Medicare and Medicaid demonstration projects and waivers

January 29, 2008

Yesterday I gave a talk on health care cost containment at a forum sponsored by the Alliance for Health Reform, and spoke specifically about issues in the design of Medicare and Medicaid demonstrations and waivers. Some have misinterpreted my comments as a criticism of the level of cooperation between the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office. Nothing could be further from the truth: we enjoy and benefit from a great working relationship with CMS. The CMS staff has a difficult and challenging job, and we respect them highly.

The issue is that too few of the demonstration projects and waivers are designed to produce the kind of analytical information that will help policy-makers grapple with options for constraining growing health care costs. Many factors, including statutory requirements and use of such authorities for broader purposes, have often meant that these projects have not been as useful as they could be.

Especially since rising health care costs are the key factor determining the nation's long-term fiscal future, we need a robust agenda of well-designed, rigorous demonstrations to develop the analytical base for achieving program savings without compromising quality. Knowledge gained from demonstrations may also have wider applicability in the health care system. We desperately need more knowledge about what works, and how approaches that hold promise can be implemented and improved. Major issues that cry out for further analytical development include, among others:

  • how to integrate information on comparative effectiveness of competing interventions into Medicare and Medicaid payments,
  • physician payment incentives,
  • more integrated payment structures, such as those based on episodes of care or bundling across providers,
  • root causes of and approaches to variation in utilization and costs across the country,
  • more efficient payment methods, including competitive bidding,
  • innovative approaches to coordinating care in specific populations, including those with chronic illnesses and high cost beneficiaries,
  • the health and cost effects of prescription drugs, and
  • how best to influence health behavior (on topics include diet and exercise)

We also need to be sure that the lessons from Medicare and Medicaid demonstrations and waivers are widely disseminated and understood.

Policy makers may wish to consider some sort of more formal process for setting research agendas and priorities in our public programs to provide more reliable and useful information about what works and what doesn't.