Budgetary Impact Of The MSSP On Traditional Medicare

The Medicare Shared Savings Program (MSSP) has been used by the federal government to test value-based payment models in traditional Medicare for over a decade. The programs offer a number of benefits to doctors, hospitals, and other health care providers, including the chance to receive a bonus for lowering spending on their patients in Medicare. In addition, providers in MSSP programs can take on greater financial risk for the spending of their patients in order to lower costs and improve quality. A new study conducted by researchers for the Health Care Payment Learning and Action Network found that the MSSP programs set up by accountable care organizations (ACOs) created net savings for Medicare of $4.3 billion to $13.4 billion between 2012 and 2023. The study’s findings are significant in that prior research found that the MSSP programs created losses for Medicare rather than savings.

Recent Research

Our study found that 678 Accountable Care Organizations (ACOs) in the Medicare Shared Savings Program (MSSP) generated an estimated $20.1 billion to $29.2 billion in gross savings for traditional Medicare. After Medicare paid $15.8 billion in bonus payments to the successful ACOs, the program resulted in net savings of $4.3 billion to $13.4 billion for traditional Medicare. This is in sharp contrast to prior research that found the MSSP model was actually increasing spending in traditional Medicare as opposed to decreasing spending.

Why It Matters

Small percentage changes in spending at Medicare, the largest single payer in the U.S. health system, can translate into billions of dollars of activity and have implications for a variety of stakeholders, including patients, clinicians, and taxpayers. For this reason, it is especially important for policymakers to understand the implications of the nation’s most prominent value-based payment model, the Shared Savings Program, or MSSP. As part of the program, groups of clinicians and health systems organized into Accountable Care Organizations (ACOs) receive payment incentives if they are able to lower spending on their patient population and meet certain quality measures.

What the Data Says

The MSSP represents a cornerstone of the payment reform efforts aimed at transitioning from a system that rewards volume of services to one that rewards value of services provided to patients. Recent cross-sectional analysis providing a series of longitudinal estimates of the effects of participation by ACOs in the MSSP on Medicare spending between 2012 and 2023 finds that, on balance, the program has moved beyond the growing pains and is currently a net positive for the federal budget. The results indicate that the participating ACOs generated a series of gross reductions in spending for Medicare services for their patients, and after accounting for the Medicare payments of additional incentives to the ACOs, traditional Medicare is estimated to have experienced net savings of $4.3 billion to $13.4 billion over the 2012–2023 period. These results are in sharp contrast to the earlier analysis of the effects of participation by ACOs in the MSSP that estimated Medicare experienced net losses of $1.3 billion over the 2013–2017 period. These results are not meant to imply that the model is perfect and ready for prime time. Rather, these results indicate that the programs are developing and as payment rules change, and as external events such as the COVID-19 pandemic impact on patterns of service use, the economic characteristics of these models can and are likely to change.

Savings =/= Better Value for Patients

Of particular note, however, is that saving money does not necessarily mean that patients are receiving better value. That report does not include the costs to MSSP and to the ACOs participating in the program, for example. In addition, the significant costs to the health systems participating in the MSSP to better coordinate care for their patients are not accounted for in the numbers. It is also possible that the funds that are saved are used for other, unneeded services and for unneeded products.

Evolution of Savings

This information shows that there is a learning curve for value-based care. Over time, ACOs get better at managing the health care of their Medicare patients and thereby reducing the level of spending on their behalf in order to generate greater savings as the ACO becomes more mature in the MSSP program.

• In their third year of participation, ACOs saw annual spending reductions ranging from 1.2% to 1.9%.
• By year six, these reductions climbed to between 3.5% and 4.8%.
• On a per-beneficiary basis, net savings grew from a range of $20–$33 in 2014 to a peak of $107–$208 in 2018.

In short, practice’s of MSSP ACOs take time to master value-based care. Once a practice has learned how to manage the population’s health, the practice’s savings per patient can drop as dramatically as that of any other organization.

Nuances and External Pressures

There are also large variances in net savings in the latter half of the decade which can be attributed to external events and also to changes in the program’s structure.

