Much of Medicare's payment reform savings is expected to come from the growing number of mandatory payment models, according to the scorekeeping agency.

Sept. 12—The high-profile innovation office within the Centers for Medicare & Medicaid Services (CMS) may not have generated much savings so far but should still garner $1.3 billion by 2019, says Congress’s nonpartisan scorekeeper.

“Our estimates from 2010 to today have not substantially changed,” Mark Hadley, deputy director of the Congressional Budget Office (CBO), said at a recent House Budget Committee hearing when asked whether CMS’s Center for Medicare and Medicaid Innovation (CMMI) will still save Medicare $1.3 billion in its first 10 years.

The assessment of CMMI, which was established by the Affordable Care Act, drew skepticism from Republican members of Congress. For instance, Rep. Tom Price (R-Ga.), a medical doctor and chairman of the committee, estimated CMMI actually will lose a net $6 billion in its first 10 years after its $10 billion operating budget is considered.

“CBO’s estimate—made in good faith—in 2010 was not accurate based on where we find ourselves today,” Price said.

Price said CMMI has generated savings of $400 million to $500 million, to date, while CBO projected the office will save a gross of $5 billion over the next three years.

A CMS spokesperson said he was unable to confirm CMMI’s savings to date or projected 10-year savings by the deadline for this article.

CBO also expects the CMMI savings to accelerate to a total of $34 billion over the next 10 years.

The continuing confidence of CBO in the potential for large savings from CMMI appeared to stem from the innovation center’s rapidly increasing number alternative payment models, rather than from actual results. For instance, Hadley said CBO expects “many or most” of the CMMI demonstrations to fail.

“Because little information is available so far about the results of demonstrations initiated by the center, CBO’s expectations on that point rely primarily on evidence from earlier periods showing that a small share of demonstrations resulted in savings, most had little or no effect on Medicare spending, and some increased Medicare spending,” Hadley stated in written testimony.

Joe Antos, a scholar from the right-leaning American Enterprise Institute and a former CBO and Medicare agency official, said at the hearing that the future savings projection was a “shot in the dark.”

“They are extrapolating from information that is not current with CMMI’s activities and they have no information—as none of us have the information—about CMMI’s future activities,” Antos said.

The CMMI payment models recently have evolved from voluntary models—accountable care organizations (ACOs) being the highest-profile example—to include several mandatory payment models, which have generated varying levels of controversy among providers. Hadley said CBO expects that a “significant portion” of CMMI savings will come from mandatory models, although CBO did not know exactly how much because the models are just starting.

The challenge of finding savings in the most mature CMMI models was highlighted by the recent release of the latest Medicare ACO results. CMS officials touted more than $1 billion in savings, but an analysis by Ashish Jha, MD, a Harvard researcher and ACO advocate, found the program lost a net $216 million in 2015 when shared-savings payments to providers were considered.

“Even when there is information from CMMI on its projects, evaluating their success is complicated and likely to produce ambiguous results,” Antos said.

How CMMI has achieved its savings so far was not clear. To date, the CMS actuary has certified in only one case that a CMMI program—the Pioneer ACO model—would save money if expanded. The evaluation found that the Pioneer model generated more than $384 million in savings for Medicare over its first two years. CMS has since incorporated elements of the Pioneer ACO model into Track 3 of the Medicare Shared Savings Program, a CMS spokesman noted.

The actuary also certified that a CMMI pilot to prevent or delay diabetes among high-risk beneficiaries by encouraging healthier lifestyles would not increase Medicare spending—but also would not provide savings—if expanded.

General Concerns

The rapidly proliferating CMMI payment models drew a range of criticisms from Republicans and some Democrats.

“There have been legitimate questions and concerns raised about CMMI’s new Medicare payment models,” Price said at the hearing. He specifically cited “concerns with the adverse impact these experiments might have on the practice of medicine and patient access to critical healthcare treatments; questions about the agency’s decision to require mandatory—rather than the usual voluntary—participation of healthcare providers in the models; and generally whether the new models exceed CMMI’s legal authority.”

Rep. John Yarmuth (D-Ky.), a senior Democrat on the committee, pushed back on such criticism.

“Constructive congressional engagement with the innovation center is much more likely to guarantee positive results for the American people and for the budget,” Yarmuth said.

Specific Problems

The mandatory CMMI models have drawn a range of provider concerns, some of which were addressed at the congressional hearing. For instance, Mark Madden, MD, an orthopedic surgeon at OrthoVirginia and a participant in the voluntary Bundled Payments for Care Improvement Initiative (BPCI), said issues in that model could impact the mandatory Comprehensive Care for Joint Replacement (CJR) pay model, a similar program that started this year that includes more than 800 hospitals. For instance, Madden cited continuing ambiguities in how CMS sets price targets that have caused BPCI participants as a group to lose money on every joint procedure under the model.

“The significant problems we have encountered in BPCI will be even more difficult in a large mandatory program like CJR,” Madden told the committee.

Some of the strongest criticism was aimed at CMMI’s Medicare Part B drug payment demonstration, which would reduce Medicare payments for 75 percent of physicians paid under the program.

Ted Okon, executive director of the Community Oncology Alliance, warned that the large demonstration will result in increased Medicare spending, based on the results of a 2012 study of a similar model. Okon also warned about the safety impact on Medicare patients who will not need to be asked to provide informed consent.

“Anyone who has an understanding of modern-day cancer care realizes there are very few instances where substitution of a less-expensive cancer drug is possible, appropriate, and safe,” Okon said.

Yarmuth noted that the pilot, which would cut Medicare patients' out-of-pocket costs, comes amid growing concerns about rising drug prices. Others hailed CMMI’s switch to mandatory programs in general.

“Voluntary initiatives are unlikely to drive payment reform,” said Topher Spiro, vice president for health policy at the left-leaning Center for American Progress. “In order to affect spending on a large scale, they must have broad participation.”

The outlook for CMMI during the next presidency is unclear. Some industry observers expect Hillary Clinton to continue and even expand its work, while Donald Trump has urged repeal of the entire ACA. Similarly, a House funding bill for the U.S. Department of Health and Human Services would defund CMMI.

Even if CMMI reaches CBO’s projections, the savings will comprise only 0.7 percent of net Medicare spending in 2026. But even that relatively small savings is worth striving for amid the need to curb long-term federal healthcare spending, supporters said.

“We need more pilots; we need to, quite frankly, make more mistakes so we can figure out exactly what we need to do to make this stuff work,” said Rep. Tim Ryan (D-Ohio).

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Monday, September 12, 2016