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Employer Education

March 2012

Health Costs, Medicare Quality Pilots & Reform Updates


A recent Congressional Budget Office (CBO) examination found dozens of Medicare pilot programs over the past two decades did not curb costs, as hoped.

Disease management. CBO reports that, on average, the 34 programs evaluated had little or no effect on hospital admissions. There was considerable variation in the estimated effects among programs, however:

  • Seven reduced admissions by between 6% and 15%
  • Four reduced admissions by 15% or more, but still not enough to offset program costs

The findings did note that greater interaction of case managers with both patients and providers – especially in person – correlated with increased savings.

As noted in Cost Connection (Nov. 2011), disappointing disease management results like these already led some private insurers to change their approach. Instead of treating an entire population the same – like diabetes patients – integrated care management programs target the highest risks among such populations, including those vulnerable to health disparities. 

Payment reforms. Results from value-based payment pilots (a shift away from fee-for-service) were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries. Medicare’s spending for those services was reduced by about 10 percent, but other pilots appear to have produced little or no savings.

ACA implications. The Affordable Care Act gives CMS the authority to expand demonstration projects like these without specific Congressional approval if the Secretary of Health and Human Services determines that they reduce spending while maintaining (or improving) care quality or improve care quality without increased cost.

As the CBO notes, however, these results, “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.”

Read more:

  • CBO brief, with links to independent evaluations of programs