• The COVID-19 Impact: In 2020, net savings dipped to as low as $0 in conservative models. The pandemic fundamentally disrupted healthcare spending and care patterns, complicating the baseline measurements used to calculate savings.
• Policy Shifts: The introduction of regional benchmarks also played a role in moderating savings after 2019. These benchmarks changed the financial incentives for ACOs, demonstrating that the math of value-based care is highly sensitive to how Medicare sets its price points.

Limitations

While the study found that ACOs in the MSSP model are saving Medicare a net of $13.4 billion, the authors noted several limitations. First, the study did not attempt to estimate Medicare’s administrative costs associated with running the MSSP program. Second, the study did not attempt to estimate the significant upfront investments that health systems make in order to participate in the MSSP model, such as the cost of information technology and the hiring of staff to support care coordination. The study did find, however, that the number of beneficiaries served by ACOs in the MSSP model increased to 10.2 million in 2023 and it remains to be seen whether ACOs in the program will be able to sustain similar levels of savings on a per beneficiary basis in future years.

Who It Affects

Medicare Beneficiaries

The biggest group affected by this Medicare policy change would be the traditional Medicare beneficiaries receiving health care services from various health care providers and suppliers. A Medicare ACO’s focus is to provide high quality, cost effective coordinated health care services to its assigned Medicare beneficiaries, and manage their chronic medical conditions and improve their overall health status. An ACO seeks to keep its patients out of the hospital for unnecessary stays and avoid other avoidable health care costs, and if the ACO is successful then its patients should receive better health care services and receive these health care services in a more timely manner and in a more coordinated fashion. However, as with other Medicare payment methods or health care programs which are designed to reduce health care costs and promote coordinated health care services, an ACO may keep some of its assigned Medicare patients outside of traditional Medicare in order to reduce costs and thus keep the patient within the ACO’s health care services delivery system. In this type of situation, the patient may have decreased access to needed and necessary specialized health care services and in some cases the patient may even be limited to receiving health care services from a smaller network of health care providers.

Clinicians

Some health care clinicians and practices also gain by increased revenue from performance based bonuses for lowering health care spending for their patients. As a result, primary care practices can invest in additional staff, data systems, and practices to manage patients with chronic illnesses in order to spend less on health care for all of their patients and to improve their health care.

Healthsystems and Independent Practices

Healthsystems and independent physician groups have to decide whether to invest in terms of money and staff in order to participate in a program as MSSP. Large, integrated healthsystems have a better chance to benefit from participating in the program than smaller healthsystems and independent physician groups. The upfront investment can be spread over a larger base of patients. Rural and independent physician groups and practices have a hard time to benefit from the program and might even be put at a disadvantage. Payers and Medicare administrators are interested in the budgetary results of a program as MSSP, as these results can be used to design payment strategies in general. Taxpayers and federal budget officials are interested in the results of a program as MSSP, as the results can be used to project future Medicare spending and to decide whether to scale the program or to apply similar models to other populations.

What Changes

• ACOs in MSSP achieved measurable reductions in Medicare spending over the period studied, and after Medicare paid bonuses, traditional Medicare registered net savings overall. These savings were not uniform year to year and were influenced by program rules and external events.
• Program design choices matter. Changes to benchmarking methods and the shift toward regional benchmarks altered incentives and appear to have moderated savings after 2019. Policymakers should treat design tweaks as consequential, not cosmetic.
• Administrative and participation costs were not fully counted in the headline budget math. For a complete picture, policymakers must measure the costs borne by participating organizations and any downstream effects on access and quality.
• Smaller practices and rural providers remain at risk of being left behind. If the goal is broad, equitable participation, targeted support, including technical assistance, funding for care management, and simpler pathways into downside-risk arrangements, will be needed.

The why behind the savings

A very important point to understand about ACOs in Medicare’s value-based payment programs is the “why” behind the savings that they generate. A considerable portion of the savings that ACOs have generated through their years of participation in MSSP and other value-based payment programs have been as a result of their work to reduce avoidable admissions and improve management of patients with chronic diseases through avoidance of unnecessary testing and other measures to improve the quality of care for their patients. In addition, as ACOs become more experienced in the Medicare programs for value-based payment, their ability to make savings are likely to increase as they become more and more skilled at population health and at using data to improve the care that they provide to their patients. There is a great deal of patience that is warranted as the health care system moves in the direction of organizing care in a manner that will improve the quality of care that is provided to all patients.

