Medicare Pilot Program Fails to Achieve Significant Cost Control

In 2005, under the Bush administration, the government authorized a Medicare pilot program that selected ten groups for an experiment in improving quality and controlling costs.  This was a forerunner of some of the cost-control rules in Obamacare, with groups given bonuses for meeting around fifteen quality measures, and for spending at least 2% less than conventional Medicare spent on a similar group of patients that lived nearby.  This is something of a forerunner to the Accountable Care Organization (ACO) model that is one of the prime means by which Obamacare's supporters expect it to control costs.


The results are now in.  The medical groups seem to have had little trouble meeting the quality metrics (though there are half as many as are contained in the new law.)  But the cost control, not so much:

In 2010, the final year, just four of the 10 sites, all long-established groups run by doctors, slowed their Medicare spending enough to qualify for a bonus, according to an official evaluation not yet made public. Two sites saved enough to get bonuses in all five years, the evaluation shows, but three did not succeed even once.
This sounds a lot like random variance to me; some groups have better experience, some worse, but the program does not seem to have achieved anything like the sort of consistent cost reduction that has been promised for the new bill.

According to the Post, Donald Berwick, the head of the Centers for Medicare and Medicaid Services, says "he is optimistic about the potential of ACOs to lower costs by coordinating care, although he acknowledged that savings from the experiment 'were unevenly distributed, and they were modest. . . . if care is correctly coordinated, costs fall and quality rises. . . . To me, it's a matter of how fast we will get there, not whether we will get there.' "

He may be right; sometimes you just haven't done a program correctly.  On the other hand, sometimes programs don't work, were never going to work, and can't be made to work.  Even in the latter case, you still hear the sort of thing that Berwick is saying from the proponents of said programs: we need more time, more money, more staff, more rules.  People have usually spent years, even decades, investing in their ideas; when contrary evidence comes in, their first instinct is rarely to say, "Well, that's too bad--it sure seemed like it was going to work, but I guess it didn't!"  No, what they want to do is double down.

To me, it's pretty significant that these medical groups were not able to consistently achieve even trivial cost control.  2% is not exactly a goal whose overweeing ambition dooms it to failure.  Gail Wilensky, who headed CMS under George H.W. Bush, agrees: 

She said it is "astounding" that savings were not greater among 10 long-established groups that she said "should have blown it out of the water. . . . It's like, are you kidding me? . . . If it was this tough for this group that I had just assumed would be hands-down winners, what does it say for groups that don't have a long history of coming together?"

The experiment, she and other health policy experts point out, was less risky financially for the groups than the proposed ACO rules, because the participants were not penalized for overspending. Under the proposal, ACOs that spend too much would have to forfeit some Medicare funding -- from the start or by their third year.
There's a tendency in health care debates for people to confuse intentions with results.  It happens with treatment regimes--we're medicating millions of people with statins, even though the evidence that this reduces mortality is pretty mixed.  We have a target, low cholesterol, and we hit it, but this does not mean we're getting the results we want, in the form of longer, healthier lives.

On the policy level, there is a tendency to assert that because a program contains a lot of proposals to control costs, that the legislators or regulators who enact it should get credit for actually having done so.  But health systems, like human bodies, are very complicated.  They are not bent easily to our will.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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