance plans to voluntarily expand coverage for men would be needed to address this gap.

Oversight

State regulators and the federal government have a role in the oversight of private plans including covered benefits, coverage appeals, and network adequacy.

Covered Benefits and Appeals

State regulators have the responsibility to oversee most private health insurance plans while the Department of Labor oversees self-funded plans. State regulators and the federal government can monitor contraceptive coverage as required by the ACA when reviewing plan documents for rate review. While most states have taken action to develop review processes that meet federal standards, CMS reviews plans in five states that have been determined not to have an adequate rate review process.⁴¹ 

At this time, this oversight does not appear to include review of the insurance carrier’s waiver process for the coverage of contraceptive methods that are not included in the plans formulary for no-cost coverage. Federal guidance requires plans to have a “waiver” process for patients who have a medical need for contraceptives otherwise subject to cost-sharing or not covered.⁴²  A KFF study found that none of the insurance carriers reviewed had established a formal process for policy holders to file a waiver contesting limitations on coverage for preventive services beyond their usual appeal process.⁴³  The use of the standard appeal process can create a time delay for women seeking timely contraceptive services which could increase women’s risk of unintended pregnancy. This is particularly problematic for women who need timely access to emergency contraceptives not covered under the policy.

Network Adequacy

Another important provision related to all preventive services including contraceptive services is network adequacy. The provider networks of the Marketplace plans determine where enrollees can seek medical care. Many states have laws to help ensure that networks are adequate to meet consumers’ needs.⁴⁴  The ACA also requires that consumers in Marketplace plans have a “sufficient choice of providers,” defined in the regulations as a right to networks that are sufficient in the “number and types of providers, including providers that specialize in mental health and substance abuse services, to assure all services will be accessible without unreasonable delay.” Narrow networks may make finding an available provider offering reproductive health services challenging for some women, especially if distance, time, and transportation barriers exist.

Marketplace plans must also include in their networks essential community providers (ECPs) that serve predominantly low-income, medically underserved individuals, including Title X clinics and Federally Qualified Health Centers. ECPs often provide services that are specifically developed to address the health needs of low income individuals, including language services, patient support services, coordination of health and social services, and location in a low-income community. As noted above, minors can receive family planning services without parental involvement at Title X clinics. For women, particularly low-income women and women of color, clinic-based providers, family planning clinics and health centers are important sources of reproductive and sexual health care. Over one-quarter (28%) of women enrolled in Medicaid and 43% of uninsured women reported they had their most recent gynecological visit at either a clinic or health center.⁴⁵  As many of these women gain insurance through Marketplace or employer-sponsored plans, community-based providers will continue to play an important role in reproductive health care.

It is unknown the extent to which state regulators and CMS are monitoring and enforcing federal and state network adequacy and ECP inclusion in Marketplace plans. As carriers are permitted to change networks during a plan year, the inclusion of ECPs in networks could change in the middle of a plan year. It is important to consider how federal and state oversight of the inclusion of ECPs can be ongoing and not just at the time of certification as a Qualified Health Plan.

Conclusion

The ACA has expanded contraceptive coverage without cost-sharing to millions of privately insured women across the nation. Ongoing consumer and provider education, continued oversight at the state and federal levels, and the resolution of the remaining legal challenges will determine how the ACA’s contraceptive coverage requirement is fully implemented.

1. U.S. Food and Drug Administration. (2015). HPV, HIV, Birth Control. ↩︎
2. Jones, RK. (2011). Beyond birth control: The overlooked benefits of oral contraceptive pills. Guttmacher Institute. ↩︎
3. Guttmacher Institute. (2010). Facts on Contraceptive Use in the United States. ↩︎
4. Ibid. ↩︎
5. Centers for Disease Control and Prevention. (2015). Health, United States, 2014. ↩︎
6. Kaiser Family Foundation. (2015). Intrauterine Devices ↩︎
7. Centers for Disease Control and Prevention. Effectiveness of Family Planning Methods. ↩︎
8. Daniels, K, Daugherty, J, & Jones, J. (2014). Current contraceptive status among women aged 15-44: United States, 2011-2013. National Center for Health Statistics, U.S. Department of Health and Human Services. ↩︎
9. Guttmacher Institute. (2015). Unintended Pregnancy in the United States. ↩︎
10. Liang, SY, Grossman, D, & Phillips, KA. (2011). Women’s out-of-pocket expenditures and dispensing patterns for oral contraceptive pills between 1996 and 2006. Contraception 83. ↩︎
11. U.S. Equal Employment Opportunity Commission. December 14, 2000. Decision- Contraception. ↩︎
12. Guttmacher Institute. (2015). State Policies in Brief: Insurance Coverage of Contraceptives. ↩︎
13. Kaiser Family Foundation and Health Research Educational Trust, 2014 Employer Health Benefits Survey. ↩︎
14. Kaiser Family Foundation. (2010). 2010 Employer Health Benefits Survey. ↩︎
15. U.S. Food and Drug Administration. (2015). Birth Control Guide. ↩︎
16. Cox C, Damico A, Claxton G, & Levitt L. Examining high prescription drug spending for people with employer sponsored health insurance. Kaiser Family Foundation. October 2016. ↩︎
17. Grandfathered plans are those that were in existence on March 23, 2010 and have stayed basically the same. If you buy coverage on your own and you first purchased your policy prior to March 23, 2010, it may be a grandfathered plan. See Kaiser Family Foundation, Health Reform FAQs, “What is a grandfathered plan? How do I know if I have one?” ↩︎
18. Plans are not required to provide no-cost contraceptive services and supplies to policyholders using out-of-network providers unless there are no available in-network providers able to provide the medical treatment. ↩︎
19. 45 CFR § 147.130(a)(4). ↩︎
20. Kaiser Family Foundation. (2015). Coverage of Contraceptive Services: A Review of Health Insurance Plans in Five States. ↩︎
21. Ibid. ↩︎
22. Centers for Medicare and Medicaid Services. (2015). FAQs about the Affordable Care Act Implementation (Part XXVI). ↩︎
23. Kaiser Family Foundation, Health Research and Educational Trust. (2014). Employer Health Benefits 2014 Annual Survey. ↩︎
24. The Administration defines closely held corporation as an entity that 1) is not a nonprofit, 2) has no publicly traded ownership interests, and 3) has more than 50 percent of the value of its ownership interest owned directly or indirectly by five or fewer individuals. 45 CFR §147.131 (b)(4) ↩︎
25. To be eligible for an accommodation, for-profit closely held corporations must adopt a resolution establishing that the corporation objects to some or all contraceptive services on account of the owners’ sincerely held religious beliefs. 45 CFR §147.131 (b)(2)(ii) ↩︎
26. Supreme Court of the United States, per curium opinion, Zubik v. Burwell, May 16, 2016, page 4, ↩︎
27. ASPE. (2015). Data Point: The Affordable Care Act is Improving Access to Preventive Services for Millions of Americans. ↩︎
28. Kaiser Family Foundation. (2014). Kaiser Health Tracking Poll. ↩︎
29. Kaiser Family Foundation. (2015). Coverage of Contraceptive Services: A Review of Health Insurance Plans in Five States. ↩︎
30. Oregon Legislative Assembly, 2015 Regular Session, HB3343- Relating to Contraceptives. ↩︎
31. Goldman, TR. (2013). Young Adults and the Affordable Care Act. Health Affairs Health Policy Briefs. ↩︎
32. Kaiser Family Foundation analysis of the 2013 Kaiser Women’s Health Survey. ↩︎
33. Frost JJ, Gold RB and Bucek A. (2012). Specialized family planning clinics in the United States: why women choose them and their role in meeting women’s health care needs. Women’s Health Issues 22(6): e519–e525. ↩︎
34. Confidentiality, Third-Party Billing, & the Health Insurance Claims Process: Implications for Title X http://www.confidentialandcovered.com/file/ConfidentialandCovered_WhitePaper.pdf ↩︎
35. Guttmacher Institute. (2015). An Overview of Minors’ Consent Law. State Policies in Brief. ↩︎
36. English, A. (2014). Adolescent Confidentiality Protections in Title X. Center for Adolescent Health & the Law, and National Family Planning & Reproductive Health Association. ↩︎
37. See S.1438 – Allowing Greater Access to Safe and Effective Contraception Act; Affordability Is Access Act (AAA) ↩︎
38. Sonfield, Adam, Rounding Out the Contraceptive Coverage Guarantee: Why ‘Male’ Contraceptive Methods Matter for Everyone, Guttmacher Policy Review, Spring 2015, Vol.18 No.2 ↩︎
39. Gavin L et al., 2014. Providing Quality Family Planning Services: Recommendations of CDC and the U.S. Office of Population Affairs, Morbidity and Mortality Weekly Report. 63(RR04); 1-29. ↩︎
40. Centers for Disease Control and Prevention. (2015). Health, United States, 2014. ↩︎
41. Centers for Medicare and Medicaid Services, Center for Consumer Information & Insurance Oversight, State Effective Rate Review Programs. ↩︎
42. Centers for Medicare and Medicaid Services. (2015). FAQs about the Affordable Care Act Implementation (Part XXVI). ↩︎
43. Kaiser Family Foundation. (2015). Coverage of Contraceptive Services: A Review of Health Insurance Plans in Five States. ↩︎
44. National Conference of State Legislators. (2014). Insurance Carriers and Access to Healthcare Providers; Network Adequacy. ↩︎
45. Kaiser Family Foundation. (2014). Women and Health Care in the Early Years of the ACA: Key Findings from the 2013 Kaiser Women’s Health Survey. ↩︎

As discussion about repeal of the Affordable Care Act (ACA) unfolds, questions emerge about how a repeal may affect Medicaid. The specific effects would depend on many factors that are currently unknown, including whether there is a replacement for the ACA, what happens to federal Medicaid expansion funding, and whether broader changes to the underlying financing structure of the Medicaid program are made. While it is difficult to quantify the specific effects of a repeal given these unknowns, this issue brief examines the changes in coverage and financing that have occurred under the Medicaid expansion to provide insight into the potential scope of coverage and funding that may be at risk under a repeal. It finds:

• In 2015, an estimated 11 million enrollees were adults made newly eligible by the expansion who could be at risk for losing Medicaid coverage. However, the scope of coverage losses among this group would depend on the specifics of the repeal and any replacement plan as well as actions by individual states. The Medicaid expansion made many parents and other adults newly eligible for the program, as there was no option for states to cover most adults without children through Medicaid before the expansion. This eligibility expansion, along with outreach and enrollment efforts associated with the ACA, led to large increases in Medicaid enrollment. Between Summer 2013, just prior to the ACA, and September 2016, there was a net increase in Medicaid and CHIP enrollment of 15.7 million people. In 2015, an estimated 11 million Medicaid enrollees were adults made newly eligible by the expansion. This number has likely continued to grow since 2015 as enrollment has continued to increase and additional states have expanded, including Louisiana and Montana.
• Loss of Medicaid coverage could reverse the progress in reducing the uninsured. The Medicaid enrollment gains contributed to a fall in the uninsured rate among nonelderly individuals, which declined from 16.6% in 2013 to a historic low of 10% in 2016.
• As a result of the enhanced federal funding for expansion, expansion states have received $79 billion in federal funding from January 2014 through June 2015. The ACA Medicaid expansion provides enhanced federal funding for newly eligible adults with no or little state matching dollars. Alaska, Louisiana and Montana, had not claimed spending for the expansion group during this period.

Why did the ACA Expand Medicaid?

The ACA’s coverage provisions built on and attempted to fill gaps in an insurance system that left many without affordable coverage. This system had built up over time and included employer-based coverage for many—but not all—workers and their families, Medicaid coverage for certain categories of low-income people, directly-purchased coverage for a small number of people who bought policies on the non-group market, and Medicare for most people over age 65 as well as some younger people with disabilities. Under this system, many were ineligible for coverage or could not afford coverage that was available. In 2013, 44 million nonelderly people were uninsured. The majority who lacked coverage were poor and low-income adults (28% of the non-elderly uninsured had incomes below poverty and 62% had incomes below 200% of poverty in 2013). The main reason that most people said they lacked coverage was cost.¹ 

The ACA Medicaid expansion was designed to fill gaps in coverage for low-income adults. Prior to the ACA, Medicaid eligibility for adults was very limited resulting in large numbers of uninsured poor adults. Income eligibility limits for parents were very low in most states, often below half the poverty level, and other non-disabled adults generally were not eligible regardless of their income. The ACA expanded Medicaid eligibility for parents and other adults to 138% FPL (about $16,000 for an individual or $28,000 for a family of three). Through this expansion and other changes, the ACA intended to establish a national minimum eligibility threshold in Medicaid of 138% FPL for nearly all individuals under age 65, making Medicaid the base of coverage for low-income people within the ACA’s broader coverage system. As enacted, this expansion was to occur nationwide beginning in January 2014. However, a 2012 Supreme Court ruling effectively made the expansion a state option.

In designing the ACA, expanding Medicaid was determined to be the most efficient and cost effective way to extend coverage to very poor adults. Medicaid had an existing role for the low-income population, and was already an operating program that could be extended rather than newly developed. Medicaid programs had experience providing coverage with low cost-sharing and comprehensive benefits suitable for a very low-income population. In addition, per capita spending in Medicaid is lower compared to private insurers after adjusting for the greater health needs of Medicaid enrollees.² 

What Coverage is at Risk Under a Repeal of the Medicaid Expansion?

Under a repeal, many low-income parents and other adults could potentially lose eligibility for Medicaid. As of December 2016, 32 states including the District of Columbia implemented the ACA Medicaid expansion to adults. By January 2017, half (16) of the expansion states will have a Republican governor (Figure 1). Prior to the Medicaid expansion most states limited Medicaid eligibility for parents to less than the poverty level, and there was no option available to states within to cover other non-disabled adults within Medicaid (Appendix Table 1). As such, in expansion states, median eligibility increased from 91% to 138% FPL for parents ($27,821 for a family of three) and from 0% to 138% FPL for other adults ($16, 394 for an individual) (Figure 2 and Appendix Table 1 for state by state eligibility levels). In contrast, in non-expansion states, median eligibility for parents remains below half the poverty level and at 0% FPL for other adults.³  What would happen to eligibility levels would depend on the specifics of changes to federal eligibility rules under a repeal, including whether states would still have an option to cover adults, as well as other state choices. If states returned to their pre-ACA 2013 eligibility levels or lower, many parents and other adults would lose Medicaid eligibility in expansion states.

