Medicare Demonstration Projects: Not Ready for Prime Time

A Congressional Budget Office (CBO) report released last month brought discouraging news about the prospects for reducing Medicare costs by expanding Medicare demonstration projects – pilot efforts in disease management, coordination of care, and alternative payment systems.

The Affordable Care Act allows the Centers for Medicare and Medicaid to expand these projects on a national scale if they meet either of two standards: reduce costs while maintaining or improving quality of care, or improve quality of care without raising costs. The CBO report examined 10 major projects that have been independently evaluated and found that, by-and-large, they failed on both accounts.

Six out of ten demonstration projects focused on disease management and care coordination. They were designed to facilitate greater efficiency in care services for patients with particularly expensive chronic conditions. These projects utilized nurses and “care managers,” who were responsible for educating patients on caring for themselves at home and then following with up them.

These efforts were mostly ineffective at reducing hospital admission rates. For example, 19 out of 34 programs used in the demonstrations neither decreased nor increased hospital admissions by a substantial margin, defined as 5% or more.

The programs that were highly successful at lowering hospitals admissions shared one characteristic: care managers who had “significant in-person contact” with patients. However, these programs often failed to reduce costs sufficiently enough to offset the extra costs incurred to run them, such as paying for the care managers.

The other four demonstration projects employed value-based payments, alternatives to traditional fee-for-service systems that offer incentives – including physician bonuses — for improving the quality and efficiency of care rather than the number of services provided. But with one exception, these projects also failed to produce significant savings and had little impact on quality of care outcomes.

The one exception involved heart bypass surgery: lower rates for the surgery were negotiated by offering “bundled payments” to doctors and hospitals for all services associated with the surgery. This payment system reduced the cost of heart bypass surgery by approximately 10 percent.

The CBO report concludes with a list of several lessons we can glean from its analysis, such as “focus on transitions in care settings,” “use team-based care,” and “target interventions toward high-risk enrollees.” For instance, programs with the fewest hospital admissions tended to smooth transitions between primary care providers and specialists and target intervention methods such as chronic illness education, careful monitoring of health, and the encouragement of adhering to self-care procedures,] to patients who were at high risk for hospital admission.

The takeaway from the CBO report is that the Medicare demonstration projects need better ideas for maintaining quality while reducing health care costs before they can be used in a national scale. I wonder how much doctors, nurses, and other clinicians are consulted for their suggestions. Doctors such as Allan Ropper have expressed frustration with the disconnect between health reform and on-the-ground input from clinical workers. According to Ropper,

[F]ew published perspectives include the view from the factory floor. The usual platitudes of about changing financial incentives, increasing efficiency, and delivering high-quality care sound naïve to clinicians who deal with the imperfections of human nature and the messy effects of illness on patients.

Jim Sabin, who writes the blog Health Care Organizational Ethics, agrees. Among his three suggestions for what Medicare reform “really needs”, he writes:

Improvement-minded physicians, nurses, other health professionals, and administrators are the ones who know how to wring the waste, estimated to be as high as 30%, out of the care system. Competition won’t do it. Vouchers won’t do it. Only motivated health professionals can.

Cameron Waldman is a research assistant at The Hastings Center.

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One Comment

  1. Dr Pullen says:

    With the cost of health care continuing to go upward, do you suggest we not try alternatives?

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