The Impact of the Payment and Delivery System Reforms of the Affordable Care Act

The U.S. health care system has long been marked by high spending, comparatively poor health outcomes, inequities, waste, and inefficiency. To address these issues, the Affordable Care Act (ACA) includes several provisions to reform how the nation organizes, structures, and pays for its health care. The law instituted several mandatory national payment reforms through the Medicare program and created the Center for Medicare and Medicaid Innovation (CMMI), which was funded with $10 billion every 10 years to develop, test, and promote innovative payment and delivery models. Below is a summary of evidence from some of the major innovations tested by CMMI since its inception.

Overall, these initiatives transformed health care delivery and payment across the United States, and many have reduced costs and improved quality of care. The results were often mixed, however, and the magnitude of impact was modest in many instances. In these first 10 years, six of the 50 models launched by CMMI yielded statistically significant savings. Furthermore, many models were not designed explicitly to address health disparities, and the evaluations rarely investigated how models impacted beneficiaries across demographics.

In 2021, CMMI published its vision of innovation over the next 10 years, which includes a renewed focus on creating value and accountability in health care, addressing affordability, advancing equity, and leveraging data to monitor and support care transformation. To achieve meaningful, sustainable gains, future models of payment and delivery system reform will need to be redesigned in light of the lessons learned from the past 10-plus years of innovation.

Mandatory National Payment Reform Initiatives

The Affordable Care Act introduced compulsory value-based payment initiatives through Medicare to reduce hospital readmissions and hospital-acquired conditions and to improve the overall quality of care that hospitals deliver. Studies evaluating these programs have produced mixed results and have not shown significant improvements in outcomes. Some evidence suggests that one of the models may have increased mortality, and that these models disproportionately penalize minority- and low-income-serving hospitals.

Accountable Care Organizations (ACOs)

ACOs are networks of physicians, hospitals, and other providers that voluntarily come together to be held accountable for the cost and quality of care for attributed patients. Participants in ACOs can accept either upside-only risk, whereby they can share in savings to Medicare, or two-sided (upside and downside) risk, whereby they can share in savings or pay a penalty, depending on the specific model, on performance on quality metrics, and on spending relative to benchmarks. As of 2022, there were 483 ACOs operating under Medicare. Overall, they appear to produce net savings for Medicare while improving or maintaining quality of care, with ACOs in the Medicare Shared Savings Program showing the greatest promise. Physician-led ACOs tend to perform better than hospital-led ACOs, and ACO performance appears to improve over time.

Episode-Based Payment Initiatives

Episode-based payment programs test whether providing a single payment for a defined episode of care can produce savings while maintaining quality of treatment. Under these models, providers keep savings if spending is below targets, and lose money if spending exceeds targets. While on the whole these models have not yielded significant savings for Medicare, episode-based payments that are mandatory and those for surgical, rather than medical, conditions show the most promise for lowering costs without reducing quality.

Primary Care Transformation

Several federal payment and delivery system innovations have aimed to increase access to and quality of primary care. These programs typically employ the evidence-based patient-centered medical home (PCMH) model, which emphasizes care coordination, teams, patient engagement, and population health management. Evaluations of these efforts show largely mixed results, with few programs demonstrating meaningful increases in the availability of primary care, reductions in costly forms of utilization, or improvements in quality. Perhaps the most successful model has been Independence at Home, indicating that home-based care can be effective for high-need patients.

Innovation in Medicaid and the Children’s Health Insurance Program (CHIP)

The Center for Medicare and Medicaid Innovation tested several innovative payment and delivery models through Medicaid and CHIP. These programs aimed to tackle growing issues in the Medicaid and CHIP populations by preventing chronic disease, improving birth outcomes, and increasing access to behavioral health care. Two of these models — the Medicaid Incentives for the Prevention of Chronic Disease and Strong Start for Mothers and Newborns — improved outcomes for Medicaid and CHIP beneficiaries, although improvements were not always significant. These two programs are currently inactive.

Improving Care for Dually Eligible Beneficiaries

To improve care delivery and coordination across payers, the Center for Medicare and Medicaid Innovation tested models that aligned financial incentives for people enrolled in both Medicare and Medicaid. The evidence from these initiatives, though mixed, indicates that targeting dually eligible beneficiaries can yield savings and decrease hospitalizations.

Accelerating the Development, Testing, and Adoption of New Payment and Delivery Models

Several initiatives of the Center for Medicare and Medicaid Innovation provided funding to support health care systems, states, and communities in developing, testing, and spreading innovative, evidence-based ways of delivering and paying for care. Evaluations of these programs have often found cost savings and lower rates of costly forms of utilization like hospitalizations, but variation exists.