Spillover effects from MSSP

The Medicare Shared Savings Program (MSSP) is the delivery reform side of the ACA. It applies to Medicare Fee for Service (FFS) where provider entities of various flavors take on significant financial risk and financial upside to manage a defined Medicare FFS beneficiary population for a year for a given cost in an Accountable Care Organization (ACO). If the ACO spends less money than the target, the ACO keeps some of the gain. If they spend more money, in some models, the ACO loses money. In some ways, it can be cheekily described as Medicare Advantage incentives in FFS clothing.

So far, it looks like the most recent round of models is leading to small savings with increased quality. This is a win. There is a big methodological fight over what the appropriate counterfactual should be to assess savings. I am, at best, qualified to tell everyone in that seminar room that we need to get out now as someone has it reserved for a meeting starting in two minutes.

The CMS actuaries make a very good point in a recent rule (h/t Farzad Mostashari) that the savings which are currently being attributed to the MSSP program are ignoring a very real and growing source of secondary savings. Medicare FFS spending levels drive Medicare Advantage benchmark bids.

To the extent that proposed changes to the Shared Savings Program will result in net savings… In addition, because MA payment rates depend on the level of spending within traditional FFS Medicare, savings or costs arising from the proposed changes to the Shared Savings Program would result in corresponding adjustments to MA payment rates…. these secondary impacts has been included in
the analysis shown.

Let’s back that out a little bit. Medicare Advantage is bid out at the local cost of providing the traditional Medicare FFS benefit package. If the cost to provide FFS benefits are lower, than the Medicare Advantage bid is lower. That saves the federal government money to provide the same service at a slightly lower price.

Now this is where it gets interesting. We could plausibly see a virtuous interaction between Medicare Advantage and MSSP.

Medicare Advantage has been shown to have positive spillover effects on the cost of FFS Medicare. As more people are covered by Medicare Advantage, the average cost of FFS goes down. Austin Frakt has a good summary of the recent literature (up to mid-2016) on Medicare Advantage spillover effects. The theory is that Medicare Advantage payers more aggressively manage care than FFS Medicare. Once a certain threshold of revenue is met, providers (doctors and hospitals) are willing to change their care patterns for all patients and not just their Medicare Advantage patients. This leads to lower FFS costs which then restrains MA bid growth in the future.

Now, what I am thinking is that if MSSP also lowers FFS costs, MA bids need to be lower. It places a cycle where more and more of the entire Medicare population is being actively managed by some risk bearing entity that has at least partial gains from becoming more efficient.

It may not be a world changer, but this could be another one of those 1% solutions that pushes us in the right direction.