Brian and Garrett Fahy

Against the backdrop of the forthcoming Supreme Court challenge and GOP nomination process, where the candidates debate the best policies for the “replace” plank of the GOP’s “repeal and replace” agenda, emerges the third dimension of the national health care debate: state-based health care reform. Though an admirable exercise in Tenth Amendment experimentation, at least one such proposed “reform” is anything but. Rather, it aims to import into Medicaid a misguided Obamacare mandate for Medicare. This so-called reform deserves special scrutiny.

Accountable Care Organizations (“ACOs”), the Orwellian-named entities spawned by section 3022 of Obamacare, are gaining attention and traction in several states. In theory, ACOs will be aggregated groups of health care providers that will work together to manage and coordinate care for Medicare’s fee-for-service beneficiaries, and meet federally-mandated care standards. Through a “shared savings” incentive program, ACOs will receive a cut of the savings they generate if they reduce costs and improve the quality of care provided. The result: improved care, cost savings, more money for doctors, and the usual refrain about ending “waste” in the system. Mission accomplished? Not so fast.

The Obama administration recently released a hefty 696 page regulation that governs the implementation of ACOs. Even a cursory review reveals there is ample cause for concern. The regulation fails to specify how the “shared savings” will be distributed among providers, jeopardizes the participation of specialists in health care decisions, and leaves the most crucial details undefined, and thus subject to bureaucratic rule-making. Further, as structured by the Administration, ACOs do nothing to encourage the kind of consumer cost-consciousness, financial transparency, or physician-central approach that is critical in any health care equation. Instead, as recently noted by the head of the Federal Trade Commission, ACOs may lead to higher costs and worse care as they encourage provider consolidation/less competition and a shifting of costs onto private insurers.

The ACOs’ chief ailment is their premise: that removed federal bureaucrats at the Centers for Medicare and Medicaid Services (“CMS”) in Washington, rather than a free and competitive healthcare market, can effect innovation in cost control and quality. Indeed, the recently-released regulation contains over 1,000 requirements for ACOs. Though well-intentioned, ACOs are simply the latest route to government-dictated price controls, and they don’t belong in Medicaid. Those who support ACOs, Republican or Democrat, should reevaluate their position for the following reasons.

Brian and Garrett Fahy

Brian and Garrett Fahy are attorneys from Los Angeles who previously worked in the White House and Senate Republican Conference, respectively. They write on national legal and political affairs. They can be reached at