According to a January 2012 report by the Congressional Budget Office (CBO), the cost effectiveness of Medicare demonstration programs have left us with a depressing picture. For over twenty years, Medicare has been implementing two demonstration programs designed to enhance health care quality, to improve the efficiency of delivering health care services to beneficiaries, and to reduce the cost of its traditional fee-for-service program.
The two categories of demonstrations are disease management and care coordination, and value-based payment. The former seeks to enhance the health care quality that Medicare beneficiaries suffering with chronic conditions receive because for those beneficiaries, health care costs are expected to be most expensive. The latter provides monetary incentives to doctors and hospitals to enhance the efficiency and quality of health care provided to beneficiaries.
The CBO conducted a review of the evaluations made by independent researchers regarding ten major demonstrations. Sadly, the evaluations revealed that most did not help in reducing Medicare’s health care spending. The demonstrations that were able to reduce Medicare spending involved care managers having direct interactions with patients and physicians. Although these programs were able to report savings, the savings were not enough to offset the money that Medicare spends.
As for the value-based payment demonstrations, the evaluation showed that the programs were able to reduce Medicare spending by approximately 10 percent on physician and hospital services for heart bypass surgeries. With respect to the other health care services, the evaluations showed that they produced no or very little savings for Medicare.
It is very apparent that Medicare will have to think of other programs to maintain or improve the quality of care rendered to beneficiaries and reduce health care spending. Medicare needs to be reformed if we don’t want to see millions of beneficiaries go without health care by 2024.