Decreases in eligibility would lead to declines in Medicaid enrollment, particularly in expansion states. Since the ACA coverage expansions were implemented starting in 2014 through September 2016, net Medicaid and CHIP enrollment has increased by 15.7 million, or 28% with the majority of growth occurring in expansion states. This growth included enrollment of newly eligible adults as well as children and adults who were previously eligible but not enrolled. Most growth was in large states in the West that expanded Medicaid (Figure 3). States that expanded Medicaid had over three times greater enrollment growth compared to non-expansion states (36% vs. 12%), although there was variation across states. If parents and adults were to lose eligibility for Medicaid, there would be declines in Medicaid enrollment, and most of these declines would likely be in areas that experienced the largest growth under expansion.

About 11 million Medicaid enrollees who were made newly eligible by the ACA Medicaid expansion would be at risk for losing Medicaid coverage if states no longer have an option to extend Medicaid eligibility to low-income adults and if federal enhanced financing is withdrawn under a repeal. The majority (82%) of Medicaid enrollees are eligible through pathways that existed prior to the ACA (e.g. children, pregnant women, elderly and individuals with disabilities). In addition, a small share of enrollees in the expansion group were eligible for Medicaid through pre-ACA expansions to adults.⁴  However, in 2015, about 11 million enrollees were adults in the expansion group who were made newly eligible by the ACA Medicaid expansion, accounting for 14% of all Medicaid enrollees (Figure 4 and Appendix Table 2 for state by state enrollment). Since 2015, this number has likely grown as enrollment has continued to increase and additional states have expanded, including Louisiana and Montana. Moreover, as of January 2016, an estimated 6.4 million adults were eligible for Medicaid but not enrolled, which include many newly eligible adults.⁵ 

Uninsured rates could rise due to losses in Medicaid coverage, but, the extent of such losses would depend on what other coverage options may be available. Medicaid enrollment gains have played a significant role in decreasing the uninsured rate. Since implementation of the ACA, the uninsured rate among the nonelderly has fallen from 16.6% to a historic low of 10% in early 2016.⁶  Over 17 million more people have health coverage in 2016 compared to 2013, as the number of nonelderly uninsured dropped from 44 million to 27 million. Because the ACA coverage expansions mostly target adults, who have historically had higher uninsured rates than children, nearly the entire decline in the number of uninsured people has occurred among adults. Moreover, the decline in the uninsured rate for adults was larger among Medicaid expansion states compared to non-expansion states (Figure 5).

What Financing is at Risk Under a Repeal of the Medicaid Expansion?

The law provided enhanced federal funding for states to implement the Medicaid expansion. Under current law, Medicaid provides a guarantee to states for federal matching payments. The federal share of Medicaid is determined by a formula set in statute that is based on a state’s per capita income. The formula is designed so that the federal government pays a larger share of program costs in poorer states. The federal share (FMAP) varies by state from a floor of 50% to a high of 74% in 2016, and states may receive higher FMAPs for certain services or populations. The ACA provided states 100% federal funding for the costs of adults made newly eligible under the Medicaid expansion from 2014-2016 with the federal share phasing down to 95% in 2017 and to 90% by 2020 and beyond.

Under a repeal, states could potentially lose access to the enhanced federal funding made available for the Medicaid expansion. From January 2014 through June 2015, spending for the new adult group was $84 billion for the expansion group, accounting for about 12% of total Medicaid spending across all states over the period (Figure 6 and Appendix Table 3 for state by state spending). Nearly all expenditures for the new adult group ($79 billion out of $84 billion) were paid for with federal funds, reflecting the enhanced federal match for newly eligible adults.⁷  In contrast, federal funds comprised 58% of the costs for the traditional Medicaid population over the same period. Some states that implemented the expansion after January 2014, including Alaska, Louisiana and Montana, had not claimed spending for the expansion group during the data collection period.

Broader economic gains states have realized as a result of the Medicaid expansion could be affected. National, multi-state, and single-state studies show that states expanding Medicaid under the ACA have realized budget savings, revenue gains, and overall economic growth despite Medicaid enrollment growth initially exceeding projections in many states.⁸  Studies show that states have achieved net positive economic impacts from increased employment; increased revenues to hospitals, physicians, and other providers; decreases in uncompensated care; and savings in other states programs, such as state-funded behavioral health or corrections.

Conclusion

As a new Administration and Congress debate a repeal of the ACA, it is important context to note that many Americans have favorable opinions of many individual provisions in the ACA with 8 in 10 (and two-thirds of Trump voters) who have a favorable opinion of giving states the option of expanding their existing Medicaid program to cover more low-income uninsured.⁹  Thirty-two states have implemented the Medicaid expansion, and as of January 2017, 16 of these states will have Republican governors. While it is difficult to quantify the specific effects of a repeal of the ACA Medicaid expansion given the many uncertainties that remain at this time, examining the changes in coverage and financing that have occurred under the Medicaid expansion provides insight into the potential scope of coverage and funding that may be at risk under a repeal. Experience to date suggests that under a repeal of the Medicaid expansion, many low-income parents and other adults would be at risk for potentially losing eligibility for Medicaid, which might contribute to increases in the number of uninsured, depending on what coverage options are available under a repeal. Moreover, states could lose access to the enhanced federal funding made available for newly eligible adults under the Medicaid expansion and face increased costs associated with rises in uncompensated care and spending in state programs for the uninsured.

1. Rachel Garfield, Melissa Majerol, Anthony Damico, and Julia Foutz, The Uninsured: A Primer – Key Facts about Health Insurance and the Uninsured in the Wake of National Health Reform (Washington, DC:  Kaiser Commission on Medicaid and the Uninsured, November, 2016), https://modern.kff.org/uninsured/report/the-uninsured-a-primer-key-facts-about-health-insurance-and-the-uninsured-in-the-wake-of-national-health-reform/ ↩︎
2. Lisa Clemans-Cope, Urban Institute, John Holahan, and Rachel Garfield, Medicaid Spending Growth Compared to Other Payers: A Look at the Evidence (Washington, DC:  Kaiser Commission on Medicaid and the Uninsured, April, 2016), https://modern.kff.org/medicaid/issue-brief/medicaid-spending-growth-compared-to-other-payers-a-look-at-the-evidence/ ↩︎
3. Changes between 2013 and 2016 reflect the conversion to use of Modified Adjusted Gross Income to determine financial eligibility under the ACA. In addition, a number of non-expansion states tie parent eligibility to a dollar value that does not regularly adjust. As such, its value as a percent of the FPL erodes over time as the FPL increases each year. ↩︎
4. California data from “Medi-Cal Monthly Enrollment Fast Facts, June 2016,” California Department of Health Care Services, http://www.dhcs.ca.gov/dataandstats/statistics/Documents/Fast_Facts_June_2016_ADA.pdf. All ACA expansion adults are included as newly eligible in KCMU analysis. ↩︎
5. Rachel Garfield, Anthony Damico, Cynthia Cox, Gary Claxton, and Larry Levitt, Estimates of Eligibility for ACA Coverage among the Uninsured in 2016. (Kaiser Family Foundation, October, 2016), https://modern.kff.org/uninsured/issue-brief/estimates-of-eligibility-for-aca-coverage-among-the-uninsured-in-2016/ ↩︎
6. Robin A. Cohen, Ph.D., Michael E. Martinez, M.P.H., M.H.S.A., and Emily P. Zammitti, M.P.H., Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–March 2016 (National Health Interview Survey Early Release Program, September 2016), http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201609.pdf ↩︎
7. In some states that had expanded coverage to adults prior to the ACA, the new adult group includes some adults that were previously eligible through these pre-ACA expansions.  These adults may be matched at a rate lower than the 100% rate for 2014-2016. ↩︎
8. Larisa Antonisse, Rachel Garfield, Robin Rudowitz, and Samantha Artiga, The Effects of Medicaid Expansion under the ACA: Findings from a Literature Review, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, June 2016), https://modern.kff.org/medicaid/issue-brief/the-effects-of-medicaid-expansion-under-the-aca-findings-from-a-literature-review/. ↩︎
9. Ashley Kirzinger, Elise Sugarman, and Mollyann Brodie, Kaiser Health Tracking Poll: November 2016, (Kaiser Family Foundation, December, 2016), https://modern.kff.org/health-reform/poll-finding/kaiser-health-tracking-poll-november-2016/ ↩︎

KEY FINDINGS:

• The November Kaiser Health Tracking Poll, conducted one week after the 2016 presidential election, finds health care played a limited role in voters’ 2016 election decisions, with larger shares of voters saying the biggest factor in their vote was the direction of the country (31 percent), Donald Trump’s personal characteristics (15 percent), jobs and the economy (15 percent), or Hillary Clinton’s personal characteristics (12 percent), than who say the same about health care (8 percent).
• While health care was not a leading factor in voters’ presidential decisions, President-elect Trump and Republican lawmakers have made it clear that one of their top priorities is the repeal of the 2010 health care law. Americans are divided on what they want to see lawmakers do to the ACA with one-fourth of Americans (26 percent) wanting to see President-elect Donald Trump and the next Congress repeal the entire law while an additional 17 percent want them to scale back what the law does. This is compared to 30 percent of the public who want to see the law expanded and 19 percent who want to see lawmakers move forward with implementing the law as it is. Among Trump voters, 50 percent want to see the law repealed and 29 percent want to see it scaled back.
• While President-elect Trump and Republican members of Congress work on a replacement to the ACA, this month’s survey finds that many of the law’s major provisions continue to be quite popular, even across party lines. The notable exception is the requirement that nearly all Americans have health insurance or else pay a fine.
• Among Trump voters, 52 percent say the cost of their health care will get better, 39 percent say the quality of their health care will get better, and 35 percent say their ability to get and keep health insurance will get better if the 2010 health care law is repealed. In general, the majority of Trump voters say President-elect Trump’s health care policies will be good for the country as a whole (71 percent) and good for them and their families (59 percent).

Health Care in the 2016 Election

Many factors were important to voters’ choices in the 2016 presidential election, with over two-thirds of voters stating that the direction the country is headed (82 percent), jobs and economy (75 percent), and health care (68 percent) were a “major factor” in their vote. Majorities also cite foreign policy (63 percent), terrorism (61 percent), immigration (58 percent), and candidates’ personal characteristics (56 percent for Clinton’s and 54 percent for Trump’s) as “major factors.” When voters are asked to select the “biggest factor” in their vote for president, the direction of the country (31 percent), Donald Trump’s personal characteristics (15 percent), jobs and the economy (15 percent), and Hillary Clinton’s personal characteristics (12 percent) rank above health care (8 percent).

Biggest Factor for Trump Voters and Clinton Voters

Among voters who supported Republican nominee Donald Trump, four in ten (38 percent) say the direction the country is headed was the “biggest factor” in their vote while about one-third of Clinton voters say Trump’s personal characteristics was the “biggest factor.” For both Trump and Clinton voters, it appears health care is a second-tier issue, with about one in ten saying it was the “biggest factor” (7 percent and 10 percent, respectively).

President-elect Trump and Health Care

While health care was not a leading factor in voters’ decisions in the 2016 presidential election, President-elect Trump and Republican lawmakers in Congress have said they would like to move quickly in 2017 on several health care issues – including most notably, the repeal and replacement of the Affordable Care Act.

The November survey, conducted after the 2016 election, finds overall public opinion towards the 2010 health care law is stable from previous months, with similar shares of the public saying they have an unfavorable opinion (45 percent) as say they have a favorable opinion (43 percent) of the law.

Repealing the Affordable Care Act

During the past six years, Republican lawmakers in Congress have voted to repeal parts or all of the 2010 health care law more than fifty times¹ , only to have efforts blocked by either Democrats or President Obama. Now, with Republicans controlling both the executive branch and Congress, lawmakers have reaffirmed their commitment to repealing the Affordable Care Act. One-fourth (26 percent) of Americans want to see President-elect Trump and Congress repeal the entire law, and an additional 17 percent want them to scale back what the law does. This is compared to 30 percent of the public who want to see the law expanded and 19 percent who want to see lawmakers move forward with implementing the law as it is.

Vast Majority of Trump Voters Have Unfavorable Views of ACA, Half Want Law Repealed

Focusing specifically on voters who supported Republican nominee Donald Trump, the majority have an unfavorable view of the health care law with 63 percent having a “very unfavorable” opinion and an additional 18 percent having a “somewhat unfavorable” opinion. This is compared to 79 percent of Clinton voters who have a favorable view of the law (40 percent have a “very favorable” and 39 percent have a “somewhat favorable” view).

In addition, half of Trump voters want to see the law repealed, three in ten (29 percent) want President-elect Trump and the next Congress to scale back what the law does, 5 percent want lawmakers to move forward with implementing the law as it is, and one in ten want them to expand what the law does.

Republicans May Be Shifting Attitudes on ACA from Repeal to Scale Back

The November Kaiser Health Tracking Poll finds a slight uptick in the share of Americans who want lawmakers to scale back the law (17 percent compared to 9 percent last month) as well as a decrease in the share who want lawmakers to repeal the entire law (26 percent compared to 32 percent in October).

The shift in attitudes is largely driven by Republicans, with about half (52 percent) of Republicans saying they want the ACA to be repealed this month, down from 69 percent in October. At the same time, there was a corresponding increase in the share of Republicans who want lawmakers to scale back what the law does, from 11 percent to 24 percent.

Republican-Sponsored Alternative to the ACA

Republican members of Congress, including House Speaker Paul Ryan, have suggested alternative health reform plans to the ACA. Among those who want to see the ACA repealed (26 percent of total population), 31 percent want to see the health care law just repealed and not replaced. Two-thirds want lawmakers to repeal the health care law and replace it with a Republican-sponsored alternative, including 42 percent who want lawmakers to wait to repeal until the details of a replacement plan have been figured out and 21 percent who want them to repeal the law immediately and figure out a replacement plan later.

These results are similar among Trump voters who want lawmakers to repeal the law, with about two-thirds wanting lawmakers to repeal the health care law and replace it with a Republican-sponsored alternative.

