Last week, CMS announced that the Medicare Shared Savings Program (MSSP) achieved record net savings of $2.1B in program year 2023 (PY 2023). CMS Administrator Chiquita Brooks-LaSure described the results as “meaningful savings for the Medicare program.”
Viewed charitably, that characterization calls to mind the first paragraph of The Adventures of Huckleberry Finn:
YOU don't know about me, without you have read a book by the name of The Adventures of Tom Sawyer; but that ain't no matter. That book was made by Mr. Mark Twain, and he told the truth, mainly. There was things which he stretched, but mainly he told the truth. That is nothing. I never seen anybody but lied one time or another, without it was Aunt Polly, or the widow, or maybe Mary. Aunt Polly—Tom's Aunt Polly, she is—and Mary, and the Widow Douglas is all told about in that book, which is mostly a true book, with some stretchers, as I said before.1
Perhaps “meaningful savings” are, like beauty, in the eye of the beholder. The $2.1B net savings in PY 2023 are ~2% of the $944B of Medicare expenditures in 2022 and represent a per capita savings of $193 for the 10.9M participants, which is almost enough to pay for Amazon Prime and Netflix for a year.2 The PY 2023 results are consistent with the net program savings per capita of $192, $190 and $190 in 2022, 2021 and 2020, respectively.3 If per capita savings are flat as Medicare increases at 5-6% per year, those “meaningful savings” will be increasingly meaningless.
Perhaps even more concerning is this paragraph from CMS’s press release:
Over the past decade, the Shared Savings Program has grown into one of the largest value-based payment programs in the country. As of January 2024, 480 Shared Savings Program ACOs include more than 608,000 clinicians who provide care to nearly 11 million people with Medicare. Based on the program’s record success and opportunities to continually improve value for people with Medicare and the health care system, CMS has set a goal that 100% of people with Traditional Medicare will be part of an accountable care relationship by 2030.
Bless their hearts.
MedPAC projects that there will be 77M Medicare beneficiaries in 2030 which, based on current trends, would result in 38M people in Traditional Medicare. Trilliant Health’s Provider Directory contains 3.0M “active” NPIs. If 608,000 clinicians – or more than 20% of active providers – are required to treat 10.9M people to generate per capita savings of $193, the implied maximum savings to CMS if MSSP were deployed against “100% of people with Traditional Medicare” in 2030 is $7.3B. In comparison to MedPAC’s projected 2030 Medicare expenditures of more than $1.5T, $7.3B is barely a rounding error.4
Moreover, America has a well-documented shortage of primary care physicians, a trend that is projected to worsen in the next decade:
The shortage of primary care physicians is even more pronounced in rural areas.
According to the Census Bureau, 24% of Americans aged 65 and over live in rural areas, calling into question yet again how MSSP can be scaled to achieve CMS’s “goal that 100% of people with Traditional Medicare will be part of an accountable care relationship by 2030.”5
I have written previously about the fact that, after 20 years of relentless promotion of value-based care by CMS and expensive consultants, only seven people have succeeded in creating valuable value-based care platforms. Notably, at least to a strategist, is that three of those platforms were operated in Miami-Dade County, which has some rather unique market characteristics and participants that frequently invite regulatory scrutiny.
The fundamentals of a lucrative VBC business model delivering “advanced” primary care are the following:
“Advanced” primary care is relatively easy to understand but exceptionally difficult to deliver, as Amazon, Cigna, CVS, Walgreens and Walmart have recently discovered. Perhaps unsurprisingly, one analyst suggests that 10 ACOs out of 453 participants – or 3% – generated 20% of PY2023 savings. Equally unsurprisingly, the health systems who have consistently generated meaningful MSSP savings in the past few years are Baylor Scott & White and Advocate Aurora Health, each of which has thousands of employed/affiliated physicians. It is unclear whether those systems need those MSSP savings to offset the financial losses typically generated when health systems employ primary care physicians.
If you think that value-based care, i.e. taking economic risk for a cohort of patients and operating an advanced primary care model focused on limiting a consumer’s interactions with the most expensive part of the healthcare system, is a good business strategy for your organization, then Godspeed. Like you, I believe VBC is a good business model and am an investor in three VBC companies. At the same time, if you, like some VBC operators, want to issue press releases about the “tax dollars” you save for America, be certain that your success is ultimately quixotic from a health policy perspective and doesn’t benefit the American taxpayer since the IRS isn’t issuing shared savings refunds.
If, on the other hand, you are promoting value-based care as the panacea to America’s septic healthcare system, then you are like one of the characters in The Wizard of Oz. You lack either the heart to tell the American public the truth about the dramatic changes required to save the healthcare system or the brains to do the 3rd grade math to know that VBC programs cannot save the day or the courage to do what is necessary to transform the system. Closing your eyes, clicking your heels and thinking that shared risk models will save Medicare enough money to bend the healthcare cost curve is a dream. In that case, you are part of the problem, not part of the solution.
The “record success” of PY2023 of MSSP, while true, is immaterial in a $4.5T health economy. True success in a business is to deliver more value consistently, providing additional benefits at the same or lower cost, a construct that most businesses understand as an immutable truth.
The only part of the U.S. economy that delivers less value than the health economy is the higher education sector, with each characterized by insatiable inflationary cost structures. Ultimately, health economy stakeholders must deliver more value, whether more services for the same price or better quality for the same price or, perish the thought, additional higher quality services at a lower price.
When CMS reimburses 100% of hip replacements with a bundled payment, I will know that the era of VBC has begun. Whether VBC in the form of bundled payments, i.e. more providers being forced to share a (smaller) DRG payment, can bend the cost curve is an open question.
Whatever yesterday’s election was about, it clearly was not about the fact that the U.S. health economy threatens to bankrupt the United States of America. America cannot avoid that conversation for much longer.