Affordable Care Act Will Save $120 Billion for Medicare over 5 Years

By Editor, on May 14th, 2011

A new report released on May 12, 2011, by the Centers for Medicare and Medicaid Services (CMS), reported that Improvements to Medicare under the Affordable Care Act will lower Medicare costs by $120 Billion over the next five years, while improving care.

The new report, entitled “Strengthening Medicare: Better Health, Better Care, Lower Costs; Efforts Will Save Nearly $120 Billion for Medicare Over Five Years,” is available on the CMS website: CMS.gov.

It outlines savings resulting from improvements to the Medicare program, including implementation of several provisions in the Affordable Care Act, cracking down on fraud, waste, and abuse in the Medicare system; reforming payment systems to reward high quality care; and others.

The report contains this chart, outlining the provisions and their savings, and showing that they will produce a combined $120 billion of savings for Medicare over the next five years:

Health Care Delivery System Reforms	Savings through 2015
Reforming provider payments — rewarding quality of care	$55 billion
Improving patient safety — lowering hospital readmissions and hospital-acquired conditions	$10 billion through 2013*
Cracking down on fraud and abuse in the Medicare system	$1.8 billion**
Getting the best value for Medicare beneficiaries and taxpayers for durable medical equipment	$2.9 billion ($17 billion over ten years)
Reducing excessive Medicare payments to insurance companies	$50 billion

* Amount shown represents the reduction in Medicare expenditures that could be achieved if the CMS
goals for reducing readmissions and hospital-acquired conditions are met.
** Estimated savings for Medicare program integrity provisions in the Affordable Care Act; does not
include other, ongoing CMS initiatives.

“Just a year after passage, we are seeing savings in Medicare begin to materialize from provisions in the Affordable Care Act,” said Donald Berwick, MD, CMS Administrator, in a release issued by the U.S. Department of Health & Human Services (HHS), accompanying the report. “This work is laying the groundwork for a larger transformation of Medicare and our health care delivery system, from simply paying for the volume of services provided to rewarding the quality of care delivered. We remain committed to achieving a health care system that pursues better care, better health, and lower cost through improvement.”

In addition to the listed provisions implemented to date, the report describes several additional steps that CMS is taking to achieve longer-term savings and reform to the health care delivery system, including:

Better coordinated care for individuals enrolled in Medicare and Medicaid;
Creation of the Center for Medicare and Medicaid Innovation to test innovative payment and service delivery models;
Promotion of Accountable Care Organizations;
Broader value-based purchasing programs;
Creation of the Independent Payment Advisory Board to recommend ways to best improve quality of care for Medicare beneficiaries while lowering costs;
Expanding use of Electronic Health Records;
Administrative Simplification;
Medicare Advantage payment reform;
Enhanced program integrity, fraud, waste, and abuse prevention work;
Promoting prevention and wellness.

Read the full CMS report, at: http://www.cms.gov/apps/files/medicare-savings-report.pdf

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