Among Those Who Want to See ACA Expanded or Repealed, Some Attitudes Are Malleable

Among Americans who have the most polarized attitudes towards the ACA – those who want to see it expanded or repealed – some attitudes can be swayed after hearing arguments for or against repeal or expansion of the law. Among those who want to see the ACA repealed, 38 percent (meaning 10 percent of the public overall) change their opinion after hearing the argument made by proponents that repealing the ACA would mean that insurance companies would be able to deny coverage to people with pre-existing conditions. A slightly smaller share (19 percent of those who wanted to see the law repealed, 5 percent, overall) change their opinion after hearing that more than 20 million Americans who have gotten health insurance through the health care law could lose their coverage if the law was repealed. Trump voters react similarly, with a larger share changing their opinion after hearing that repealing the ACA would mean that insurance companies would be able to deny coverage to people with pre-existing conditions (27 percent) than changing their opinion after hearing that more than 20 million Americans could lose their coverage (8 percent).

On the other hand, among those who want to see the ACA expanded, one-fifth change their opinion after hearing that federal health care spending in the U.S. would increase if the law was expanded (6 percent, overall).

Americans Have Favorable Attitudes towards Some ACA Provisions

While President-elect Trump and Republican members of Congress make efforts to repeal the ACA, many of the law’s major provisions continue to be quite popular, even across party lines.

For example, large shares of Americans – including at least eight in ten overall and at least eight in ten Democrats, Republicans, and independents – have a favorable view of the fact that the law allows young adults to stay on their parents’ insurance plans up to age 26.

In addition, at least seven in ten Democrats, Republicans, and independents have a favorable view of the provisions that eliminate out-of-pocket costs for preventive services and create health insurance exchanges or marketplaces where small businesses and people who don’t get coverage through their employers can shop for insurance and compare prices and benefits.

Other provisions of the ACA including those that close the Medicare “doughnut hole” for prescription drug coverage, provide financial help to low- and moderate-income Americans to help them purchase coverage, and give states the option of expanding Medicaid are favored by the vast majority of Democrats and independents, and at least six in ten Republicans. Fewer, but still a majority of Democrats, Republicans, and independents, favor the fact that the law prohibits insurance companies from denying coverage based on pre-existing conditions and establishes the Medicare payroll tax on earnings for upper-income Americans.

The provision that requires employers with 50 or more employees pay a fine if they do not offer health insurance to their employees is favored by a majority of Democrats and independents (83 percent and 60 percent, respectively) but by fewer than half of Republicans (45 percent). The glaring exception to the popularity of individual provisions of the law is the requirement that nearly all Americans have health insurance or pay a fine, which is viewed unfavorably by about two-thirds of the public.

Majority of Trump Voters Have Favorable Attitudes Towards Many ACA Provisions

Many of the ACA’s major provisions are also quite popular among Trump voters, with more than seven in ten having favorable attitudes towards the provisions that allow young adults to stay on their parents’ insurance plans up to age 26 and eliminate out-of-pockets costs for preventive services. In addition, at least two-thirds of Trump voters also favor the fact that the law creates health insurance exchanges or marketplaces where small businesses and people who don’t get coverage through their employers can shop for insurance and compare prices and benefit (72 percent), closes the Medicare prescription drug coverage gap (71 percent), provides financial help to low- and moderate-income Americans to buy health insurance (68 percent), and gives states the option of expanding Medicaid to cover more low-income, uninsured adults (66 percent).

Perceived Impact of Health Care Changes on Americans

Most Say Changes to Health Care Law Will Not Impact Them, But Some Concern For How Trump’s Health Care Policies Could Affect At-Risk Populations

When asked how a repeal of the 2010 health care law would affect the quality of and access to health care, most Americans say the quality of their own health care as well as their own ability to get and keep health insurance would stay about the same (57 percent and 55 percent, respectively). Americans are more divided on how a repeal of the ACA would affect health care costs for them and their family with 30 percent saying the cost of their health care would get worse, 27 percent saying it would get better, and 40 percent saying it would stay about the same.

Among Trump voters, 52 percent say the cost of their health care will get better, 39 percent say the quality of their health care will get better, and 35 percent say their ability to get and keep health insurance will get better if the 2010 health care law is repealed.

Some Concern That President-elect Trump’s Health Care Policies Will be Bad for Women, Uninsured, and Lower-Income Americans

A large share of Americans do not think that President-elect Trump’s health care policies will make much of a difference to many groups (wealthy Americans, men, and them and their family). The public is less positive about how other groups – including the uninsured, lower-income Americans, and women – will fare. About four in ten Americans think President-elect Trump’s health care policies will be “bad” for the uninsured (43 percent), lower-income Americans (43 percent), and women (36 percent). Attitudes are more split on how individuals with a pre-existing condition, seniors, middle-class Americans, and the country as a whole will fare, with similar shares saying Trump’s health care policies will be good, bad, or not make much of a difference to these groups.

The majority of Trump voters say President-elect Trump’s health care policies will be good for the country as a whole (71 percent) and good for them and their families (59 percent). This is compared to 7 percent of Clinton voters who say his health care policies will be good for the country as a whole and 5 percent who say his policies will be good for them and their families.

Kaiser Health Policy News Index: November 2016

The November Kaiser Health Tracking Poll finds the Republican nominee Donald Trump’s election as the 45^th president of the United States dominated the public’s attention during the past month with eight in ten Americans (82 percent) closely following news about his presidential campaign win. Other stories that captured the attention of Americans include the conflict involving ISIS in Mosul, Iraq (71 percent) and the top health policy story this month – Republican plans to repeal the ACA (70 percent). Fewer Americans report following three additional health policy stories: news about rising prescription drug costs (59 percent), reports about rising ACA health insurance premiums (55 percent), and the ACA’s fourth open enrollment period (45 percent).

This Kaiser Health Tracking Poll was designed and analyzed by public opinion researchers at the Kaiser Family Foundation (KFF). The survey was conducted November 15-21, 2016, among a nationally representative random digit dial telephone sample of 1,202 adults ages 18 and older, living in the United States, including Alaska and Hawaii (note: persons without a telephone could not be included in the random selection process). Computer-assisted telephone interviews conducted by landline (422) and cell phone (780, including 467 who had no landline telephone) were carried out in English and Spanish by Princeton Data Source under the direction of Princeton Survey Research Associates International (PSRAI). Both the random digit dial landline and cell phone samples were provided by Survey Sampling International, LLC. For the landline sample, respondents were selected by asking for the youngest adult male or female currently at home based on a random rotation. If no one of that gender was available, interviewers asked to speak with the youngest adult of the opposite gender. For the cell phone sample, interviews were conducted with the adult who answered the phone. KFF paid for all costs associated with the survey.

The combined landline and cell phone sample was weighted to balance the sample demographics to match estimates for the national population using data from the Census Bureau’s 2014 American Community Survey (ACS) on sex, age, education, race, Hispanic origin, and region along with data from the 2010 Census on population density. The sample was also weighted to match current patterns of telephone use using data from the July-December 2015 National Health Interview Survey. The weight takes into account the fact that respondents with both a landline and cell phone have a higher probability of selection in the combined sample and also adjusts for the household size for the landline sample. All statistical tests of significance account for the effect of weighting.

The margin of sampling error including the design effect for the full sample is plus or minus 3 percentage points. Numbers of respondents and margins of sampling error for key subgroups are shown in the table below. For results based on other subgroups, the margin of sampling error may be higher. Sample sizes and margins of sampling error for other subgroups are available by request. Note that sampling error is only one of many potential sources of error in this or any other public opinion poll. Kaiser Family Foundation public opinion and survey research is a charter member of the Transparency Initiative of the American Association for Public Opinion Research.

1. USA Today, Obama vetoes GOP attempt to repeal Obamacare, January 2016. http://www.usatoday.com/story/news/politics/2016/01/08/obama-vetoes-gop-attempt-repeal-obamacare/78506800/     ↩︎

Under current law, Medicare has several financial protections in place that are designed to safeguard Medicare beneficiaries—seniors and people with permanent disabilities—from unexpected and confusing charges when they seek care from doctors and other practitioners.  These protections include the participating provider program, limitations on balance billing, and conditions on private contracting.  This issue brief describes these three protections, explains why they were enacted, and examines the implications of modifying them for beneficiaries, providers, and the Medicare program.

Main Findings

• The participating provider program was enacted in 1984 for two purposes: (1) to assist Medicare patients with identifying and choosing providers who charge Medicare-approved rates; and (2) to encourage providers to accept these rates. Given this program’s strong provider incentives, the number of participating providers grew rapidly across all states and today, the vast majority (96%) of eligible physicians and practitioners are “participating providers”—agreeing to charge Medicare’s standard fees when they see beneficiaries.
• The Congress instituted limitations on balance billing in 1989, in conjunction with implementation of the Medicare physician fee schedule. This financial protection limits the amount that “non-participating” providers may charge beneficiaries through balance billing—whereby beneficiaries are responsible for the portion of the provider’s charge that exceeds Medicare’s fee-schedule rate. Total out-of-pocket liability from balance billing has declined significantly over the past few decades dropping from $2.5 billion in 1983 ($5.65 billion in 2011 dollars) to $40 million in 2011.
• In 1997, the Congress codified several conditions for private contracting that apply to physicians and practitioners who “opt out” of Medicare and see beneficiaries only under individual private contracts. These restrictions were instituted to ensure that beneficiaries are aware of the financial ramifications of entering into these private contracts, and to safeguard patients and Medicare from fraud and abuse.  In general, private contracting is relatively rare with only 1 percent of practicing physicians opting out of Medicare.

Background: Current Provider Options for Charging Medicare Patients

Under current law, physicians and practitioners have three options for how they will charge their patients in traditional Medicare.  They may register with Medicare as (1) a participating provider, (2) a non-participating provider, or (3) an opt-out provider who privately contracts with each of his or her Medicare patients for payment (Figure 1).  This issue brief describes these three options and then examines three current provisions in Medicare that provide financial protections for Medicare beneficiaries.

Participating providers:  Physicians and practitioners who register with Medicare as participating providers agree to “accept assignment” for all of their Medicare patients. Accepting assignment entails two conditions: agreeing to accept Medicare’s fee-schedule amount as payment-in-full for a given service and collecting Medicare’s portion directly from Medicare, rather than the patient. Therefore, when Medicare patients see participating providers, they can be certain that these providers will not charge fees higher than Medicare’s published fee-schedule amount and that they will not face higher out-of-pocket liability than the maximum 20-percent coinsurance for most services. The vast majority (96%) of providers who provide Medicare-covered services are participating providers.

Non-participating providers:  Non-participating providers do not agree to accept assignment for all of their Medicare patients; instead they may choose—on a service-by-service basis—to charge Medicare patients higher fees, up to a certain limit. When doing so, their Medicare patients are liable for higher cost sharing to cover the higher charges. This arrangement is called “balance billing” and means that the Medicare patient is financially responsible for the portion of the provider’s charge that is in excess of Medicare’s assigned rate, in addition to standard applicable coinsurance and deductibles for Medicare services.  When non-participating providers do not accept assignment, they may not collect reimbursement from Medicare; rather, they bill the Medicare patient directly, typically up front at the time of service. Non-participating providers must submit claims to Medicare on behalf of their Medicare patients, but Medicare reimburses the patient, rather than the nonparticipating provider, for its portion of the covered charges.  A small share (4%) of providers who provide Medicare-covered services are non-participating providers.

Opt-out providers, privately contracting:  Physicians and practitioners who choose to enter into private contracts with their Medicare patients “opt-out” of the Medicare program entirely. These opt-out providers may charge Medicare patients any fee they choose. Medicare does not provide any reimbursement—either to the provider or the Medicare patient—for services provided by these providers under private contracts. Accordingly, Medicare patients are liable for the entire cost of any services they receive from physicians and practitioners who have opted out of Medicare. Several protections are in place to ensure that patients are clearly aware of their financial liabilities when seeing a provider under a private contract.  An extremely small portion of physicians (less than 1% of physicians in clinical practice) have chosen to “opt-out” of the Medicare program, of whom 42 percent are psychiatrists.

These provider options have direct implications on the charges and out-of-pocket liabilities that beneficiaries face when they receive physician services (Figure 2).  They also play a major role in several financial protections in current law—namely, the physician participation program, limitations on balance billing, and conditions for private contracting—which help beneficiaries understand the financial implications of their provider choices and encourage providers to accept Medicare’s standard fees.

Medicare’s Participating Provider Program

Medicare’s participating provider program includes several incentives (both financial and nonfinancial) to encourage physicians and practitioners to “accept assignment” for all of their Medicare patients.  When providers accept assignment, they agree to accept Medicare’s fee-schedule amount as payment-in-full for a given service and are allowed to bill Medicare directly for its portion of the reimbursement.  Physicians and practitioners who agree to accept assignment on all services that they provide to Medicare patients are “participating providers” and are listed in Medicare provider directories.  Beneficiaries who select a participating provider are assured that, after meeting the deductible, their coinsurance liability will not exceed 20 percent of the charge for the services they receive (Figure 2).

Congress established the participating provider program in the 1984 Deficit Reduction Act (DEFRA) to address two main concerns: confusion among beneficiaries about the fees they were being charged when they saw a doctor and escalating rates of balance billing from charges that exceeded Medicare’s established “usual, customary, and reasonable” rates for their area.¹  At that time, aside from Medicaid-eligible beneficiaries, Medicare had no limits on the amount that physicians and practitioners could balance bill for their services. Surveys conducted by the Physician Payment Review Commission (PPRC), a congressional advisory body and predecessor of the Medicare Payment Advisory Commission (MedPAC), revealed that prior to the participating provider program, beneficiaries often did not know from one physician to the next whether they would face extra out-of-pocket charges due to balance billing and how much those amounts might be.²   By 1984, beneficiaries’ payment for balance billing reached 27 percent of total Medicare Part B out-of-pocket liability and was jeopardizing their access to affordable physician services.³ 

The establishment of the participating provider program in Medicare instituted multiple incentives to encourage providers to accept assignment for all their patients and become participating providers.  For example, Medicare payment rates for participating providers are 5 percent higher than the rates paid to non-participating providers.  Also, participating providers may collect Medicare’s reimbursement amount directly from Medicare, in contrast to non-participating providers who may not collect payment from Medicare and typically bill their Medicare patients upfront for their charges.  (Non-participating providers must submit claims to Medicare so that their patients are reimbursed for Medicare’s portion of their charges.) Participating providers also gain the benefit of having electronic access to Medicare beneficiaries’ supplemental insurance status, such as their Medigap coverage. This information makes it considerably easier for providers to file claims to collect beneficiary coinsurance amounts, as well as easing the paperwork burden on patients.  Additionally, Medicare helps beneficiaries in traditional Medicare seek and select participating providers by listing them by name with their contact information on Medicare’s consumer-focused website (www.Medicare.gov).

