A new report demonstrates the failure of central planners in Washington to reform Medicare.
A new report demonstrates the failure of central planners in Washington to reform Medicare.
A new report released by the Congressional Budget Office (CBO) on September 28 demonstrates the failure of central planners in Washington to reform Medicare.
CBO’s report analyzes the Center for Medicare and Medicaid Innovation (CMMI), a government office created by the Affordable Care Act (also known as “Obamacare”) whose mission is to test new ways of paying for and delivering health-care services in federal health programs through pilot programs called “models.” These models are required by law to reduce costs and/or improve quality of care, which they pursue by enacting major policy changes.
Policy experts predicted that this legal mandate, combined with CMMI’s focus on evidence-based policy-making and its insulation from the daily politics of Capitol Hill, would enable CMMI to transform federal health programs. By 2016, in CBO’s previous report on CMMI, it projected that the new authorities and flexibilities given to CMMI would empower it to save $34 billion over a decade. In its new report, CBO calculated savings would be $77.5 billion from 2021 to 2030 under the same analytical methodology.
Instead, CBO not only lowered the forecasted savings but reversed its sign. CBO now projects that CMMI and its models will fail to reduce spending at all. Instead, they cost money.
CBO’s previous analyses were always suspect, as it was premised on an excessive faith in the wisdom of giving government officials more power. Essentially, CBO assumed that through robust empiricism and constant experimentation, CMMI would develop and expand models that saved money and modify or discard those that didn’t. Therefore, CMMI would inherently find success by virtue of its own managerial competence.
Such expectations soon belied reality. After a decade of operation, only five out of 54 models saved money and four met the criteria for expansion. In light of actual experience, CBO revised its methodology in its new report. It now estimates that CMMI cost the federal government $5.4 billion between 2011 and 2020 versus the $2.8 billion in savings it expected during that time.
CBO forecasts that CMMI will cost $1.3 billion between 2021 and 2030 compared to $77.5 billion in savings under its old assumptions — a difference of $78.8 billion. Of note is that other analysts have estimated even higher costs of $9.4 billion between 2017 and 2026 compared to the $34 billion in savings CBO previously projected over that time.
This belated recognition of CMMI’s technocratic limitations is important because policy-makers and the health-care sector have staked much on its success. Medicare provides bonuses to physicians who participate in “advanced” models and commercial insurers have adopted similar models.
The very features that were supposed to make CMMI so effective also make it uniquely powerful in an era of overreaching executive-branch agencies. As is the case with all government demonstrations, CMMI tests models by changing parts of federal law in order to design new federal health policies. But unlike other demonstration authorities, CMMI has much more leeway to modify models, apply them nationwide, or mandate participation by health-care providers, all without congressional approval. Furthermore, CMMI’s activities are exempt from administrative and judicial review and typically do not have public notice-and-comment requirements that apply to other government actions.
Given CMMI’s disappointing performance and its power to essentially amend federal law unilaterally, it would make sense for Congress to impose guardrails on CMMI by requiring transparency for model performance, enforcing higher standards for model design and evaluation, and generally exhibiting more oversight. Given that the office’s operational funding ($10 billion per decade) far outweighs any projected gross savings, that funding should also be cut.
CBO’s new report might finally provide an opening to reform CMMI.
CBO’s previous methodology discouraged Congress from making any changes to CMMI. CBO scores are very influential in the legislative process; bills that increase deficits rightfully face more scrutiny. But this dynamic insulated CMMI from congressional accountability. Although CBO previously admitted that it had no basis for judging how untested models would impact cost or quality of care, its faith that CMMI’s process would produce savings “on average” meant that any attempt by Congress to delay or block individual models or to cut back on CMMI’s unique powers would also reduce savings (i.e., increase spending) on paper.
Thus, CBO’s methodology encouraged Congress to cede significant authority to CMMI — that is, to unelected government officials rather than voters’ elected representatives. This is contrary to our Constitution’s requirement that legislation happen in the legislature.
CBO, to its credit, has discarded many of its old assumptions in the face of new facts. It now knows that CMMI has failed to save money and likely won’t save money in the future. This removes a major procedural hurdle to reform.
While it is unfortunate that time and money have been devoted toward fruitless efforts at health-policy innovation, CBO’s new report should prompt policy-makers to consider other reforms for federal health programs. Hopefully, these will occur in a way that respects the proper role of federal agencies and leads to patient empowerment rather than fitful experimentation by central planners.