Testimony on CBO’s Estimates of the Budgetary Effects of the Center for Medicare & Medicaid Innovation
On September 7, 2016, CBO Deputy Director Mark Hadley testified on CBO’s estimates of the budgetary effects of the Center for Medicare & Medicaid Innovation before the Committee on the Budget, U.S. House of Representatives.
The center was established in 2010 under the Affordable Care Act. It conducts demonstration projects that test new ways to deliver and pay for health care in certain programs, especially Medicare, trying to identify approaches that reduce spending and improve quality. The center’s process for conducting those demonstrations marks a shift from how demonstrations were conducted in the past. For example, the Secretary of Health and Human Services has the authority to expand all approaches tested by the center that meet certain criteria.
CBO expects the center to reduce federal spending by about $34 billion over the next 10 years. That estimate is based on judgments of how effectively the center will identify, refine, and expand approaches that reduce spending. Such judgments are inherently uncertain, however. CBO is monitoring the center’s implementation of demonstrations and will update its assessments as more information becomes available.
In what follows, I will first review the use of Medicare demonstration projects by the Department of Health and Human Services (HHS) before the establishment of the center. Next, I will discuss how it was designed and what it has done since its inception. I will then explain how CBO incorporates the budgetary effects of the center’s activities into its 10-year budget projections, as well as how CBO estimates the potential effects of legislation that would interact with those activities. Finally, I will outline what CBO might learn from the center’s experiences in the next few years.