Given the strong incentives of the participation program, combined with limits on balance billing (discussed in the next section), it is not surprising that the share of physicians and practitioners electing to be participating providers has risen to high levels across the country. Overall, the rate of providers with participation agreements has grown to 96 percent in 2011, up considerably from about 30 percent in 1986, two years after the start of the participating provider program (Figure 3).⁴   As a result, across all states, most beneficiaries now encounter predictable expenses for Medicare-covered services, and are never responsible for Medicare’s portion of the fee (Appendix 1).

Medicare’s Balance Billing Limitations

Despite the incentives to become participating providers, a small share (4%) of physicians and practitioners who are registered with Medicare are non-participating providers. These providers can—on a service-by-service basis—charge patients in traditional Medicare higher fees than Medicare’s fee-schedule amount, up to a specified maximum. When charging higher fees, beneficiaries are responsible for the difference between Medicare’s approved amount and the providers’ total charge—essentially the balance of the bill remaining after accounting for Medicare’s reimbursement. This higher cost-sharing arrangement is called “balance billing” and means that the Medicare patient is financially liable for not only the applicable coinsurance and deductible, but also for any amount in which the provider’s charge exceeds Medicare’s assigned rate. Providers may not balance bill Medicare beneficiaries who also have Medicaid coverage.⁵ 

When non-participating providers balance bill, they bill the beneficiary directly, typically for the full charge of the service—including Medicare’s share, applicable coinsurance and deductible, and any balance billed amount.  Non-participating providers are then required to submit a claim to Medicare, so that Medicare can process the claim and reimburse the patient for Medicare’s share of the charge.  Two Medigap insurance policies, which beneficiaries may purchase to supplement their Medicare coverage, include coverage for balance billing.⁶   Balance billing is prohibited for Medicare-covered services in the Medicare Advantage program, except in the case of private fee-for-service plans.

In traditional Medicare, the maximum that non-participating providers may charge for a Medicare-covered service is 115 percent of the discounted fee-schedule amount. (Medicare’s fee-schedule rates for non-participating physicians are reduced by five percent.)  Accordingly, non-participating providers may bill Medicare patients up to 9.25 percent more than participating providers (i.e., 1.15 x 0.95= 109.25).  If the non-participating physician or practitioner balance bills the maximum amount permitted (not including any unmet deductible), total beneficiary liability for Medicare-covered services is about 33 percent of Medicare’s regular fee schedule amount (Figure 2).

Balance billing limitations were implemented in conjunction with the institution of Medicare’s physician fee-schedule in the Omnibus Budget Reconciliation Act of 1989.  At the time, Medicare’s charge-based methodology for physician services gave rise to rapid spending growth and confusion among beneficiaries about what charges they would face for physician services.⁷  Moreover, high cost-sharing liabilities weighed disproportionately on beneficiaries who were sickest and used the most physician services. Despite physician reports that they took patient incomes into account when determining whether to charge higher-than Medicare rates, PPRC research did not find a relationship between beneficiary income and the probability that claims would be assigned.⁸ 

While the Congress constrained growth in provider fees through the implementation of the fee schedule, it also implemented maximum “limiting charges” to establish further certainty and predictability for patients on their expected costs for services. In trying to rein in Medicare fee-schedule payments, the Congress sought to protect beneficiaries from excess charges that providers could otherwise impose in response to restrictions on their fees.⁹ 

The continued desire to protect beneficiary spending during the implementation of the new physician fee schedule gave rise to the question of whether Congress might consider imposing even greater restrictions on balance billing or even mandate assignment (prohibiting balance billing) for all claims.¹⁰  Ultimately, the rationale in Congress for allowing limited balance billing was that it would provide for:  (1) a “safety valve” for physicians who believed that the fee schedule did not adequately reflect the quality of services that they provided; (2) a means to correct any underpricing of resource costs in the fee schedule; and (3) necessary financial protections for beneficiaries, particularly in areas of the country where choice of physicians was limited.¹¹ 

As limits on balance billing were implemented and incentives for physicians and practitioners to take assignment took hold, beneficiary liability for balance billing declined dramatically.  CMS data show that in 2011, total balance billing amounted to $40 million, down significantly from $2.5 billion in 1983, (which equals $5.6 billion in 2011 dollars) (Figure 4).  Concurrently, the rate of assigned claims to total covered charges climbed from 51% in 1983 to 99% in 2011.

Private Contracting Conditions for Providers who Opt Out of Medicare

A very small share of providers (less than 1 percent of physicians) have elected to “opt out” of Medicare and contract privately with all of their Medicare patients, individually.¹²  Their fees are not bound by Medicare’s physician fee schedule in any way, which means that these providers have no limits on the amounts they may charge beneficiaries for their services.  Medicare does not reimburse either the provider or the patient for any services furnished by opt-out providers.  Therefore, Medicare patients are financially responsible for the full charge of services provided by providers who have formally opted out of Medicare.¹³ 

Serving as beneficiary protections, several important conditions exist for providers who elect to contract privately with Medicare patients. One condition is that prior to providing any service to Medicare patients, physicians and practitioners must inform their Medicare patients that they have opted out of Medicare and provide their Medicare patients with a written document stating that Medicare will not reimburse either the provider or the patient for any services furnished by opt-out providers. Their Medicare patients must sign this document to signify their understanding of it and their right to seek care from a physician or other practitioner who has not opted-out of Medicare.

Providers opt-out by submitting a signed affidavit to Medicare agreeing to applicable terms and affirming that their contracts with patients include all the necessary information.  Physicians or practitioners who opt out of Medicare must privately contract with all of their Medicare patients, not just some.  Once a physician or practitioner opts out of Medicare, this status lasts for a two-year period and is automatically renewed unless the physician or practitioner actively cancels it.¹⁴   Providers may not enter into a private contract with a beneficiary who also has Medicaid benefits or who is experiencing an urgent or emergent health care event. ¹⁵ 

These conditions, which provide protections for both beneficiaries and the Medicare program, were included in the Balanced Budget Act of 1997 as part of the legislation that first codified physicians’ ability to privately contract with Medicare beneficiaries.  Requiring opt-out providers to privately contract for all services they provide to Medicare patients (rather than being able to select by individual patients or services) was intended to prevent confusion among Medicare patients as to whether or not each visit would be covered under Medicare and how much they could expect to pay out-of-pocket.  Similarly, requiring providers to opt out for a minimum period of time—two years—was intended to ensure that beneficiaries had consistent information to make knowledgeable choices when selecting their physicians.  Both of these provisions also addressed Medicare’s duty to guard against fraudulent billing in an administratively feasibly manner.  If, for example, physicians contracted with only some of their patients and/or services, Medicare would have to examine each contract for each submitted claim to discern which claims were eligible for Medicare reimbursement and which were not.

Previous Kaiser Family Foundation analysis shows that psychiatrists are disproportionately represented among the 0.7 percent of physicians (4,863) who have opted out of Medicare—comprising 42 percent of all physicians who have opted out (Figure 5).¹⁶   Another 1,775 clinical professionals with non-physician doctorate degrees (i.e. oral surgeon dentists, podiatrists, and optometrists) also have opted-out of the Medicare program.¹⁷  Dentists who are oral surgeons comprise the majority of this group (95%).  Earlier research that examined opt-out providers through 2002 found similarly low numbers of providers opting out (2,839) as well as relatively higher opt-out rates among psychiatrists compared with other specialties.¹⁸ 

Some physician organizations attribute physician decisions to opt out of Medicare to frustration with Medicare’s fees and regulations.¹⁹  Others have noted a similar trend in physician refusal to work with any insurers—including commercial insurance plans—especially in prosperous communities. ²⁰  In these cases, providers require patients to pay them directly out-of-pocket, leaving the patient to seek reimbursement, if any, from their insurer.  For providers with patients who have the resources to make the payments, this billing method significantly reduces providers’ paperwork.

Concierge Practice Models

Some physicians are turning to concierge practice models (also called retainer-based care), in which they charge their patients annual membership fees and typically have smaller patient caseloads.  Physicians in a concierge practice model do not necessarily need to opt-out of Medicare to see Medicare patients.  However, if they do not opt-out of Medicare, these physicians are subject to Medicare’s balance billing rules, and therefore, cannot charge beneficiaries additional fees for services that are already covered by Medicare.²¹  For example, the annual fee for a concierge practice may not be used for the yearly wellness visit covered by Medicare, but it could be applied to items such as a newsletter and high-end waiting room furniture.  More controversy exists about concierge practices applying annual fees paid by Medicare beneficiaries to enhanced appointment access and extra time with patients.²² 

While anecdotal reports suggest a significant migration of primary care physicians to concierge/retainer practices, particularly in areas around Washington D.C and other major east and west coast cities, reliable data on the number of these practices are lacking.  In 2010, a report for MedPAC found listings for 756 concierge physicians, compared with 146 found by Government Accountability Office in 2005.²³   Other news articles have reported larger numbers (4,400 in 2012) according to the American Association of Private Physicians.²⁴ 

Implications of Proposals to Modify Incentives and Relax Certain Financial Protections—Pros and Cons

Proposals introduced by Rep. Tom Price, House Speaker Paul Ryan and others have sought to relax private contracting conditions either throughout the Medicare program or as a demonstration project that could be implemented by the Administration.  For example, in 2015, two Bills introduced in the House with a companion Bill in the Senate²⁵  include provisions to allow physicians and practitioners to engage in private contracting on a beneficiary-by-beneficiary basis, instead of requiring providers to opt-out of Medicare entirely. These Bills would also allow beneficiaries to seek Medicare reimbursement for the portion of the privately contracted fee that equals Medicare’s fee schedule amount, but no out-of-pocket limits would apply to the remaining portion of the provider’s charge.  Similar changes are also proposed as a demonstration in the 2016 House Republican Plan, “A Better Way, our Vision for a Confident America.”²⁶   An earlier House Bill also included a demonstration to allow non-participating providers to collect Medicare’s portion of their charge directly from Medicare.²⁷ 

Pros: Support for Relaxing restrictions and increasing physician autonomy

Proponents of such proposals, including the American Medical Association, support relaxing restrictions on balance billing and private contracting for a number of reasons—perhaps the foremost is that they would allow physicians to charge Medicare beneficiaries higher rates and thereby get relief from fees that they say have failed to keep pace with the rising costs of running their practices.²⁸   Proponents also assert that this ability could increase the overall number of providers willing to accept Medicare patients. This concern may be an issue in some geographic areas, though surveys and other data sources show that nationally, access to physicians among Medicare seniors is generally comparable to access among people age 55 to 64 with private insurance.²⁹ 

Physician groups also state that proposals to relax constraints on balance billing and private contracting would give providers a sense of greater autonomy in how they relate to both their patients and the Medicare program and would allow physicians to charge higher fees to some patients based on their assessment of their patients’ ability to pay.³⁰   Additionally, beneficiaries would be able to seek at least partial Medicare reimbursement for services they received under private contracts.  Proposals that would allow non-participating providers to collect Medicare’s portion of their charge directly from Medicare would obviate the need to charge patients the full fee upfront. This circumstance could be helpful to those patients who do not want to wait for Medicare’s reimbursement, even if on net, they would incur higher out-of-pocket liability due to balance billing.  Non-participating providers could also experience a more reliable payment from Medicare, compared with the challenges, in some cases, of collecting fees from Medicare patients for unassigned claims.

Cons: Concerns about Eroding Financial Protections

Other analysts have raised concerns about the effects of relaxing private contracting rules and balance billing restrictions.³¹   To the extent that such changes lead to increases in the number of non-participating and/or opt-out providers, they could exacerbate problems that lower-income beneficiaries face when seeking care.  Beneficiaries without the ability to pay higher rates (who are also likely to be disproportionately sicker) could find a reduced pool of physicians willing to accept them. Also, for rarer physician specialties and in some geographic areas, such as rural parts of the country, patients may have little choice among physicians.  If the limits on balance billing and private contracting were relaxed, beneficiaries in these situations could face the types of problems that existed prior to the imposition of limits on balance billing—high out-of-pocket costs and greater confusion and uncertainty about possible charges.  Additionally, concerns have been raised about the accuracy and appropriateness of providers determining which Medicare patients in their caseload can afford higher fees, and by how much.

While proposals that allow beneficiaries and non-participating physicians to seek reimbursement from Medicare may, in the short term, reduce out-of-pocket liability for beneficiaries, they could also decrease the incentives for physicians and practitioners to become participating providers.  In the long run, if significantly more providers balance billed their Medicare patients or opted-out of Medicare, this shift could alternatively increase beneficiary out-of-pocket spending.

From the perspective of the Medicare’s program integrity, Medicare would have significant difficulty tracking fraud and abuse if physicians were able to contract selectively for services with some but not all beneficiaries.  Medicare would have to examine every physician-patient contract, on a claim-by-claim basis, to determine which claims could be reimbursed directly to the physician and which would be the full responsibility of the patient.  Additionally, Medicare would need to examine these physicians’ billing practices to ensure that beneficiaries were not being charged inappropriately.

Conclusions

Balance billing limits, with incentives for physicians to accept assignment, have proven effective in limiting beneficiaries’ out-of-pocket liability for physician services. Today, a small share of Medicare beneficiaries experience balance billing just as only small share of provider claims in Medicare are paid unassigned—very different from the years before balance billing limits were instituted.  Moreover, only about 1 percent of physicians provide services to beneficiaries on a private contracting basis.  As the Congress has been considering changes to the way in which Medicare pays for physician service in the context of SGR repeal, some proposals have briefly surfaced to relax constraints on balance billing and private contracting.

On the one hand, these proposals could increase physician autonomy and provider willingness to treat Medicare patients, particularly among those providers who charge higher fees. On the other hand, such proposals could result in higher out-of-pocket liability, particularly in the longer term, which could affect beneficiary access to care.  Additionally, relaxing these protections could foster less predictability in the fees beneficiaries encounter when seeing physicians and practitioners.  Patients most at risk for experiencing a greater financial burden would be those with modest incomes and greater health care needs.  Beneficiaries in geographic areas with limited choices of physicians might also be at higher risk if a growing number of providers choose to balance bill or require private contracts with their Medicare patients.  The key is to strike a balance between assuring that providers receive fair payments from Medicare while also preserving financial protections that help beneficiaries face more predictable and affordable costs when they seek care.

