20 Years of Medicare Experiments for Naught

After 20 years of demonstrations by Medicare's administrators, the Congressional Budget Office has found that most programs did not reduce federal spending on Medicare.

After 20 years of demonstrations by Medicare’s administrators, the Congressional Budget Office has found that most programs did not reduce federal spending on Medicare.

The programs were in two categories: disease management and care coordination and value-based payment demonstrations. The purpose was to enhance the quality of health care while improving the efficiency of health care delivery in its fee-for-service program. The demonstrations were all evaluated by independent researchers.

Most of the disease management and care coordination programs didn’t reduce spending. These 34 programs had nurses “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.”

These programs were trying to reduce hospital admissions since hospitalization is expensive. Overall, they had little or no effect on hospital admissions and spending was either unchanged or increased.

“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 health care delivery system, which does not facilitate communication or coordination among providers,” according to CBO.

Results from the value-based payment demonstrations were mixed. In one, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries and spending was reduced by 10%. However, the other value-based payment demonstrations produced little or no savings.

“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,” CBO wrote.