A simulation shows limited savings from meeting quality targets under the Medicare Shared Savings Program

The Medicare Shared Savings Program, created under the Affordable Care Act, will reward participating accountable care organizations that succeed in lowering health care costs while improving performance. Depending on how the organizations perform on several quality measures, they will "share savings" in Medicare Part A and B payments-that is, they will receive bonus payments for lowering costs. We used a simulation model to analyze the effects of the Shared Savings Program quality measures and performance targets on Medicare costs in a simulated population of patients ages 65-75 with type 2 diabetes. We found that a ten-percentage-point improvement in performance on diabetes quality measures would reduce Medicare costs only by up to about 1 percent. After the costs of performance improvement, such as additional tests or visits, are accounted for, the savings would decrease or become cost increases. To achieve greater savings, accountable care organizations will have to lower costs by other means, such as through improved use of information technology and care coordination.