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Medicare Covid-19 Spending Could Exceed $115 Billion, Study Says

March 26, 2020, 6:02 PM

The Covid-19 pandemic could cost Medicare anywhere from nearly $40 billion to more than $115 billion over the next year, depending on severity of the outbreak and hospitalization rates, according to a new analysis.

The analysis by the National Association of Accountable Care Organizations suggests the unpredictable nature of the crisis could present major financial challenges for Medicare’s push to control program spending through value-based care.

Accountable care organizations—the groups of doctors, hospitals, and other caregivers that provide coordinated care for traditional Medicare beneficiaries—can be penalized financially if their treatment of Medicare patients costs more than agreed-upon thresholds.

The association has asked the Centers for Medicare & Medicaid Services to exclude spending for Covid-19 patients from ACO expenditures that count toward those thresholds.

With roughly 20% of all Medicare beneficiaries assigned to an accountable care organization, outbreak-related costs for these patients could range from $7.7 billion to $23.1 billion, the analysis found. Total spending for accountable care organization beneficiaries in 2018 was about $125 billion, but that could increase anywhere from 6% to 18% because of Covid-19-related expenses, the study found.

“In short, COVID-19 threatens to derail adoption of alternative payment models and the movement to value-based care” in Medicare, Clif Gaus, the association’s president and CEO, said in a statement. “We need policymakers to give assurance to ACOs that they’ll take appropriate steps to provide needed protection.”

Without financial assistance, “we could see generated savings wiped out, massive penalties, and worst of all, ACOs dropping out of the program to avoid losses,” Gaus added.

To contact the reporter on this story: Tony Pugh in Washington at tpugh@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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