1. Physician Payment Review Commission, “Chapter 9: Assignment and the Participating Physician Program: Current Status,” Annual Report to Congress, March 1998. ↩︎
2. Physician Payment Review Commission, “Appendix E: Trends in Assignment, Participation and Balance Billing,” Annual Report to Congress, 1989. ↩︎
3. Physician Payment Review Commission, “Chapter 9: Assignment and the Participating Physician Program: Current Status,” Annual Report to Congress, March 1998. ↩︎
4. U.S. House of Representatives Committee on Ways and Means, 2004 Green Book, March 2004, WMCP: 108-6, Table 2-34.  Much of that increase is attributed to the implementation of the Participating Physicians program.  Centers for Medicare & Medicaid Services, Data Compendium 2011, Table VI.6, Medicare Participating Physician Program, December 2011. ↩︎
5. Specifically, providers are prohibited from balance billing Medicare beneficiaries who have full Medicaid coverage (dual eligible) or those who receive Medicaid coverage through the Qualified Medicare Beneficiary (QMB) program.  Also, some services are not eligible for balance billing such as clinical diagnostic laboratory services. ↩︎
6. Medigap plans F and G include coverage for balance billing, referred to as “excess charges.” Regarding other supplemental coverage, balance billing is prohibited for Medicare-covered services in the Medicare Advantage program, except for private fee-for-service plans. Among employer-sponsored retiree health plans, potential liability for balance billing depends on the terms of each plan. ↩︎
7. Burney, I., et al., “Medicare Physician Payment Participation, and Reform,” Health Affairs, 3, no.4 1984; and Physician Payment Review Commission, “Chapter 9: Assignment and the Participating Physician Program: Current Status.” Annual Report to Congress, March 1998. ↩︎
8. Ginsburg, P. and P. Lee, “Physician Payment,” in Eli Ginzberg (ed) Health Services Research: Key to Health Policy. Harvard University Press, 1991. ↩︎
9. See statements from Senator Dole (130 Cong.Rec.S. 8373, 8375 (daily ed. June 27, 1984) reprinted in 1984 U.S. Code Cong. & Admin News, Deficit Reduction Act Legislative History at 2156) and Senator Rostenkowski (130 Cong.Rec.H. 7085, 7086 (daily ed. June 27, 1984) reprinted in Legislative History at 1450. Accord, H.Conf.Rep. No. 98-861, reprinted in Deficit Reduction Act Legislative at 751, 1308). ↩︎
10. Holahan, J. and S. Zuckerman, 1989.  “Medicare Mandatory Assignment: An Unnecessary Risk,” Health Affairs, Spring 1989. ↩︎
11. Physician Payment Review Commission, “Appendix E: Trends in Assignment, Participation and Balance Billing,” Annual Report to Congress, 1989. ↩︎
12. Boccuti, C. et al., “Medicare Patients’ Access to Physicians: A Synthesis of the Evidence,” Kaiser Family Foundation, December 2013. ↩︎
13. Medigap plans do not make payments for services provided by opt-out physicians.  Other supplemental insurance plans have the discretion to determine whether or not they will cover services provided by opt-out physicians. ↩︎
14. Automatic renewal provisions were included in 2015 legislation, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Pub.L. 114-10, 114th Congress (2015-2016). ↩︎
15. Specifically, providers are prohibited from entering into private contracts with Medicare beneficiaries who have full Medicaid coverage (dual eligible) or those who receive Medicaid coverage through the Qualified Medicare Beneficiary (QMB) program. ↩︎
16. Boccuti, C. et al., “Medicare Patients’ Access to Physicians: A Synthesis of the Evidence,” Kaiser Family Foundation, December 2013. ↩︎
17. Dentists, podiatrists, and optometrists did not become eligible to opt out of Medicare until December 2003. Section 603 from the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 added dentists, podiatrists, and optometrists to the definition/list of physicians who may opt out of Medicare. ↩︎
18. Buczko, W. “Provider Opt-Out Under Medicare Private Contracting.” Health Care Financing Review, vol 26, no 2, Winter 2004-2005. ↩︎
19. Melinda Becker, “More Doctors Steer Clear of Medicare, Some Doctors Opt Out of Program Frustrated With Payment Rates and Mounting Rules,” New York Times, July 29, 2013 ↩︎
20. See for example, Rabin, Roni C., “When Doctors Stop Taking Insurance,” New York Times, October 1 2012; When physicians state that they “don’t take insurance,” it often indicates that they will bill the patient for the full charge and the patient must seek reimbursement (if applicable) from their insurer, similar to non-participating providers in Medicare. ↩︎
21. Physicians in concierge practices who have opted out of Medicare may charge whatever fees they have outlined in their private contracts with their Medicare patients; Medicare does not reimburse either the physician or the Medicare patient for items or services provided by opt-out physicians. ↩︎
22. Pasquale, F. “The Three Faces of Retainer Care: Crafting a Tailored Regulatory Response,” Yale Journal of Health Policy, Law, and Ethics Vol.7: Iss. 1, Article 2. 2007. ↩︎
23. Hargrave, E., et al. “Retainer-Based Physicians: Characteristics, Impact, and Policy Considerations” Prepared for the Medicare Payment Advisory Commission, March 2010. ↩︎
24. Leonard, D. “Is Concierge Medicine the future of Health Care?” Bloomberg Business Week, November 29, 2012. ↩︎
25. See H.R. 2300 (Empowering Patients First Act of 2015) and H.R.1650 / S.1849 (Medicare Patient Empowerment Act of 2015). ↩︎
26. See “A Better Way: Our Vision for a Confident America,” House Republican proposal, June 22, 2016. ↩︎
27. See The Chairman’s amendment in the nature of a substitute to H.R. 2810 (Medicare Patient Access and Quality Improvement Act of 2013). ↩︎
28. See letter to the Honorable Tom Price from the American Medical Association: https://searchlf.ama-assn.org/letter/documentDownload?uri=%2Funstructured%2Fbinary%2Fletter%2FLETTERS%2Fmedicare-patient-empowerment-act-28april2015.pdf. ↩︎
29. Medicare Payment Advisory Commission (MedPAC), Report to Congress: Medicare Payment Policy. Chapter 4, March 2016. ↩︎
30. See, for example, Letter to Speaker John Boehner from state medical associations and state and medical physician societies, May 19, 2011. ↩︎
31. Ginsburg, P. “The Case Against Balance Billing” EyeNet Magazine, American Academy of Ophthalmology, November/December 2010.   ↩︎

Policymakers, health care providers, and policy analysts continue to call for “delivery system reform”—changes to the way health care is provided and paid for in the United States—to address concerns about rising costs, quality of care, and inefficient spending.  The Affordable Care Act (ACA) established several initiatives to identify and test new health care payment models that focus on these issues.  Many of these ACA programs apply specifically to Medicare, the social insurance program that provides coverage to 57 million Americans age 65 and older and younger adults with permanent disabilities.

This Primer describes the framework and concepts of three payment models that CMS is currently testing and implementing within traditional Medicare—medical homes, ACOs, and bundled payments.  Combined, these three models account for care provided to over 10 million Medicare beneficiaries and are frequently cited by media, researchers, and policymakers as current examples of ongoing delivery system reforms.  Within each of these three broad models, the Centers for Medicare and Medicaid Services (CMS) is testing a variety of individual payment approaches and program structures.  This Primer reviews each of the models, including their goals, financial incentives, size (number of participating providers and beneficiaries affected), and potential beneficiary implications.  It also summarizes early results with respect to Medicare savings and quality.

Preliminary results from these models are somewhat mixed at this point, with some models showing more promise than others.  This might be expected given their early stages, the diverse number of approaches being implemented, and methodological challenges associated with calculating savings.  Many of the models are meeting quality targets and showing improvements in quality of care, but to date, overall net savings to Medicare are relatively modest, with large variation between models as well as among the individual programs running within them.  More results are expected to be released in the future, and new models launched in 2016—several of which are designed to address issues raised by stakeholders with respect to the initial model designs.

Looking ahead, as more results become available, a key question is how Medicare patients fare in these delivery system reform models, especially those with the greatest health care needs.  The answer, along with performance on overall spending and quality, will help policymakers identify which models to pursue or discard, which to alter, and what might be needed to disseminate successful models more broadly.

The Affordable Care Act (ACA) established several initiatives to identify new payment approaches for health care that could lead to slower spending growth and improvements in the quality of care.  Many of these new delivery system reforms are currently being implemented and tested in traditional Medicare.  This Primer describes the framework and concepts of three broad alternative payment models—medical homes, ACOs, and bundled payments—and reviews their goals, financial incentives, size (number of participating providers and beneficiaries affected), and potential beneficiary implications.  It also summarizes early results with respect to Medicare savings and quality.

Context for Delivery System Reform in Medicare

Delivery system reform in Medicare focuses on shifting a portion of traditional Medicare payments from fee-for-service (FFS) (which reimburses based on the number of services provided) to payment systems that incorporate some link to the “value” of care as determined by selected metrics, such as patient outcomes and Medicare spending.  The Department of Health and Human Services has announced a goal to have 90 percent of traditional Medicare payments linked to quality or value by 2018.¹   The agency also reports that it has met its goal of having 30 percent of Medicare payments tied specifically to alternative payment models (such as Accountable Care Organizations (ACOs), bundled payments, and medical homes) by the end of 2016, and expects to reach 50 percent by the end of 2018.²   Additionally, recent legislation to reform Medicare payments for physician services, the Medicare Access and CHIP Reauthorization Act (MACRA), includes bonus payments for physicians and other health professionals who participate in qualifying alternative payment models.³ 

To establish a central place for designing, launching, and testing new payment models, the ACA created the Center for Medicare and Medicaid Innovation (CMMI), also referred to as the “Innovation Center,” housed within CMS.  The ACA granted CMMI wide authority to design and test new models that aim to either lower spending without reducing the quality of care, or improve the quality of care without increasing spending.⁴   The intent of designing and launching multiple new models is that the cream of all of these approaches will rise to the top, providing direction as to what works and what does not—so best practices can be quickly disseminated across the country.  In fact, the ACA gives CMMI unprecedented authority to expand models across the U.S. when they are found to be successful.

Medical Homes, ACOs, and Bundled Payments

Medical homes, ACOs, and bundled payment models, combined, account for care provided to over 10 million Medicare beneficiaries⁵  and are frequently cited by media, researchers, and policymakers as major examples of delivery system reforms implemented widely across the U.S.⁶   These models are described briefly below:

• Medical homes are team-based models of patient care that rely heavily on the primary care practice (provider and care team) as the main and central source for delivery and coordination of the majority of health, illness, and wellness care for Medicare beneficiaries. Health insurers that support the medical home model typically provide monthly care management fees or other payments in addition to fee-for-service reimbursement for activities related to patient care and coordination.
• ACOs are groups of doctors, hospitals, and other health care providers who agree to share collective accountability for the quality and cost of care delivered to the patients attributed to their ACO. Payments to ACOs incorporate varying levels of financial incentives in the form of shared savings or losses (sometimes referred to as bonuses or penalties) for performance on identified spending and quality metrics.
• Bundled payments focus on discrete episodes of care by establishing an overall budget for services provided to a patient receiving a course of treatment for a given clinical condition over a defined period of time. In contrast to paying for each service individually, bundled payments provide incentives for providers to come in “under budget” for episodes of care.

Within each of these three delivery system reforms, CMS is managing the implementation and assessment of multiple payment models (Table 1).

Ongoing Evaluation of these Models and Programs

The ACA requires that each model managed by CMMI be evaluated for changes in both spending and quality of care provided.⁷   In fact, the ACA incorporates assessments of both quality and cost in the criteria for granting the Secretary of Health and Human Services the authority to expand models nationally if they either reduce spending without reducing the quality of care or improve the quality of care without increasing spending.⁸ 

By working with many types of providers who are treating a variety of patients in various kinds of facilities, CMMI is evaluating cost and quality not just for the models overall, but also how these results may differ based on other variables, such as patient and provider characteristics.  CMS is also examining the attractiveness of the models to providers based on model participation rates, feedback from participants regarding the process (challenges, barriers, success strategies, etc.), and other operational, quantitative, and qualitative measures.

Preliminary results from these models are modest and mixed at this point, with some models showing more promise than others (Table 2).  This might be expected given their early stages, the diverse number of approaches being implemented, and methodological challenges associated with calculating savings.  Many of the models are meeting quality targets and showing improvements in quality of care, but to date, overall net savings to Medicare are relatively modest, with large variation between models as well as among the individual programs running within them.  Given the difference in beneficiary counts, care models, and evaluation time periods for each model, it is difficult to compare the relative magnitude of savings among them.

Implications for Medicare Beneficiaries

Questions about how beneficiaries are involved in these new payment approaches and the implications these models have on beneficiary care—particularly for those with multiple chronic conditions—are key issues, yet at this stage, the answers are not well understood.  For the most part, Medicare beneficiaries in these models do not experience any changes in their Medicare benefits, as they are not required to see certain providers and do not experience differences in their levels of cost-sharing.  Accordingly, even though beneficiaries are notified of their providers’ participation in these models, it is not clear that beneficiaries are aware of their “attribution” to them, nor the inherent implications of the model’s payment incentives for less costly care.  Beneficiaries whose primary care provider is transforming their practice into a medical home may notice differences in the delivery of their care—for example, greater reliance on clinical teams and electronic health records—but for the ACO and bundled payment models, beneficiaries would not necessarily notice changes in care practices.

On the one hand, having Medicare attribute beneficiaries to these new delivery models is least disruptive to beneficiaries and places greater responsibility on the providers to engage with their patients and deliver better quality care.  It is also less susceptible to selection issues, whereby beneficiaries with higher health costs may be somehow discouraged from enrolling in an ACO or medical home.  On the other hand, some analysts propose that beneficiaries could play a greater role in lowering health care costs and improving quality if they took a more active role in selecting a medical home or ACO and encountered incentives to see providers affiliated with or recommended by their ACO or medical home, or if the providers did more to actively engage them. (CMS is exploring several of these approaches via new ACO models that started in 2016.)

Issues about directing patients to certain providers also play a role in bundled payment approaches.  For example, when beneficiary and provider incentives are aligned, patients leaving the hospital may seek or receive recommendations for post-acute providers and settings that deliver high-quality care at relatively lower overall costs. However, other considerations, such as patient convenience and the absence of family caregiver support are factors that may play a far greater role in beneficiary preferences than provider interests.  These issues highlight the need to monitor care provided to the vulnerable patients in these models of care and to institute patient protections if quality and access problems are found.

