CBO: Certain CMS demos have not reduced Medicare spending

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Most programs in the two broad categories of value-based payment demonstrations and disease management and care coordination demonstrations from the Centers of Medicare & Medicaid Services (CMS) have not reduced Medicare spending, according to a January issue brief from the Congressional Budget Office (CBO). "In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered," the brief continued.

CBO reviewed the outcomes of 10 major demonstrations--six in the disease management and care coordination category and four in the value-based payment category--via independent researchers.

The disease management and care coordination demonstrations comprised 34 programs that used nurses as care managers to educate Medicare beneficiaries about their chronic illnesses, encourage them to follow self-care regimens, monitor their health and track whether they received recommended tests and treatments. All of the programs sought to reduce hospital admissions by maintaining or improving beneficiaries' health, and that reduction was expected to be the key mechanism for reducing Medicare spending. CBO found:
  • Four programs showed reductions of 15 percent or more;
  • Seven programs showed reductions of 6 to 15 percent;
  • Nineteen programs showed changes between -5 and 5 percent;
  • Two programs showed increases of 6 to 15 percent; and
  • Two programs showed increases of at least 15 percent.

"In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered," CBO continued. "Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs. But, on average, even those programs did not achieve enough savings to offset their fees."

Results from the demonstrations of value-based payment systems were mixed. Only the Medicare Participating Heart Bypass center demonstration (one of four demonstrations) has yielded significant savings for the Medicare program, according to the brief. In that demonstration, Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries, and Medicare spending for those services declined by about 10 percent.

"The other demonstrations appear to have resulted in little or no savings for Medicare," CBO stated. "One, the Physician Group Practice demonstration, allowed large multispecialty physician groups to share in estimated savings if they reduced total Medicare spending for their patients. The Premier Hospital Quality Incentive demonstration offered hospitals bonuses if they met certain criteria regarding the quality of care. The Home Health Pay-for-Performance demonstration allowed home health agencies to share in estimated savings if they reduced total Medicare spending for their patients and met certain targets for quality of care."

Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare's fee-for-service payment system, which rewards providers for delivering more care but does not pay them for coordinating with other providers, and the nation's decentralized healthcare delivery system, which does not facilitate communication or coordination among providers, the brief concluded. "The results of those Medicare demonstrations suggest that substantial changes to payment and delivery systems will probably be necessary for programs involving disease management and care coordination or value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients."