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Medicare

The Medicare program provides subsidized medical insurance for the elderly and for some disabled people. Spending for Medicare totaled about $555 billion in 2012, providing coverage for about 50 million people. CBO projects that Medicare spending will continue to rise rapidly over the next decade, as baby boomers retire and spending per beneficiary continues to rise.
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Highway Investment, Job Creation, and Economic Growth Act of 2012

cost estimate

February 14, 2012

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Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services

Nov 2012 - CBO estimates that greater use of prescription drugs by Medicare beneficiaries reduces Medicare’s spending on medical services.

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related publications


  • Lessons from Medicare's Demonstration Projects on Disease Management and Care Coordination

    January 18, 2012

  • Lessons from Medicare's Demonstration Projects on Value-Based Payment

    January 18, 2012
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Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment

report

January 18, 2012

read complete document  (pdf, 678 kb)

Highlights

In the past two decades, Medicare has conducted two broad categories of demonstrations aimed at enhancing the quality of health care and improving the efficiency of health care delivery in its fee-for-service program:

  • Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly.
  • Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

CBO reviewed the outcomes of 10 major demonstrations that have been evaluated by independent researchers. The evaluations show that most programs have not reduced Medicare spending. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees. Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare.

Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care but does not pay them for coordinating with other providers, and in the nation’s decentralized health care delivery system, which does not facilitate communication or coordination among providers. The results of those Medicare demonstrations suggest that substantial changes to payment and delivery systems will probably be necessary for programs involving disease management and care coordination or value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients.



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Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment

blog post

January 18, 2012


  • blog post

related publications


  • Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment

    January 18, 2012

  • Lessons from Medicare's Demonstration Projects on Value-Based Payment

    January 18, 2012
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Lessons from Medicare's Demonstration Projects on Disease Management and Care Coordination

working paper

January 18, 2012

read complete document  (pdf, 481 kb)

Abstract

This paper summarizes the results of Medicare demonstrations of disease management and care coordination programs. Such programs seek to improve the health care of people who have chronic conditions or whose health care is expected to be particularly costly, and they seek to reduce the costs of providing health care to those people. In six major demonstrations over the past decade, Medicare’s administrators have paid 34 programs to provide disease management or care coordination services to beneficiaries in Medicare’s fee-for-service sector. All of the programs in those demonstrations sought to reduce hospital admissions by maintaining or improving beneficiaries’ health, and that reduction was a key mechanism through which they expected to reduce Medicare expenditures. On average, the 34 programs had no effect on hospital admissions or regular Medicare expenditures (that is, expenditures before accounting for the programs’ fees). There was considerable variation in the estimated effects among programs, however. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce hospital admissions than programs without those features. After accounting for the fees that Medicare paid to the programs, however, Medicare spending was either unchanged or increased in nearly all of the programs.


  • blog post

related publications


  • Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment

    January 18, 2012

  • Lessons from Medicare's Demonstration Projects on Disease Management and Care Coordination

    January 18, 2012
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Lessons from Medicare's Demonstration Projects on Value-Based Payment

working paper

January 18, 2012

read complete document  (pdf, 455 kb)

Abstract

This paper summarizes the results of Medicare demonstrations of value-based payment systems, which give providers financial incentives to improve the quality and efficiency of care. Only one of the four demonstrations for which results are available has yielded significant savings for the Medicare program. In that demonstration, Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries, and Medicare spending for those services declined by about 10 percent. The other demonstrations appear to have resulted in little or no savings for Medicare. One, the Physician Group Practice Demonstration, allowed large multispecialty physician groups to share in estimated savings if they reduced total Medicare expenditures for their patients. Another offered hospitals bonuses if they met certain criteria regarding the quality of care. The last (for which results are available only on a preliminary basis for the first year) allowed home health agencies to share in estimated savings if they reduced total Medicare expenditures for their patients and met certain targets for quality of care.


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Raising the Ages of Eligibility for Medicare and Social Security

report

January 10, 2012

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Highlights

Raising the ages at which people can collect Medicare and Social Security would reduce federal spending and increase federal revenues by inducing some people to work longer. However, raising the eligibility ages for those programs also would reduce people's lifetime Social Security benefits and cause many of the people who would otherwise have enrolled in Medicare to face higher premiums for health insurance, higher out-of-pocket costs for health care, or both. This issue brief reviews how ages of eligibility affect beneficiaries under current law and how delaying eligibility would affect beneficiaries, the federal budget, and the economy.

Among CBO's findings:

Policy Option

Long-Term Budget Impact

Implications for Beneficiaries

Raise the Medicare eligibility age from 65 to 67

Medicare spending declines by about 5 percent

Access to Medicare would be delayed for most people; many of the affected people would pay more for health care

Raise the full retirement age for Social Security from 67 to 70

Social Security spending declines by about 13 percent

People would face reduced benefits over a lifetime

Raise the early eligibility age for Social Security from 62 to 64

Social Security spending changes little

Access to Social Security benefits would be delayed for many people, but their monthly benefit amounts would increase

By inducing people to work longer, raising any of the ages of eligibility would increase the size of the workforce and the economy. Although the magnitude of those effects is difficult to predict, CBO estimates that:

  • Raising Social Security's early eligibility age to 64 or the full retirement age to 70 would, in the long term, boost the size of the workforce and the economy by slightly more than 1 percent.
  • Raising Medicare's eligibility age to 67 would also boost the size of the workforce and the economy, but by a much smaller amount.


monthly archive

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Raising the Ages of Eligibility for Medicare and Social Security

blog post

January 10, 2012


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H.R. 1173, Fiscal Responsibility and Retirement Security Act of 2011

cost estimate

December 2, 2011

read complete document  (pdf, 26 kb)

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Spending Patterns for Prescription Drugs Under Medicare Part D

blog post

December 1, 2011


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