NCPA - National Center for Policy Analysis

Lessons from Medicare's Demonstration Projects

January 26, 2012

Aside from its sweeping changes for individuals and state governments, the Patient Protection and Affordable Care Act (PPACA) also established the Center for Medicare and Medicaid Innovation.  Under law, it is charged with conducting experiments, called "demonstrations," that are aimed at cutting costs or improving health outcomes.  Furthermore, it can implement them nationwide without consulting Congress, so long as the secretary of health and human services verifies their efficacy, says the Congressional Budget Office (CBO).

This CBO analysis looks to 10 major demonstrations conducted in two broad categories.  The following are the results for the first category, "disease management and care coordination" demonstrations, which focuses on improving the health of those with chronic illnesses.

  • Within this category, there were six separate demonstrations containing 34 separate programs in total.
  • While results between the 34 programs were highly variable, on average the programs had little or no effect on hospital admissions or regular Medicare spending.
  • Hospital admissions fell by an average of 7 percent and regular Medicare spending by an average of 6 percent for programs in which care managers had substantial direct interactions with physicians -- one of the variables being tested.

Researchers were able to draw several conclusions from the results of these six demonstrations, but overall neither spending nor saving was improved by disease management and care coordination demonstrations.

The study also looked to four demonstrations in a second category, "value-based payments," which experiments with alternative payment systems that incentivize health care providers to improve health outcomes.

  • Only one of the four demonstrations, which experimented with bundling payments for a heart bypass procedure, yielded significant savings (approximately 10 percent).
  • Meanwhile, none of the other three demonstrations had any effect on savings.
  • In terms of improving health outcomes, two of the programs produced slightly improved health care, while the other two had no discernible effect.

Source: Lyle Nelson, "Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment," Congressional Budget Office, January 2012.

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