Looking Ahead

In traditional Medicare, delivery system reforms and alternative payment models are being implemented and tested to determine how they might encourage better care coordination for patients across settings—particularly for those patients with chronic conditions and high health care needs—while simultaneously reducing provider inefficiencies and potentially lowering costs (or cost growth) for Medicare.  By design, these goals are intrinsic to these models, and stakeholders (including CMS, other payers, providers, patients/ consumers, and the Congress) naturally want to see real-world results from their investments as soon as possible.  This pressure presents a clear tension between the desire for immediate results versus the time it takes to test fully-implemented interventions.

CMS’s commitment to “rapid cycle” improvements in the demonstrations means that CMS is able to refine the payment models as they are being implemented in light of early results and unforeseen circumstances.⁹   While potentially advantageous, tracking and monitoring the changes will be difficult, and designing evaluations that can hold constant all other factors, including site-specific variables, to determine definitively what works and what does not, presents methodological challenges.¹⁰   Additionally, the evaluation of medical homes, ACOs, and bundled payments are conducted separately, which may preclude assessing how they might work together in a coherent way.

CMMI has also launched a number of new models in 2016, several of which are designed to address issues raised by stakeholders with respect to the initial model offerings.  For example, new ACO and bundled payment models, described later in this Primer, will provide advance payments to providers to address their concerns about start-up resources needed for transforming their patient care and business models.  CMMI is also offering models that aim to inform and engage beneficiaries about the goals of the new payment approaches.  Consumer involvement has not, as yet, been a major component of delivery system reform, particularly outside of medical home models.  It will be helpful in future models to see how beneficiaries’ understanding of the models affects provider approaches, changes in service utilization, and patient outcomes.  With increased beneficiary involvement also comes the need to incorporate appropriate measures for beneficiaries who have cognitive impairments.

Introducing delivery system reform in Medicare is an extremely ambitious effort and one that comes with a number of challenges.  Health care is changing rapidly, and while it is difficult to guarantee a controlled experiment in which only the changes of interest (typically targeted payment incentives) are allowed to vary, understanding the ability of providers to lower costs while maintaining or improving quality may help illuminate the ingredients of success (or failure).  Ultimately, a key consideration for CMS and Congress to track is how Medicare patients fare in these delivery system reform models, especially those with the greatest health care needs.  This issue, along with overall spending and quality, will help policymakers identify which models to pursue, and what it will take to disseminate the most successful payment and delivery models more broadly.

Medical Homes, Accountable Care Organizations (ACOs), and Bundled Payments: Descriptions and Summaries of Early Evidence

Medical Homes

What is a Medical Home?

The medical home—also called an advanced primary care practice model or a patient-centered medical home—is a team-based approach to patient care that is intended to provide comprehensive care and serve as the medical practice which provides for the majority of their patients’ health care needs.¹¹   When seeking care, medical home patients either obtain care from their medical home directly, or the medical home coordinates their care with another provider.  Overall management of care in a medical home is generally led by a primary care clinician—often a physician, but it may also be another health professional, such as a nurse practitioner.¹²   Health insurers that support the medical home model typically provide monthly care management fees or other resources to the practice to support certain activities.  These include care management and coordination, communication with patients outside of office visits for acute, chronic, and preventive health care needs (including by email, internet “portals,” and telephone), and data collection for reporting patient outcomes and quality improvement. CMMI is supporting the transformation of primary care practices into medical homes through grant funding and technical assistance for several models.  Among them, CMS has released results on savings and quality (detailed in Table 3) for the following four models located across the country (Figure 1):

• Multi-Payer Advanced Primary Care Practice (MAPCP) – The MAPCP model tests if medical homes that receive monthly care management fees for most of their patients across multiple insurers (including but not limited to Medicare) perform better on quality and spending measures than either (a) medical homes without payer alignment of these fees (non-MAPCP medical homes); or (b) practices which are not medical homes.  State agencies coordinate the medical practice requirements and monthly care management fees across Medicare, Medicaid, and commercial insurers.
• Comprehensive Primary Care (CPC) – Similar to the MAPCP model, the CPC model is also testing a multi-payer approach for medical homes.  However, CMMI—rather than the state—is playing the major role in convening insurers to combine resources to provide care management fees to medical homes, provide data feedback on patient utilization, and implement quality and efficiency incentives that are aligned across all insurers. Participating payers provide practices with care management fees and an opportunity for regional shared savings. They also share data on cost and utilization to give practices information on their patients’ total spending.
• Federally-Qualified Health Center (FQHC) Advanced Primary Care Practice (APCP) – The FQHC/APCP model, which ended in 2014, tested effects on the cost and quality of care for Medicare beneficiaries served by FQHCs.  Each participating FQHC was paid monthly care management fees per Medicare beneficiary to support services and activities associated with requirements for patient-centered medical homes. An additional goal of the FQHC/APCP model was to help FQHCs achieve recognition by the National Committee for Quality Assurance for as a “Level-3” medical home.
• Independence at Home (IAH) – The IAH model is testing effects on health outcomes and Medicare spending when primary care services are provided to chronically ill beneficiaries in their own homes. Although IAH practices have the same home visit coverage in traditional Medicare as other practices, IAH practices are uniquely eligible for incentive payments for meeting quality and spending targets.  Unlike MAPCP and CPC, IAH providers are not paid monthly care management fees.

Conceptually, How Could Medical Homes Improve Quality and Reduce Costs?

The overarching goals of medical homes are to improve clinical outcomes and patient experience while reducing overall health costs through reductions in unnecessary and avoidable acute care services and long-term expenses associated with chronic illness and its complications.  In fully implemented models, the medical home relies on several features: a care team (including clinicians, care managers and coordinators, social workers, and when applicable, pharmacists community health workers, and others); health information technology; standardized preventive and acute care consistent with evidence-based guidelines; patient and family engagement in care and medical decision-making; access to clinicians outside of regular office hours; and consideration of the whole patient, inclusive of social, mental, and behavioral health and other issues.¹³    This model presumes that in addition to better patient care, it costs less on the whole to provide patients with comprehensive primary care than it does to cover the health care costs of patients who seek specialty services without care management and coordination by their primary care provider.

How Do Medical Homes Differ from the Status Quo in Traditional Medicare?

Aside from the recently established chronic care management code, medical practices, in general, may not bill Medicare separately for many activities that are outside of the direct provision of face-to-face medical care.¹⁴   Such activities could include care coordination with external providers taking place between a patient’s visits, information technology enhancements, follow-up phone communications with patients, and after-hours clinical access.  Three of the medical home models being tested (MAPCP, CPC, and FQHC/APCP) provide additional payments in the form of supplemental per member per month fees to primary care providers that are intended, in part, to offset the costs of these activities whether or not they are performed in the presence of the patient.  Additional costs defrayed by these care management fees include staffing expenses and infrastructure costs needed to perform functions of, or be recognized as, a medical home.

How Are Medicare Beneficiaries Involved in Medical Home Models?

Approximately 1.4 million beneficiaries are attributed to one of the four CMMI models of medical homes described in Table 3.  A core concept of the medical home model of care is that the beneficiary be actively engaged and involved in their care.  While these medical home models have beneficiary satisfaction and engagement measures as part of their quality indicators, the degree to which patients themselves are educated about the medical home model and informed about their role and options is not clear and varies across models.  Even less clear is how well beneficiaries understand the model, even after receiving these explanations.  In general, providers do not enroll beneficiaries in the CMMI medical homes; instead, eligible beneficiaries in traditional Medicare are attributed through a claims-based process by CMS.  Beneficiaries are notified by mail or by a posted notification within the practice that their primary care provider is part of a medical home model being tested by CMMI.  This notification also explains that beneficiaries may opt out of having CMS share their Medicare utilization and spending data with the medical home.  Consistent with traditional Medicare, beneficiaries are free to seek services from other Medicare providers such as specialists at any time and are not required to obtain care from the medical home to which they are attributed.

What Are Some of the Implications for Beneficiaries in Medical Homes?

Beneficiaries whose primary care providers are converting to medical homes may encounter new care models that include greater reliance on clinical teams and electronic health records—which may or may not be features beneficiaries desire—and enhanced access to clinicians outside of office visits and after regular business hours.  Patients with higher health risks are considered key targets for care management in medical homes, so patients with multiple chronic conditions may receive more frequent contact from their primary care practice to encourage them to maintain prescribed treatment protocols and to monitor their health.  Beneficiaries in the IAH model are able to stay home to receive primary care services.  While beneficiaries in medical homes may be receiving more advanced primary care services, this emphasis could possibly translate to the beneficiary as reluctance from their primary care providers to make referrals to specialists.

What Are Some of the Implementation Challenges with Medical Homes?

Implementation of the medical home model presents many practical challenges for both the primary care clinicians in medical homes and researchers examining their impact on care quality and spending.  The key elements of the medical home—including expanded patient access, acute and preventive care management, and adoption of health information technology—represent changes to the process and design of current primary care practice.  Accordingly, organizational and financial hurdles may surface when trying to transform practices into medical homes.¹⁵   Further, providers in medical homes report operational problems stemming from the lack of incentives for external providers and systems to interact with medical homes, minimal mechanisms for physicians to share in overall savings in certain models, and insufficient resources to hire additional staff and purchase infrastructure (such as electronic health record systems), particularly for models with little or no monthly care management fee structures.¹⁶ 

Medical home providers have also noted that beneficiaries do not have financial incentives to consult with their medical home prior to seeking specialty care or going to a hospital emergency department.  Health services researchers face significant challenges evaluating the impact of medical home interventions on clinical outcomes, due to the variability in how these models are being implemented across the many sites involved, and the rapid cycle manner of continuously adapting and modifying interventions based on real-time feedback in the field. Additionally, there may be some self-selection issues among primary care practices that voluntarily joined the CMMI models, raising the potential for greater challenges with dissemination across primary care practices that may be less interested in the medical home model of care.

What Early Results Are Available for the Medical Home Models?

Early results from CMMI’s medical home and advanced primary care models are mixed (Table 3).  In the MAPCP model, one state (Michigan) out of eight achieved savings over the first two years, net of care management fees.  The CPC model almost broke even after care management fees, and the FQHC/APCP models experienced comparatively greater net losses, on average.  In contrast, the IAH model, which focuses on providing care to chronically ill Medicare patients in their own homes, showed savings—over $25 million in its first year and over $10 million in its second year.¹⁷   Unlike the other medical home models, the IAH model does not pay monthly care management fees to providers.  Given the difference in beneficiary counts for each medical home model, it is difficult to compare the relative magnitude of savings among the different models.

With respect to quality, evaluation results across the medical home models have found some improvement, but generally minimal effects across most measures. For the CPC model, patient-reported measures on their experience with the practice improved slightly more for CPC practices than for comparison groups, as did performance on quality measures for diabetes care. CMS also reports that for 2015, CPC quality scores improved overall compared to 2014.  For the FQHC/APCP model, little difference was noted on quality measures between FQHCs that were participating in the medical home model and those that were not, and FQHCs had higher rates of emergency room visits compared to non-medical home FQHCs.  In the first year of the IAH model, all 17 participating practices (including one consortium) met quality goals on at least three or six quality measures, such as lower hospital readmissions and greater follow-up contact between the patient and the provider after a hospital or emergency department discharge.  In the second year, all 15 participating IAH practices further improved on at least two of six quality measures, and four practices met goals for all six quality measures.

What are the Newest Medical Home Models to be Introduced?

• Comprehensive Primary Care Plus (CPC+) Model – After the conclusion of the CPC model at the end of 2016, current participants and new practices will have the opportunity to transition into (or join) the CPC+ model in January 2017.  CMS projects that the new CPC+ model will have a greater number of participants (up to 5,000 practices in 20 regions) compared to the CPC model.  All CPC+ practices will receive a prospective Medicare care management fee, as in the CPC model; however, CPC+ practices will also receive a pre-paid incentive for meeting quality and utilization benchmarks that, if not met, will be recouped by CMS.  Also, the CPC+ model will include two payment tracks to accommodate practices that are more or less advanced in their existing medical home capabilities.  CPC+ practices will receive higher prospective payments under track 2 than track 1, but lower standard office visit payments—a hybrid payment arrangement that CMMI designed to provide a greater incentive for care management outside of face-to-face encounters.  In August 2016, CMMI selected 14 regions for the CPC+ model.  CMMI estimates that up to 5,000 primary care practices serving an estimated 3.5 million beneficiaries could participate in the model.

Accountable Care Organizations (ACOs)

What is an ACO?

ACOs are groups of doctors, hospitals, and other health care providers who form partnerships to collaborate and share accountability for the quality and cost of care delivered to Medicare beneficiaries who are attributed to their ACO.  Medicare payments to ACOs incorporate financial incentives for their performance on specified spending and quality metrics for their attributed beneficiaries.  These financial incentives—in the form of shared savings or losses (sometimes referred to as bonuses or penalties)—are paid to, or collected from, the ACO rather than being divided among the individual providers or facilities that treated each of the ACO’s attributed beneficiaries.  ACOs can be comprised of physicians only, or include hospitals and other providers, as well. CMS and CMMI are currently implementing several ACO models across the U.S. (Figure 2), including the following three, for which early results are described in Table 4:

• Medicare Shared Savings Program (MSSP) ACOs — The MSSP is a permanent ACO program in traditional Medicare that provides financial incentives for meeting or exceeding savings targets and quality goals. The MSSP allows ACOs to choose between sharing in both savings and losses, or just savings. Overwhelmingly, for 2016, most ACOs are in models which only include potential for shared savings. MSSPs are accountable for at least 5,000 assigned Medicare beneficiaries.
• Pioneer ACOs — Like the MSSP, the Pioneer ACO model is designed to assess the effects of providing ACOs with financial incentives to lower overall spending and maintain or improve care quality.  However, unlike most MSSP ACOs, all Pioneer ACOs are required to pay back CMS if spending exceeds a target amount.  Thus, all Pioneers accept both upside and downside risk.  Also, Pioneer ACOs enter the model already having experience accepting risk through contracts with other payers and are accountable for at least 15,000 assigned Medicare beneficiaries.
• Advanced Payment ACOs — The Advance Payment ACO model is a subset of the MSSP.  It provides up-front payments to ACOs to support infrastructure development and operations.  The Advance Payment ACO model assesses whether or not these early investments increase participation in the MSSP among smaller and/or rural providers.  Advance Payment ACOs also receive monthly, population-based payments and can share in savings, if realized after CMS recoups the additional advance payments.

