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Value-Based Care Failed, Let’s Admit it and Progress to Real Reform

The Congressional Budget Office found that CMS experiments in value-based care payment schemes have cost us billions over 10 years, and will continue to do so. A prominent health foundation leader says, let’s double down. We say: time to admit defeat and advocate for a single payer system.

February 4, 2024

Federal Budgetary Effects of the Activities of the Center for Medicare & Medicaid Innovation

US Congressional Budget Office
September 2023

The Center for Medicare & Medicaid Innovation (CMMI) was created by the Affordable Care Act (ACA) in 2010. It conducts pilot programs, known as models, that test new ways to deliver and pay for health care in Medicare, Medicaid, and the Children’s Health Insurance Program, with the goal of identifying approaches that reduce spending or improve the quality of care.

CBO currently estimates that CMMI’s activities increased direct spending by $5.4 billion … between 2011 and 2020. …

By contrast, in 2010, when the ACA was enacted, CBO projected that CMMI would produce net savings over the 2010–2019 period. …

 Looking ahead, CBO currently projects that CMMI’s activities will increase net federal spending by $1.3 billion, or 0.01 percent of net spending on Medicare … from 2021 to 2030.

The CBO Report That Didn’t Roar
January 4, 2024
By Drew Altman (KFF CEO & President)

A Congressional Budget Office (CBO) report in September slipped … largely unnoticed by the larger health community despite its potentially broad implications for efforts to promote value through popular payment changes. …

CBO found that most of post Affordable Care Act (ACA) payment and delivery demonstrations launched by the Centers for Medicare and Medicaid Innovation (CMMI) in CMS between 2011 and 2020 did not save money as intended, and cost the government $5.4 billion more than they saved, including administrative costs associated with them. CBO also projected that CMMI would be a net loser cost-wise for Medicare through 2030.

This matters because the CMMI demonstrations have been widely regarded as the leading edge of a generation of value-based payment initiatives which have become the primary cost strategy in the U.S. over the past decade, displacing what had always been the dominant schools of cost containment, competition (favored by conservatives), and regulation (favored by liberals). …

CMS’s goal remains to see every Medicare beneficiary in some form of accountable care arrangement in seven years. And recently former Health and Human Services Secretary Alex Azar called for an end to demos altogether, feeling value-based payment was the way to go. After all, Medicare spending growth has slowed in recent years. While the full explanation for that is not well understood, it’s possible that the drive towards value-based payment and accountable care has changed provider attitudes and behavior and is part of the explanation, though that is difficult to quantify. Still, Medicare spending is expected to accelerate in the future.

Back to the CBO report. Whatever the results of a particular group of demonstration projects, CMS will always need the authority to experiment with changes in its three big programs: Medicare, Medicaid, and the ACA. In a more perfect world not every demonstration would need to save the federal government money; some good things could actually cost more and might be worth investing in; for example, if they demonstrably improve access or health outcomes. 

Having worked in CMS earlier in my career trying to coordinate waivers from the administrator’s office, and once been nominated to run the agency, I know the need to have a division within CMS, like CMMI, to oversee R&D activity. In fact, it would make good sense to better consolidate CMS waiver and demonstration activity across Medicaid, Medicare, and the ACA within the agency, but that’s truly inside baseball and a subject for another day.

Comment by: Ana Malinow & Jim Kahn

The recent post by Drew Altman in “KFF Beyond the Data” spotlighted the overlooked but important Congressional Budget Office (CBO) report published in September on the budgetary effects of the Center for Medicare and Medicaid Innovation (CMMI). The report strikingly found that in its first decade, the CMMI did not reduce Medicare program expenditures, as mandated and promised, but instead cost Medicare $5.4 billion more than it saved, with ongoing losses projected through 2023.

Instead of advocating that CMS / CMMI abandon its model of using value-based care to try to fix fee-for-service, Dr. Altman makes excuses as to why only six of the 49 demonstration models produced modest savings. It goes further, wishing “equity” into existence if CMMI just integrates a “focus on equity on everything [it] does.” The evidence available suggests that VBC fails to control costs[i], improve quality, or increase equity. Defining and measuring value is extremely difficult, and as a result, CMMI pilots have little to do with value and lots more to do with cost (which, again, go up). We never have the data we need — complete, accurate, and timely. Little data, little value.

We all agree that CMS resources should be used efficiently to pay for care for enrollees. And we agree that CMS has not succeeded in that mission.

Where we disagree is what comes next. Dr. Altman supports continued experimentation with VBC. We believe that we now have ample evidence from the US and other countries that the fundamental problem is a health care system with a huge role for for-profit insurers and contracting intermediaries.

Can we (and especially Dr. Altman) say … our system is broken, resistant to real change with weak tools like value-based care, where financial incentives are primary and at odds with good care. CMS and the rest of us should follow the lead of dozens of other wealthy nations with identical comprehensive publicly mandated insurance for everyone, with no role for profit-oriented intermediaries. Time for single payer.

This represents an attack on the current system. Having someone like Dr. Altman, with his policy heft, making the argument would be revolutionary.

Can we move beyond what has failed and focus instead on improving and expanding Medicare?

[i] As discussed in the article’s comment, an updated analysis shows that MSSP further increases costs to Medicare. We’ll report on this soon.

About the Commentator, Jim Kahn

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Jim (James G.) Kahn, MD, MPH (editor) is an Emeritus Professor of Health Policy, Epidemiology, and Global Health at the University of California, San Francisco. His work focuses on the cost and effectiveness of prevention and treatment interventions in low and middle income countries, and on single payer economics in the U.S. He has studied, advocated, and educated on single payer since the 1994 campaign for Prop 186 in California, including two years as chair of Physicians for a National Health Program California.

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