CBO: Medicare cost-savings demonstrations a bust

January 25, 2012

Two decades of studies intended to reduce Medicare spending didn’t save much money, the Congressional Budget Office says. Learn more about the failed plans.

Ten demonstrations conducted over 2 decades intended to reduce spending for the Centers for Medicare and Medicaid Services (CMS) didn’t end up saving much money, according to an issue brief from the Congressional Budget Office (CBO) released January 18.

The CBO studied 10 demonstrations, six in disease management and care coordination and four in value-based payment systems. The disease management demonstrations 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. In the end, however, the efforts had little or no effect on hospital admissions, the CBO reported.

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 financial bonuses paid to the participating organizations were included, according to the CBO.

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 bonuses.

Results from four demonstrations of value-based payment systems were mixed but mostly produced little or no savings, according to the CBO. In one of the demonstrations examined, Medicare bundled payments that covered hospital and doctor services for heart bypass surgeries and spending for those services went down by about 10%.

“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,” writes author Lyle Nelson of CBO’s health and human resources division.

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