Conceptually, How Could an ACO Improve Care and Reduce Costs?

The basic assumption underlying the ACO model of care is that patient care is improved and less fragmented when providers have a financial incentive to work together to coordinate care.  Under this premise, joint accountability among providers may lead to lower costs and better quality, such as reductions in unnecessary or duplicative testing, fewer medical errors, and lower rates of hospitalizations due to exacerbations of chronic conditions and medical complications.¹⁸   The ACO model is designed to reward providers financially for working together, sharing information, and coordinating care, especially for high-risk and high-cost chronically-ill patients.  In addition to overall Medicare spending, CMS also factors in performance on quality measures to determine final payments to ACOs.  Accordingly, quality and cost savings intersect in the overall incentive structure of the ACO model.

How Are ACOs Different from the Status Quo in Traditional Medicare?

In traditional Medicare, providers do not receive bonuses or penalties tied to the overall net spending for their patients in a given time period; rather, they receive payment for the care they provide in their own practices/facilities.  When Medicare spends less on patients in an ACO—netted across all settings—than their target amount (based, in part, on national spending in traditional Medicare), the ACO shares in the Medicare savings.  Pioneer ACOs and a small number of MSSP ACOs are also at a financial risk when the reverse happens: when their spending is higher than expected, they owe CMS a portion of the “excess” cost (i.e., a penalty).  When applicable, shared-savings payments offer ACO providers the opportunity to gain additional revenue without providing additional care.  Savings and losses may be shared across partnering providers as an incentive for furnishing high quality care and, in the case of shared savings, to offset costs associated with services and staff needed to effectively implement their care protocols.

In theory, as a result of these incentives, greater coordination between the various providers and across settings distinguishes care delivered by ACO providers from non-ACO providers in traditional Medicare.  This coordination may occur in a variety of ways.  For example, care coordinators or care managers may work with individual patients as navigators and advocates, reaching out to patients in between visits to the physician.  Coordination may also occur through the sharing of information via electronic health records and health information exchanges, so that all providers have timely access to complete and current information.  Similar to the medical home model, in the ACO model, the primary care provider or medical practice ideally coordinates all patient care to reduce fragmentation of care across different specialists and facilities. Additionally, ACOs may have incentives to encourage patients to seek care at lower-cost settings, provided the care meets the patients’ needs.

How Are Medicare Beneficiaries Involved with ACOs?

As of January 2016, almost 9 million Medicare beneficiaries were attributed to an ACO.¹⁹   CMS attributes beneficiaries to ACOs based on fairly complex claims analyses, which vary based on the type of ACO, but generally reflect beneficiaries’ link to a primary care practice affiliated with an ACO.  By and large, beneficiaries do not actively select (or enroll in) an ACO; rather, they are informed of their attribution by their provider and can opt-out if they do not wish their data to be shared with other providers.  Pioneer ACOs may submit attestations from beneficiaries regarding their desire to be attributed or not attributed to the ACO.  Consistent with traditional Medicare, beneficiaries are free to seek services from any provider who will see them, so there is no “lock-in” from the beneficiary’s standpoint and they have no obligation or financial incentive to stay within the ACO and its network of providers.  In newer ACO models, CMS is testing ways for beneficiaries to indicate or verify whether they consider their assigned ACOs to be their main provider (described later in this section).

What Are Some of the Implications for Beneficiaries in ACOs?

Essentially, Medicare beneficiaries attributed to ACOs do not experience any difference in their traditional Medicare benefits.  In many cases, they may not be aware that their physician is part of an ACO and that CMS has attributed them to one, despite having received notification with this information or being told by their doctor.  On the one hand, this attribution method is the least disruptive to beneficiaries and places greater responsibility on the providers to engage with beneficiaries and provide better quality care.  It is also less susceptible to selection issues, whereby beneficiaries with lower health costs are somehow encouraged to “join” an ACO, either through an enrollment process or through their selection of a primary care physician.  On the other hand, some analysts propose that beneficiaries could play a greater role in lowering health care costs if they understood how Medicare and ACO incentives are aligned, and if they had incentives to see providers in their ACO and participate in care management activities.  Further, when providers and Medicare share in savings, some propose that beneficiaries could as well.  In newer ACO models, CMS is exploring ways for beneficiaries to receive financial incentives from CMS for seeking care from ACO providers (described later in this section).

While analyses of Pioneer ACOs and MSSP ACOs finds that beneficiaries attributed to ACOs are demographically similar to beneficiaries in comparison groups in the same market areas, additional research is needed to examine how Medicare beneficiaries in ACOs compare to the general Medicare population.²⁰  In particular, it would be useful to understand the extent to which ACOs across the country are serving high-cost and high-need populations—such as beneficiaries with multiple chronic conditions and beneficiaries dually covered by Medicare and Medicaid.

What Are Some of the Implementation Challenges with ACOs?

Policy analysts, researchers, and ACOs providers have raised a number of challenges associated with implementing ACOs.  For example, some have cited that the infrastructure costs for ACOs are front-loaded with start-up expenses including: hiring and training of staff; creation of partnerships; design and implementation of coordination tools, such as electronic health record (EHR) upgrades; and process changes.  These investments may take years to recoup—if at all—through future shared savings.  Further, the up-front investments serve the entire patient population of that practice, not just the Medicare ACO patients.  Yet if savings are achieved, they only reflect amounts associated with Medicare ACO patients and therefore do not account for savings realized by other payers.  CMS is also faced with challenges determining the best benchmark upon which to measure spending performance.  ACOs have noted that benchmarks which incorporate ACOs’ spending history make it more difficult for high-saver ACOs to perform better in future years.  CMS is offering new methods for benchmarking in future years to address some of these concerns.

Another implementation challenge involves how beneficiaries are attributed to each ACO based on a CMS claims analysis, as described above.  As with the medical home models, because beneficiaries do not take an active role in selecting an ACO and have no obligation or financial incentive to stay within the ACO and its network of providers, ACOs have little control over costs that may result from out-of-ACO utilization.  The challenge for ACO providers lies in educating and engaging beneficiaries about their health care and reasons for staying within the ACO network.  This issue is magnified by the retrospective process of beneficiary attribution to ACOs in the MSSP (for 2015 and earlier), preventing the ACOs from knowing at the point of care whether they will ultimately be held accountable for the beneficiary.  Addressing this concern, CMS provides ACOs with a prospective list of likely assigned beneficiaries, but the final payment reconciliation is based on retrospective assignment.  Pioneer ACOs have more opportunities to know with certainty their attributed beneficiaries because Pioneer ACOs may submit attestations from beneficiaries regarding their desire to be attributed/not attributed to the ACO, and beneficiaries who were part of the ACO in previous years may be prospectively attributed.

Another consideration that has been raised is the potential for ACOs to contribute to the current trends for market consolidation through hospital and health system mergers and the purchase of physician practices.²¹   When a limited number of health systems consume a large portion of a market area, they may have the ability to drive up health care spending, particularly for non-Medicare insurers.

What Early Results Are Available for the ACOs?

Medicare ACOs are, by most accounts, showing mixed results, with most ACOs reaching quality benchmarks, but realizing relatively modest or no savings on net.²²   From the most recently reported results, for 2015, less than one third of the MSSP ACOs and half of the Pioneer ACOs earned shared savings bonuses because their total spending was low enough (compared to their benchmark) and their quality scores were high enough.  Among the Pioneer ACOs that did not receive shared savings bonuses, a small share owed CMS payments to account for spending over their benchmarks.  About one quarter of the Advance Payment ACOs, a subset of the MSSP ACOs, qualified for shared savings.

Both MSSP ACOs and Pioneer ACOs achieved lower beneficiary expenditures than their benchmarks in 2015; but after factoring in Medicare’s shared savings bonuses only the Pioneer ACOs saved Medicare, on net, totaling $669,000 in savings (Table 4).²³   In contrast, total bonus payments Medicare made to MSSP ACOs exceeded the total savings that MSSP ACOs achieved on beneficiary expenditures, resulting in a net cost of $216 million in 2015.  Advance payment ACOs saved $45 million on net, after bonus payments.  It is difficult to compare the magnitude of savings across models because of the variation in their sizes.

In addition to quality improvements since their initial years, CMS has stated that for both MSSP and Pioneer ACOs, performance on quality measures is comparably as good or better than the traditional Medicare program overall.²⁴   Further, ACOs that continued in the program for multiple years performed better on quality measures and were more likely to share in savings than ACOs that withdrew.²⁵   In terms of participation in the ACO models, the number of MSSP ACOs has almost doubled, growing from about 200 MSSP ACOs in the initial year to over 400 in 2016.  In contrast, participation in the Pioneer ACO model has declined from 32 at the start to 9 in 2016, but several Pioneer ACOs that withdrew transitioned to become MSSP ACOs.

What are the Newest ACO Models to be Introduced?

In addition to establishing a “Track 3” option in the MSSP program (described below), CMMI has launched new ACO models to test additional interventions and refinements to the current models, based on the early ACO experiences and discussions with stakeholders.

• Track 3 MSSP ACO — Started in 2016, Track 3 of the MSSP ACO model offers new financial incentive structure and different beneficiary attribution rules.  For example, under Track 3, ACOs have the potential for both greater shared risk and greater shared savings than under Track 2, the initial track that had downside risk.   Also, in Track 3, beneficiaries are prospectively attributed to the ACO, allowing ACOs to know their assigned beneficiaries ahead of time, and in 2017, beneficiaries will be able to select the ACO in which their main doctor is participating.  Beneficiaries may request a waiver from traditional Medicare rules requiring a 3-day hospital stay for most post-acute care coverage.  In several ways, the Track 3 MSSP ACO program is similar to the Pioneer ACO model, but can have fewer than 10,000 attributed beneficiaries.  As of November 2016, 16 ACOs are participating in this model.
• The ACO Investment Model — Started in 2016, this model provides advanced capital resources to MSSP ACOs to aid in their development of infrastructure for population health care management.  This model is focused predominantly on physician-only ACOs and rural ACOs with between 5,000 and 10,000 assigned beneficiaries.  It follows a similar financial structure as the Advance Payment ACO, which provides for shared savings opportunities after accounting for advance payments.  As of November 2016, 45 ACOs are participating in this model.
• The Next Generation ACO Model — Also started in 2016, this new ACO model is designed to allow experienced ACOs with at least 10,000 Medicare beneficiaries to assume higher levels of both financial risk and reward than the earlier ACO models.  Additionally, beneficiaries have the opportunity to confirm or reject their claims-based attribution to an ACO and may receive a coordinated care incentive (payment made directly to beneficiaries from CMS) if at least a specified percentage of their patient encounters are with their Next Generation ACO’s providers/suppliers (or preferred providers and affiliates).  As with other ACOs, and consistent with traditional Medicare, patients in Next Generation ACOs will continue to have no restrictions on their ability to see any providers they choose, whether or not the providers are affiliated with their assigned ACO.  As of November 2016, 18 ACOs are participating in this model.

Bundled Payments

What Are Bundled Payments?

Also known as episode-of-care payments, the concept of bundled payments is to establish a total budget for all services provided to a patient receiving a course of treatment for a given clinical condition over a defined period of time.  For example, a single payment amount for a patient undergoing knee replacement would include: the surgeon’s fee, the anesthesiologist charges, the hospital’s charges, other physician charges for hospital-based care, and costs for post-surgical physical therapy.  Rather than each provider (or each site) being responsible only for their part in the patient’s care and spending, all of the affiliated providers share a portion of the total budget.  As such, if total expenses for an episode of care are lower than the target price of the bundle, then the affiliated providers may share in the “savings”; alternatively, if their costs for that episode of care exceed the bundle’s target price, then the providers may “lose” money on that episode.

CMS is testing several new and ongoing bundled payment models for acute and post-acute care, four of which are part of the Bundled Payment Care Improvement (BPCI) initiative.  As noted below, these models vary based on scope of services included in the bundle, type of organization that holds the overall risk contract for the episodes (e.g., inpatient hospital or post-acute provider), and payment methodology.  In some of the models, providers also have flexibility to choose the length of the episode (30, 60, or 90 days).  Early results from BPCI are detailed in Table 5; newer models, for which results are not yet available, are described later in this section.  Across the country (Figure 3), the four BPCI models that CMMI is implementing are:

• BPCI Model 1 —Model 1 bundles all inpatient hospital services for the episode of care and applies a discount to the usual Medicare hospital payment. Hospitals can make “gainsharing” payments to contracted physicians or practitioners to provide incentives for lowering overall episode spending.
• BPCI Model 2 —Model 2 bundles inpatient hospital services, physician services, and post-acute care services throughout an episode of care (beginning with an inpatient hospitalization), as well as other Part A and Part B services received post-discharge from the hospital, including hospital readmissions. CMS retrospectively compares actual expenditures against a target price.
• BPCI Model 3 —Model 3 bundles post-acute care services throughout an episode of care (which begins after discharge from an inpatient hospitalization), as well as other Part A and Part B services received post-discharge from the hospital, including hospital readmissions. Like Model 2, CMS retrospectively compares actual expenditures against a target price.
• BPCI Model 4 —Model 4 bundles all inpatient and physician services during the initial hospital stay and subsequent hospital readmissions, but does not include post-acute care services in the bundle. Unlike models 2 and 3, Model 4 provides a prospective payment at the start of the episode of care.

Conceptually, How Could Bundled Payments Improve Care and Reduce Costs?

When a set of providers shares the budget for multiple services provided to a given patient within one episode of care, rather than separate payments for each service, the providers have a financial incentive to collaborate to improve efficiency and possibly lower their own costs associated with an episode of care.²⁶   For example, under models two and three, providers may find ways to eliminate duplicative or unnecessary services and work with patients and other physicians to select the most appropriate post-acute patient care settings.  Bundled payments may also create incentives to improve care quality, because the cost of treatments due to errors or medical complications comes from within the total episode budget.  Fewer complications may translate into higher savings to be shared among the participating providers, as well as better patient experience.

How Do Bundled Payments Differ from the Status Quo in Traditional Medicare?

