Bundled payments are GOOD under Democrats but BAD under Republicans?

It’s been a couple days now since the U.S. Senate released their discussion draft entitled the “Better Care Reconciliation Act of 2017“. And, we’ve all witnessed the predictable hyperbolic, nonsensical, fact-devoid, rhetoric from Democrat Senators like Chuck Schumer and Elizabeth Warren who rile up their base by stating “the Senate health care plan will KILL millions of Americans!” All I can do is Chuckle when I see claims like this because both Chuckles and Fauxcohontas were strident supporters of Obamacare. In fact, other than Barack Obama, I can’t think of two more strident supporters of his “signature legislation“. Yet, when Republicans attempt to adopt one of the key features of Obamacare (albeit on a larger scale) by offering block grant payments to states so that they can better manage their Medicaid population, we are told that this feature will “KILL millions of Americans“. What feature am I referring to? None other than “bundled payments” which were a key feature of the “Pioneer ACO” program under Obamacare.


The concept of bundled payments was first attempted during George W. Bush’s administration but it really gained a foothold in the health care industry under Obamacare. There were 32 “Pioneer ACOs” – Accountable Care Organizations – set up under Obamacare in 2012 and the data we are now receiving only a few years later is very encouraging.  In fact after only 3 full years of operation, the end results of the usage of bundled payments and bonuses for participants who meet quality metrics is quite remarkable. This is why our nation’s largest health insurer adopted a value based bundled payment model and saved employers $10,000 per orthopedic procedure.

According to the most recent press release from CMS – Centers for Medicare and Medicaid Services, “Affordable Care Act Accountable Care Organization initiatives put patients at the center of their care while generating more than $1.29 billion in total Medicare savings since 2012″. Equally impressive is the fact that all 12 participants in the Pioneer Accountable Care Organization Model improved their quality scores from 2012 to 2015 by more than 21 percentage points. Overall quality scores for 9 out of 12 Pioneer participants were more than 90 percent in 2015.” Now, I’m not an expert on the English language but that sounds to me like patients are receiving better care whilst taxpayers are saving a lot of money.  The most compelling evidence (including huge savings and improved patient care) comes from the data collected on joint replacements, Cardiac care, outpatient acute care, inpatient rehab and skilled nursing facilities. How is this possible and why would Democrats not want to try this on a larger scale via Medicaid when faced with this encouraging data?


Bundled payments or “Value based payments” compel medical providers to increase patient care and control costs by offering them the opportunity to operate under a single fixed payment model for medical services rendered. The amount of the bundled payment to a hospital, hospital group or surgical center for example is based upon the most recent data collected pertaining to how much it should cost to treat a certain condition. The hospital is then given a “bundled” or “fixed” payment and required to operate as efficiently as possible in order to meet the goal of not exceeding the bundled payment amount. If they meet the goal and do not exceed the fixed payment amount and actually improve patient care, they are rewarded with monetary bonuses. If they do not achieve the value metrics outlined when the payment is made, they do not. It’s a simple and efficient concept really.

It’s a concept that is so simple and so efficient that  H.H.S. – Heath & Human Services – launched a $10 billion BPCIBundled Payments for Care Initiative – which is now comprised of over 360 organizations and 1,755 providers nationwide. In the first half of 2016 alone, Medicare spent $1.1 billion on care under bundled payment models. The resulting clinical improvements led to $72 million in overall savingsThe next generation of BPCI is expected to go live in 2018 and it will further advance the value-based care model using bundle payments because it works.


A “Block grant” is nothing more than a large payment made from the Federal government to state governments in order to manage their Medicaid population. It is (on a larger scale) exactly what has already been achieved under Value based Bundled payments. So, attempting to replicate the savings and patient care improvements already achieved under the BPCI should not be condemned by Democrats, it should instead be welcomed and encouraged. If something is not done to save Medicaid then there will soon be no Medicaid program left. Medicaid is already the largest line item on nearly every state’s budget and in state’s like Illinois it’s clearly not working. Providers are not being paid and Medicaid recipients are not getting the care they need. So, something has to be done to preserve Medicaid for those who are truly in need and Republicans are leading the way in that effort.

The Republican Senate “Better Care Reconciliation Act” not only provides states with the option of Block Grants but like the BPCI, it incentivizes states to manage their Medicaid population more efficiently by providing an $8 billion reward fund for states that achieve quality performance metrics in improving their Medicaid/CHIP programs. It also eventually caps over all spending so there is a strong impetus for states to start improving care and cutting costs now, not later.


The Republican Senate discussion draft entitled “Better Care Reconciliation Act of 2017” is is not “cruel” nor will it “KILL millions of Americans“. What IS “cruel” is doing nothing to reform Medicaid by leaving it as an open-ended entitlement and a massive unfunded liability. What is also “cruel” is how Obamacare treats our nation’s indigent by relegating them to Medicaid and leaving them with no other option. If you are a single person who lives in a state that expanded Medicaid under Obamacare AND you are unlucky enough to have an annual MAGI – Modified Adjusted Gross Income – of less than $16,248 (138% of FPL – Federal Poverty Level) you are relegated to Medicaid and are left with no other option unless you can afford to pay FULL PRICE for private health insurance. At that income level, such an “option” is not really an option at all.

In contrast, the “Better Care Reconciliation Act of 2017” no longer relegates our nation’s indigent to Medicaid with no other option. Instead, the Act provides a much more compassionate off-ramp for existing Medicaid recipients who may lose Medicaid once Obamacare Medicaid Expansion is eventually repealed. It provides (for the first time in U.S. history) generous Advance Premium Tax Credits to those with incomes below the Federal Poverty Level so that they can purchase private health insurance. Walking into a hospital, doctor or other medical provider’s office with a Blue Cross private health insurance card not only will provide those consumers with a much better chance of actually getting the care they need but it will also ensure that their medical providers will actually get paid. That is not the case with Medicaid which is why so few providers are still willing to accept Medicaid. It’s also why Medicaid is in desperate need of reform.

In addition to this unprecedented act of providing tax credits to those under the Federal Poverty Level, the “Better Care Reconciliation Act” also provides more than $100 billion in assistance to states, health insurers and consumers to better ensure that premiums, co pays and deductibles are more affordable for those that need that assistance. It even continues “Cost Sharing Reduction” subsidies (which help lower deductibles, co pays and coinsurance for those under 250% of FPL) until 2020 even though House Republicans sued the Obama administration for distributing these subsidies without congressional appropriation. If that’s “cruel”, then we all need a new understanding of that word.


Isn’t it interesting how the American Hospital Association endorsed Bundle Payments and how the American Medical Association ‘applauded Alternative Payment Models‘ just last year but both are now “slamming” the Better Care Reconciliation Act and opposing it in group think mode? Why would they do this when the Act simply uses the same concepts they endorsed only a year ago to reform Medicaid?  Maybe these organization have a financial incentive to continue an open-ended entitlement which rewards states one federal dollar for every state dollar they spend. Or, maybe it’s political? Nah, I’m sure all of them read it and I’m sure all of them have no other agenda. I also have some ocean front property I’d like to sell you in Arizona.





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