Pressing Concerns

Another factor that could impact ACO performance is selection bias. ACOs may select the healthiest patients in order to avoid complex or difficult to manage cases. This type of bias could be occurring implicitly or explicitly and would undermine efforts to reduce spending and improve quality. Furthermore, as larger hospital systems and groups of physicians become part of integrated systems of care, these entities will have an advantage in being able to become ACOs in order to reap the financial bonuses. In addition, as these systems of care become more integrated, they will become more powerful in the health care system and could drive up prices of care outside of Medicare for commercial payers. This could also result in decreased access of care for patients.

Interpretation

In addition, interpretation of results from the MSSP models is complicated by experience with COVID-19. The impact of the pandemic on Medicare beneficiaries and on the healthcare system as a whole led to a number of policy changes to provide relief to both, such as suspension of certain requirements for risk and for beneficiary assignment to ACOs and the additional payments made for certain services during the public health emergency. Claims data from Medicare also reflect the changes in use of services during the pandemic as well as the increase in levels of elective care that have occurred after the time that the country was affected by the virus. Thus, results from before the time of the pandemic should not be compared to results from after that time and results from the time of the pandemic should take into account the policy changes that were made in order to assess the results from the MSSP models and to evaluate the program and make needed changes to protect its beneficiaries and to enable the program to continue to achieve its goals.

What’s next?

There are many things that need to be done. First, we need to make sure that we are accurately accounting for all of the spending that takes place in Medicare, including the spending of all of the incentives, the spending of all of the administrative costs to run the program, and the spending by the participating organizations to prepare for the ACO model of care. Second, we need to make sure that the access to and the equity of care for all patients is not negatively affected by the ACOs. In addition, we need to make sure that small practices and rural practices are able to participate in the ACO model of care and receive a return on their investment without placing themselves in a position of excessive risk. Finally, we need to make sure that the financial incentives used in value-based payment models, such as the MSSP model of care, are used to reward the best quality of care and the best patient outcomes, rather than just rewarding the lowest spending, even if the spending is decreased by eliminating unnecessary use of services. In summary, we need to be very cautious in scaling up the features of the MSSP model of care to other settings and we need to test the features of the MSSP model of care in other settings first to see how they work and to make sure that they can achieve the intended goals in those other settings without placing an inordinate burden on the other systems of care.

Participation in MSSP

For both clinicians and health systems, there are many benefits that can be realized. While it may be more difficult for smaller practices and those in rural areas to participate, with the right support and incentives, these organizations can reap financial and clinical rewards.

The positive numbers for MSSP indicate that it is possible to design a payment program that changes the behavior of providers. However, the positive numbers for MSSP also indicate that how a program is designed, who participates in the program, and the larger health system in which the program is operated all play important roles in determining the results that are achieved for patients and the bottom line of the program. Thus, for those designing programs for Medicare payment reform, the bottom line for the MSSP program is that the positive numbers indicate that there are programs that can be developed to bring value to the health care system for patients and for Medicare and that the key for those developing these programs is to measure broadly, design carefully, and use financial incentives in conjunction with a wide array of supports to increase participation and to protect patients.

Main Takeaway

There is evidence that MSSP is working in a precarious balance of positive experiences of participating ACOs and the design of the program and external economic circumstances. A great deal of work is being done to transform health care payment systems to reward value. Long-term sustainability of this work will require continued health care payment system reform. As of the end of 2023, the mean tenure of ACOs was 6.3 years, or in a mature phase of implementation.

Reference

1. Khullar D, Schpero WL, Civelek Y, et al. Budgetary Impact of the Medicare Shared Savings Program on Traditional Medicare. JAMA Health Forum. 2026;7(2):e256915. Published 2026 Feb 6. doi:10.1001/jamahealthforum.2025.6915