Potential Savings of Key Obamacare Program Overestimated

The estimated potential savings of Obamacare’s Shared Savings Program (SSP) may have to be downgraded according to a recent letter from the American Medical Group Association (AMGA) to the White House’s Office of Management and Budget (OMB).

Just before the passage of Obamacare, the Congressional Budget Office reported to Congress that the Shared Savings Program for accountable care organizations would save $0.5 billion dollars through 2014 and $4.9 billion dollars through 2019.[1]
In three separate articles, Politico Pro has reported that there was an internal battle within the Obama Administration over the SSP.2 It seems that OMB insisted that the proposed regulation require participants to take on significant risks so as to actually save half-a-billion dollars.

But, of course, that amount will be zero dollars if no one chooses to participate. So the Obama Administration took notice when all ten of the original demonstration project health provider networks collectively wrote CMS Administrator Donald Berwick to inform him that they would not participate in the Shared Savings Program without significant changes to the rules CMS proposed in April.3

Now the AMGA has written to OMB asking it to downgrade the expected savings from $510 million dollars to $170 million dollars.4 That’s two-thirds less than the original estimate.

How much less, then, should the savings estimate of $4.9 billion dollars through 2019 be reduced?

[1] Letter from Douglas W. Elmendorf, Director, Congressional Budget Office, to the Honorable Nancy Pelosi, Speaker of the U.S. House of Representatives, (March 20, 2010), page 4 of Table 5, available at http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf.

[2] See J. Lester Feder, OMB review may lock CMS into ACO rule, POLITICO PRO, May 19, 2011, https://www.politicopro.com/story/healthcare/?id=3415; J. Lester Feder, Sources: OMB raised the ACO savings goals, POLITICO PRO, May 20, 2011, https://www.politicopro.com/story/healthcare/?id=3449; and J. Lester Feder, AMGA to OMB: Don't lock in ACO savings so high, POLITICO PRO, June 9, 2011, https://www.politicopro.com/go/?id=3859.

[3] Letter from Nicholas Wolter, M.D., CEO of Billings Clinic, et al., to Donald Berwick, M.D., Administator, Centers for Medicare and Medicaid Services (May 12, 2011) available at http://thehill.com/images/stories/blogs/healthwatch/unhappyacos.pdf.

[4] Sam Baker, Providers say ACO savings estimates are too high, THE HILL HEALTHWATCH, June 9, 2011, http://thehill.com/blogs/healthwatch/health-reform-implementation/165607-providers-say-aco-savings-estimates-are-too-high.