CBO Study Concludes Medicare Demonstration Projects Do Not Result in Savings

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On January 18, the Congressional Budget Office (CBO) issued its report entitled “Lessons from Medicare’s Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment.” The CBO report, which looked at ten Medicare demonstration projects from the past 20 years, concluded that most programs did not reduce overall Medicare spending, and in some cases, even increased spending relative to spending without the project.

The CBO reviewed evaluations of six demonstration projects focused on disease management and care coordination and four projects dealing with value-based payment. It found that nearly all projects in the first category had no effect on reducing Medicare spending, and only one project from the value-based payment category, involving bundled payments for all hospital and physician services related to heart bypass surgeries, resulted in savings to Medicare—about 10 percent. The CBO concluded that the changes resulting from the demonstration projects were insufficient to overcome the incentives generated by Medicare’s fee-for-service payment system, and that “substantial changes to payment and delivery systems will probably be necessary” for future demonstration projects to produce significant improvements in Medicare spending and quality of care...

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