The Medicare Advantage (MA) program allows for sufficient capitation (aka upfront payments) to providers, especially in comparison to that amount received by Accountable Care Organizations (ACOs) in Traditional Medicare. This limitation in Traditional Medicare prevents ACOs from investing in the innovative programs and infrastructure needed to advance in value-based specialty care. While there have been recent efforts to improve capitation in the new PC Flex model and deliver pre-paid shared savings to MSSP ACOs, the dollar amounts still pale in comparison to what’s available in MA. In this piece, I will describe the capitation mechanisms in PC Flex, AOC REACH, and MSSP.

PC FLEX

The ACO PC FLEX model (slated to run from 2025 to 2029), built on the chassis of the Medicare Shared Savings Program (MSSP), focuses on independent PCPs as the main participant and capitation. These upfront payments, also known as Prospective Primary Care Payments (PPCP) range from $125 - $200 PPPY and are comprised of a FLEX Enhancement and County Enhancement. If your ACO has 10K beneficiaries, you would be paid between $313K and $500K per month.

Both the County Enhancement and the Flex Enhancements are factored into (or netted out of) the performance year expenditure, impacting the calculation of shared savings or losses. Capitated payments in PC Flex can only be used for primary care services, such as care coordination, patient outreach, and team-based care. Funds cannot be spent on non-healthcare items like marketing or administrative overhead unrelated to patient care.

Country Base Rate is derived from the average primary care spending in its county:

• Eligibility: Applies to counties with below-threshold primary care spending (top of the second decile, risk-standardized)
• Base Rate: Calculated using historical risk-standardized spending, similar to Medicare Advantage rates
• Enhancement: Difference between the national threshold and the county’s base rate
• Risk Adjustment: Adjusted for beneficiaries' clinical risk scores to account for health status
• Trend Adjustment: Adjusted using Primary Care Prospective Administrative Trend (PCPAT)
• Cap: Total enhancements (County + Flex) capped at $200 PBPY
• Primary Care Outside ACO (PCOA) Adjustment: Reflects primary care services received outside the ACO.

Flex Enhancement is based on the characteristics of the ACO and its assigned population:

• Fixed Amount: $125 per beneficiary per year (PBPY) for all PC Flex ACOs
• Risk Adjustment: Adjusted for beneficiaries' clinical risk scores to account for health status
• Trend Adjustment: Adjusted using Primary Care Prospective Administrative Trend (PCPAT)
• Cap: Combined County and Flex Enhancements limited to $200 PBPY per beneficiary
• PCOA Adjustment: Reflects primary care services received outside the ACO.
• Health Equity Adjustment: Additional adjustment based on beneficiaries’ equity scores to address socioeconomic disparities