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Health Care Law 3rd Anniversary: Paying for Quality Saves Health Care Dollars

On the third anniversary of the Affordable Care Act, Secretary Kathleen Sebelius lays out some of the ways in which health reform has lowered costs.

Ed. note: This post was first published on the official blog of You can see the original post here.

For decades before the passage of the Affordable Care Act, health care costs outstripped inflation, without corresponding improvements in health care quality. Our system didn’t incentivize quality or efficiency. We paid providers for the quantity of care, not the quality of care delivered. And we were not using technology to deliver smarter care.

The Affordable Care Act includes steps to improve the quality of health care and lower costs for you and for our nation as a whole. This means avoiding costly mistakes and readmissions, keeping patients healthy, rewarding quality instead of quantity, and creating the health information technology infrastructure that enables new payment and delivery models to work.

Here are just a few ways that the health care law builds a smarter health care system and incentivizes quality – not quantity of care - to drive down costs and save you money.

We’re Shifting the Focus to Quality, Not Quantity

The health care law creates new Accountable Care Organizations (ACO) that incentivize doctors and other providers to work together to provide more coordinated care to their patients. ACOs agree to take responsibility for the cost and quality of their patients and to improve care coordination, safety, and to promote appropriate use of preventive health services. And when this new care model saves the Medicare program money, that savings is shared with the ACO. Over 250 organizations are participating in Medicare ACOs, giving more than 4 million Medicare beneficiaries access to high-quality coordinated care throughout the nation. ACOs are estimated to save the Medicare program up to $940 million in the first four years.

The Affordable Care Act also ties Medicare Advantage bonus payments to the quality of coverage these private plans offer. This gives seniors a broader range of higher quality Medicare Advantage plans from which to choose. As a result, in 2013, the 14 million Medicare beneficiaries currently enrolled in Medicare Advantage have access to 127 four and five star plans, which is 21 more high-quality plans than were available in the previous year.

Keeping You Out of The Hospital

Every year, about 2.6 million seniors – or nearly one in five hospitalized Medicare enrollees – are readmitted within 30 days of discharge, at a cost of more than $26 billion to the Medicare program. Many of these readmissions stem from preventable problems. These rates can be drastically reduced if we do a better job coordinating care and support. The health care law’s Hospital Readmissions Reduction Program reduces Medicare payments to hospitals with relatively high rates of potentially preventable readmissions to encourage them to focus on this key indicator of patient safety and care quality.

We’re starting to see results. Medicare readmissions rates have remained stuck near 19 percent over the five years that the data has been collected (and likely for decades prior to that), but in 2012 the nationwide rate of hospital readmissions of Medicare patients declined to about 17.8 per cent. This translates to over 70,000 fewer preventable hospital readmissions.

Lowering Costs

Taken together these improvements are providing more value for your health care dollar and helping to fuel historically low cost growth rates in Medicare and Medicaid. Last year, Medicare cost growth increased by only 0.4 percent, continuing the historically low Medicare growth we saw in 2011 and 2010. Spending in Medicaid actually decreased 1.9 percent from 2011 to 2012.

And a recent report found that health care price inflation in January dropped to 1.5 percent, one of the smallest increases on record.

As the nation’s largest insurer, Medicare can lead the way in effective practices like this that deliver better care and drive down costs. Our goal is that these reforms and investments build a health care system that will ensure quality care for generations to come.

Learn more about key features of the Affordable Care Act: