Economists Caution: ACOs May Not End Wasteful Health Spending

Expensive technologies like proton beam therapy and hot chemo baths are among the reasons America’s health care spending is rising at an unsustainable clip and making the federal deficit so hard to tame.

But two of the nation’s top health care economists are expressing doubts that accountable care organizations — one of Obama administration’s most-hyped mechanisms to save money — will be able to overcome the medical system’s lust for the new new thing.

Established through last year’s health law, ACOs are networks of doctors and hospitals that would collaborate to provide quality care at lower cost, with the motivation of keeping a share of the savings they deliver to Medicare and private insurers. Medicare has been working for months to get the program running by next year.

In a paper delivered last week at a Federal Reserve Bank of Kansas City symposium in Jackson Hole, Wyo., Harvard’s Katherine Baicker and Amitabh Chandra warned that ACOs may not want to rein in the use of expensive technologies that haven’t been proved superior to old-fashioned approaches, since the new stuff is often a major lure for patients.

They write:

The authors also warn that even if ACOs do achieve savings by performing fewer procedures, “some of the savings from lower quantities may be offset with higher prices as ACOs exert market power” by charging more to private insurers.

Their paper has the relatively snappy title of “Aspirin, Angioplasty, and Proton Beam Therapy: The Economics of Smarter Health Care Spending.” It’s the latest argument that’s been made about the need to limit the use of fancy technology, as political accusations of “death panels” have receded for the moment.

But the Harvard professors are bleak that fixing most of America’s wasteful health spending, including that on iffy technology, will be enough. They conclude:

jrau@kff.org