Healthcare

Using Competition and Medicare Accountable Care Organizations to Control Costs

AEI
AEI•Apr 9, 2026

Why It Matters

Competitive enrollment for ACOs could lower Medicare expenditures without sacrificing care quality, offering a scalable policy tool for cost containment. Successful implementation would relieve fiscal pressure on the federal budget and improve affordability for beneficiaries.

Key Takeaways

  • •High‑performing ACOs have reduced Medicare spending without quality loss
  • •Competition for enrollment could incentivize ACOs to improve efficiency
  • •Policymakers lack mechanisms to scale ACO competition nationally
  • •Dowd and Lo Sasso present data supporting competitive ACO model
  • •AEI discussion aims to shape health‑policy reforms on cost control

Pulse Analysis

Health‑care spending in the United States continues to outpace inflation, consuming a growing share of household budgets and federal outlays. As Medicare accounts for roughly one‑quarter of national health expenditures, policymakers are under pressure to find solutions that curb costs while safeguarding clinical outcomes. Traditional fee‑for‑service models have proven inadequate, leading experts to explore value‑based alternatives that align provider incentives with patient health. The urgency of this challenge has placed innovative delivery structures, such as Accountable Care Organizations, at the forefront of the policy conversation.

Accountable Care Organizations are provider‑led networks that assume responsibility for the total cost and quality of care for a defined Medicare population. Empirical studies, including those cited by Dowd and Lo Sasso, demonstrate that high‑performing ACOs can achieve measurable savings—often double‑digit percentages—without compromising quality metrics like readmission rates and patient satisfaction. Introducing competition for Medicare enrollment would create a marketplace where only the most efficient ACOs attract beneficiaries, fostering continuous improvement. This competitive pressure could accelerate the diffusion of best practices, drive technology adoption, and incentivize data‑driven care coordination across the health system.

Implementing a competitive ACO enrollment framework, however, poses regulatory and operational hurdles. Federal agencies would need to design transparent selection criteria, ensure equitable access for underserved populations, and monitor antitrust concerns. Moreover, scaling the model requires robust data infrastructure and standardized performance reporting. AEI’s platform for scholarly dialogue, exemplified by the recent webcast, plays a critical role in shaping the narrative and informing legislators. If embraced, competition‑driven ACOs could become a cornerstone of Medicare reform, delivering sustainable cost reductions and higher quality care for millions of Americans.

Original Description

Rising health care costs are placing ever-heavier financial burdens on households and governments. Policymakers want to break this pattern without harming patients’ quality of care.
Allowing high-performing accountable care organizations (ACOs) to compete for enrollment in Medicare is a promising option. These provider-led managed care networks have demonstrated they can hold down total costs without harming quality. Bryan Dowd of the University of Minnesota and Anthony T. Lo Sasso of the University of Wisconsin–Madison persuasively argue that competition would allow these ACOs to deliver even more impressive results.
Join AEI’s James C. Capretta for a discussion with Dr. Dowd and Dr. Lo Sasso on how competition can harness ACOs’ potential to transform American health care.
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