Health Reform WK-EDGE CBO says CMMI to save Medicare nearly $34B over 10 years
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Thursday, September 15, 2016

CBO says CMMI to save Medicare nearly $34B over 10 years

By Sarah E. Baumann, J.D.

The Congressional Budget Office (CBO) expects the Center for Medicare & Medicaid Innovation’s (CMMI) activities to reduce federal spending by about $34 billion from 2017 through 2026, regardless of the Presidential Administration. The CMMI’s process for conducting demonstrations strengthens the likelihood of landing on approaches that increase savings; one such demonstration has already been expanded to cover all Medicare beneficiaries. The CBO anticipates that the CMMI will spend $12 billion to conduct demonstrations, but will achieve savings—almost all in the Medicare arena—of $45 billion (CBO Testimony, September 7, 2016).

CMMI process. The CMMI was established in 2010 pursuant to section 3021 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Prior to that time, many demonstration projects were mandated by legislation that hampered HHS’ ability to modify them based on early experience, terminate them, open them to various geographies and providers, or expand them to other beneficiaries. The CMMI, however, has the authority to modify demonstrations based on early experience or terminate them where they appear to either increase spending or fail to increase quality. It has a "robust mechanism" to select ideas for testing and prioritizes projects that can be empirically evaluated. The HHS Secretary also has the authority to expand CMMI demonstrations if doing so will reduce spending without negatively impacting quality or will improve quality without increasing spending. Current law allows for a set amount of funds that provides an incentive to end unsuccessful demonstrations and allocate the funds to more worthy projects.

To evaluate the effects of demonstration, the CMMI must compare actual results with estimates of what outcomes would have been absent demonstrations. The CBO stated that the most "powerful" way to do so is to require beneficiary or provider participation and compare the results of participants with the results of non-participants. In addition to determining whether a demonstration reduces spending, requiring participation also suggests how a project could be expanded to encompass a broader population of which the participants are representative. In contrast, participants in voluntary studies are generally not representative of a population.

Existing demonstrations. The CMMI has conducted a variety of studies thus far, including accountable care and episode-based payment demonstrations. Medicare’s Chief Actuary has certified that two demonstrations—the Pioneer accountable care organization demonstration and a program that encourages healthy lifestyles among high-risk beneficiaries to prevent or delay diabetes—could be expanded without increasing spending. The diabetes program is the first and only program to be expanded at this time.

CBO considerations. In reaching its spending estimate, the CBO considered that HHS would expand successful demonstrations, which will lead to savings; successful demonstrations will operate for four to seven years before HHS makes an expansion decision; unsuccessful demonstrations will operate for two to five years before cancellation; and the CMMI will take time to gain its footing, such that earlier demonstration sets might achieve slightly smaller savings than later sets.

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