Proponents of the Patient Protection and Affordable Care Act (PPACA) have advocated for Medicare accountable care organizations (ACOs)—groups of doctors, hospitals, and other health care providers that form new organizations to serve Medicare patients—as a way to supposedly transform how hospitals and physicians care for their patients and thus slow the rate of health spending while also improving the quality of care. But more than three years after enactment, it is clear that PPACA ACOs are fundamentally flawed because they prevent genuine consumer choice: the populations the ACOs are supposed to manage are often unaware that they are enrolled in an ACO and therefore have little incentive to stay within the ACO care network. The ACOs are furthermore hamstrung by their reliance on cumbersome fee-for-service payment systems. On the other hand, long-standing integrated care initiatives have shown potential for slowing cost growth and improving the quality of care. Rather than seeking to repair the broken PPACA ACO model, reformers should create a new model that incorporates provider-driven managed care into a larger system of genuine consumer choice and marketplace competition.
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