Under traditional Medicare, each provider or facility is reimbursed separately for the services they deliver, whether or not they are part of a larger episode of care for a given patient.  In contrast, with bundled payment arrangements, Medicare determines a single target price for a defined episode of care, which may span across multiple providers (potentially, hospitals, physicians, and post-acute care providers).  Presumably, the financial risk and savings are shared across providers, but the extent to which individual providers in bundled payment arrangements incur losses or bonuses depends on their contractual agreements with the organization that is officially designated as accountable for the episodes of care (i.e., the “awardee”).

CMS payment to BPCI providers are subject to the same quality incentive payments administered through traditional Medicare, such as in the Hospital Value-Based Purchasing program.²⁷   The reconciliation payments (e.g., the savings to Medicare that providers keep from spending below their target levels) are not tied to specific quality metrics.  BPCI awardees, however, may make incentive payment to partnering providers that meet quality performance targets pre-determined in their contractual agreement.

How Are Beneficiaries Involved in Bundled Payment Models?

CMMI estimates that about 130,000 beneficiaries are affected by the BPCI models—all of whom had a hospitalization to “trigger” the episode of care under a bundled payment arrangement.  CMS requires that providers participating in all four models of the BPCI inform their patients that they are participating in the model, and that as beneficiaries in traditional Medicare, they are free to obtain services from any willing Medicare provider.  Providers participating in bundled payment models may recommend or direct patients to certain provider partners (such as certain home health agencies), if they determine that those providers might offer care that could help meet quality and spending targets.

What Are Some of the Implications for Beneficiaries of Bundled Payments?

On the one hand, beneficiaries may experience better health outcomes, considering providers’ financial incentives to improve care to avoid re-hospitalizations and other complications.  Additionally, for patients who wish to recover at home following a hospital admission, bundled payment arrangements may help providers find ways to provide adequate care in lower-cost environments.  On the other hand, with incentives to reduce the overall costs, there is a concern that bundled payment arrangements may encourage some providers to stint on care or avoid caring for sicker patients.²⁸   Patients with high health needs and less family caregiver support at home may require more costly post-acute care than other patients, highlighting the need for program evaluation to monitor care provided to these vulnerable patients.  Also, while Medicare beneficiaries have free choice of their providers, it will also be important to examine discharge patterns to understand if or how patients may be steered to affiliated facilities—which may be beneficial to patients when the facilities provide better and more efficient care, but may not be as helpful to patients if the facilities are inconvenient or provide lower-quality care.

What Are Some of the Implementation Challenges with Bundled Payments?

Administering bundled payments raises several implementation challenges from the standpoints of both Medicare and the individual providers.  For Medicare and CMS, these include determining what services are included in the bundles, setting payment levels for each bundle, and identifying appropriate quality measures.  Except for model 1, all other BPCI models allow provider participants to select the conditions for which their bundled payments will apply (from 48 options), which may minimize the potential benefit of the payment approach.  Provider organizations receiving bundled payments also face challenges, including determining which partners bear the costs of infrastructure investments and how potential savings will be shared among the affiliated providers, given that some may see more patients, or costlier patients, than others.

What Early Results Are Available from the Bundled Payment Models Being Tested?

Evaluation results for the BPCI models show variation both between models and within models, depending on the type of clinical episode and other variables, such as post-acute care settings (Table 5).  For example, for Model 1, which bundles inpatient hospital care, evaluators report that for the first 15 months, BPCI episodes achieved lower cost growth overall than non-BPCI episodes (relative to the baseline level).  Savings during the initial hospital stay were minimized when factoring in relatively higher spending in the post-acute period for the BPCI participants.  Regarding quality, the first evaluation found no significant differences in readmission rates or mortality rates between BPCI and non-BPCI episodes, but evaluators noted need for further analysis of outlier mortality measures.  Multiple withdrawals during the evaluation period among participants in Model 1 affected the measurability of these results.

Model 2, for which hospitals and physician groups are accountable for both the acute and post-acute period of care, was the most widely adopted model among BPCI participants.  Evaluation results for the first year found that orthopedic surgery episodes (mostly hip and knee replacements) among BPCI participants had lower spending over 90 days than non-BPCI participants.  This reduction was attributable, in part, to decreases in the use of skilled nursing facility (SNF) services and inpatient rehabilitation facilities (IRF) concurrent with increases in the use of home health services, and reductions in hospital readmissions.  Spinal surgery episodes, however, had higher Medicare payments among BPCI participants compared to non-BPCI participants.  The remaining four clinical episode groups showed no statistically significant difference in spending between BPCI and non-BPCI episodes. Researchers are considering the impacts that noted increases in the number of episodes may have on total Medicare spending among BPCI hospitals.²⁹   Quality outcomes showed no differences between BPCI and non-BPCI episodes in hospital readmissions, but certain BPCI episodes had higher emergency department use. Using additional months of outcome data, evaluators generally found no statistically significant differences in mortality rates for most episode groups.

In Model 3, which focused only on post-acute care episodes, and Model 4, which focused only on acute care, most clinical episode groups did not show a statistically significant change in overall spending, though days in SNF care among Model 3 participants was lower.  Also for Model 3, quality outcomes were similar to those in comparison groups, with a few exceptions, including an increase in readmission rates.  Model 4 participation declined during the evaluation period, limiting the ability to detect statistically significant differences in spending and quality.

What are the Newest Bundled Payment Models to be Introduced?

CMS is planning additional bundling payment models in the near future, including:

• Oncology Care Model (OCM) — This model, started in 2016, focuses on care provided by medical practices to beneficiaries receiving chemotherapy for cancer during six-month episodes of care. It will include a two-part payment system—a per-beneficiary payment for each month of the episode and a lump sum performance-based payment for episodes of chemotherapy care based on quality and spending outcomes.  This program is also seeking agreements with other insurers, including commercial insurers and state Medicaid agencies, to join this payment model for participating practices and potentially create broader incentives for care transformation at the practice level, not just for Medicare beneficiaries in traditional Medicare.  As of November 2016, nearly 200 physician practices are participating.
• The Comprehensive Care for Joint Replacement (CJR) Model — This bundled payment model, started in 2016, is designed for episodes of care initiated by a hospital stay for lower extremity joint (hip and/or knee) replacements. This model is similar to BPCI Model 2, but a key difference is that for most hospitals in the 67 selected geographic areas, participation is mandatory rather than voluntary.  Under the CJR model, about 800 hospitals will be at financial risk for the care provided during the initial hospital stay plus 90 days after discharge from the hospital.  As with other bundled payment approaches, the aim is to give hospitals and other providers an incentive to improve care coordination and invest in activities that will increase quality and efficiency.

Appendix: Payments Allocated for CMMI Models

1. Department of Health and Human Services, Press Release: “Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value,” January 26, 2015, http://www.hhs.gov/about/news/2015/01/26/better-smarter-healthier-in-historic-announcement-hhs-sets-clear-goals-and-timeline-for-shifting-medicare-reimbursements-from-volume-to-value.html. ↩︎
2. DHHS, 2015. ↩︎
3. On October 14, 2016, CMS released its final rule defining the health professionals who can qualify for bonuses, and the eligibility criteria for the applicable alternative payment models. See final rule here: https://www.federalregister.gov/documents/2016/11/04/2016-25240/medicare-program-merit-based-incentive-payment-system-mips-and-alternative-payment-model-apm. ↩︎
4. Centers for Medicare and Medicaid Services: Center for Medicare and Medicaid Innovation, Report to Congress, December 2012, cited September 20, 2014, available at http://innovation.cms.gov/Files/reports/RTC-12-2012.pdf. ↩︎
5. Includes programs managed outside of CMMI, such as the Medicare Shared Savings Program. Calculated from data provided on Center for Medicare and Medicaid Innovation sites as of August, 2015, available at https://innovation.cms.gov. ↩︎
6. Blumenthal, D., M. Abrams, and R. Nuzum, “The Affordable Care Act at 5 Years,” N. Engl. J. Med. 2015;372(25):2451-58; Abrams, M. et al., “The Affordable Care Act’s Payment and Delivery System Reforms: A Progress Report at Five Years,” Bipartisan Policy Center, May 2015, http://www.commonwealthfund.org/publications/issue-briefs/2015/may/aca-payment-and-delivery-system-reforms-at-5-years; Korda, H. and Gloria N. Eldridge, “Payment Incentives and Integrated Care Delivery: Levers for Health System Reform and Cost Containment,” Inquiry (Oslo) 2011;48(4):277-87; America’s Health Insurance Plans, “Transforming Care Delivery,” January 2012, available at http://www.ahip.org/HillBriefings/Issue-Brief-Transforming-Care-Delivery/. ↩︎
7. Office of the Legislative Counsel, 2010; Centers for Medicare and Medicaid Services, Report to Congress, 2012. ↩︎
8. Rajkumar, R., M. Press, and P. Conway, “The CMS Innovation Center—A Five-Year Self-Assessment” New England Journal of Medicine 372;21 (May 2015) http://www.nejm.org/doi/full/10.1056/NEJMp1501951. ↩︎
9. Shrank, W., “The Center for Medicare and Medicaid Innovation’s Blueprint for Rapid-Cycle Evaluation of New Care and Payment Models,” Health Aff. (Millwood) 2013;32(4):1-6. ↩︎
10. For further discussion of the evaluation methods for the CMMI models, see: Howell, B., P. Conway, and R. Rajkumar, “Guiding Principles for Center for Medicare & Medicaid Innovation Model Evaluations,” Journal of American Medical Association, 313;23 (June 16, 2015). http://jama.jamanetwork.com/article.aspx?articleid=2278025. ↩︎
11. American College of Physicians, “What is the Patient-Centered Medical Home?” cited June 9, 2014, available at http://www.acponline.org/running_practice/delivery_and_payment_models/pcmh/understanding/what.htm. ↩︎
12. AcademyHealth, “Medical Homes and Accountable Care Organizations: If We Build It, Will they Come?” 2009, available at http://www.academyhealth.org/files/publications/RschInsightMedHomes.pdf. ↩︎
13. Cassidy, A., “Patient-Centered Medical Homes,” Health Affairs and the Robert Wood Johnson Foundation Health Policy Brief, September 14, 2010, available at http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_25.pdf. ↩︎
14. Starting January 1, 2015, Medicare allowed certain physicians and other health professionals to bill a care management code for non-face-to-face care management of eligible Medicare patients with multiple conditions.  For more information, see: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/ChronicCareManagement.pdf. ↩︎
15. Mathematica Policy Research, “Coordinating Care for Adults with Complex Care Needs in the Patient-Centered Medical Home: Challenges and Solutions,” prepared for Department of Health and Human Services: Agency for Healthcare Research and Quality, January 2012, available at https://pcmh.ahrq.gov/sites/default/files/attachments/Coordinating%20Care%20for%20Adults%20with%20Complex%20Care%20Needs.pdf; “Patient-Centered Medical Homes,” 2010. ↩︎
16. Curnow, R.J., “The Patient Centered Medical Home: Opportunity and Challenges”

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    , cited June 7, 2014, available at http://www.pcpcc.org/sites/default/files/media/curnow_cmd_12-07-10.pdf. ↩︎
17. Centers for Medicare and Medicaid Services, “Affordable Care Act payment model saves more than $25 million in first performance year,” June 18, 2015, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-06-18.html; Centers for Medicare and Medicaid Services, “Affordable Care Act payment model continues to improve care, lower costs,” August 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-08-09.html. ↩︎
18. Centers for Medicare and Medicaid Services: Center for Medicare and Medicaid Innovation, “Accountable Care Organizations (ACOs): General Information,” cited November 23, 2015, available at https://innovation.cms.gov/initiatives/ACO/. ↩︎
19. Centers for Medicare and Medicaid Services, “Next Generation Accountable Care Organization Model (NGACO Model),” January 11, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-01-11.html. ↩︎
20. McWilliams, M, et al, “Early Performance of Accountable Care Organizations in Medicare,” N Engl J Med 374:2357-2366 (June 2016). Nyweide, D., et al, “Association of Pioneer Accountable Care Organizations vs Traditional Medicare Fee for Service with Spending Utilization, and Patient Experience,” JAMA 313(21), (May 2015). ↩︎
21. Cutler, D.M. and F.S. Morton, “Hospitals, Market Share, and Consolidation,” JAMA 2013;310(18):1964-70; Baicker, K., “Coordination versus Competition in Health Care Reform, N Engl. J. Med. 2013;369(9):789-91. ↩︎
22. Medicare Payment Advisory Commission, “Accountable Care Organizations Payment Systems,” revised October  2016, available at http://medpac.gov/docs/default-source/payment-basics/medpac_payment_basics_16_aco_final.pdf?sfvrsn=0; Muhlestein, D., Saunders, R., and McClellan M., “Medicare Accountable Care Organization Results for 2015: The Journey to Better Quality and Lower Costs Continues,” Health Affairs Blog September 2016, http://healthaffairs.org/blog/2016/09/09/medicare-accountable-care-organization-results-for-2015-the-journey-to-better-quality-and-lower-costs-continues/. ↩︎
23. On balance, the CMS Office of the Actuary certified the Pioneer ACO model as cost-saving. Nyweide, D., et al, “Association of Pioneer Accountable Care Organizations vs Traditional Medicare Fee for Service with Spending Utilization, and Patient Experience,” JAMA 313(21), May 2015. ↩︎
24. Centers for Medicare and Medicaid Services, “Medicare ACOs Provide Improved Care While Slowing Cost Growth in 2014,” August 25, 2015, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-08-25.html;  Medicare Payment Advisory Commission, 2015. ↩︎
25. Centers for Medicare and Medicaid Services, August 2015; U.S. General Accounting Office, “Results from the First Two Years of the Pioneer Accountable Care Organization Model,” April, 2015. ↩︎
26. Bertko, J. and Rachel Effros, “Increase the Use of ‘Bundled’ Payment Approaches,” RAND Corporation, 2010, http://www.rand.org/pubs/technical_reports/TR562z20.html. ↩︎
27. Established by the Affordable Care Act, the Hospital Value-Based Purchasing program adjusts Medicare payments to hospitals based on their performance on selected quality measures. For more information, see: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html. ↩︎
28. Miller, H. and Strategic Initiatives Consultant, [Working Draft] “From Concept to Reality: Implementing Fundamental Reforms in Health Care Payment Systems to Support Value-Drive Health Care,” July 21, 2008, available at http://amcp.org/WorkArea/DownloadAsset.aspx?id=13445. ↩︎
29. Fisher, E.S., “Medicare’s Bundled Payment Program for Joint Replacement: Promise or Peril?” JAMA 2016;316(12):1262-64. ↩︎