CBO Report: Medicare Pilot Programs Don't Control Health-Care Costs

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I was always skeptical of the projections that ObamaCare would reduce the budget.   In fact, I made some counter-predictions of my own. The cuts needed were very deep, and likely to be politically difficult; the benefits claimed in terms of actual improving health or even personal finances had been far too large.


So far, events have borne me out.  About half the projected deficit reduction has now evaporated, because programs added to the bill in order to raise revenue, like the moronic provision requiring everyone to give 1099s to all their vendors, and the fiscally unsustainable CLASS Act long-term care program, had to be axed.  The reimbursement cuts to providers and the excise tax on "cadillac" insurance plans that cost too much won't go into effect for a while, but I still think it likely that they, too, will be (expensively) modified in the face of political and administrative realities.  Medicare's chief actuary thinks so too, so this is not exactly a crazy belief.

But always when the law's critics raised these points, supporters of the law would say that we were not considering the possibilities for extra savings, and even bigger care improvements.  The vehicles for these upside surprises were to be first, the Independent Payment Advisory Board, which is supposed to make binding reimbursement rate recommendations that cut down on unnecessary (and unnecessarily expensive) care; and second, the Medicare pilot projects which would allow us to experiment with really game-changing reforms.

I'm considerably less enthusiastic about pilot projects than your average wonk.  Today, re-reading Hannah Rosin's terrific article about housing-project demolition in Memphis, I was reminded why:

Starting in 1977, in what became known as the Gautreaux program, hundreds of families relocated to suburban neighborhoods--most of them about 25miles from the ghetto, with very low poverty rates and good public schools. The authorities had screened the families carefully, inspecting their apartments and checking for good credit histories. They didn't offer the vouchers to families with more than five children, or to those that were indifferent to leaving the projects. They were looking for families "seeking a healthy environment, good schools and an opportunity to live in a safe and decent home."

A well-known Gautreaux study, released in 1991, showed spectacular results. The sociologist James Rosenbaum at Northwestern University had followed 114 families who had moved to the suburbs, although only 68 were still cooperating by the time he released the study. Compared to former public-housing residents who'd stayed within the city, the suburban dwellers were four times as likely to finish high school, twice as likely to attend college, and more likely to be employed. Newsweek called the program "stunning" and said the project renewed "one's faith in the struggle." In a glowing segment, a 60 Minutes reporter asked one Gautreaux boy what he wanted to be when he grew up. "I haven't really made up my mind," the boy said. "Construction worker, architect, anesthesiologist." Another child's mother declared it "the end of poverty" for her family.

Only after we had demolished a bunch of housing projects, it turned out that relocating the poor didn't solve as many problems as we initially thought:


If replacing housing projects with vouchers had achieved its main goal--infusing the poor with middle-class habits--then higher crime rates might be a price worth paying. But today, social scientists looking back on the whole grand experiment are apt to use words like baffling and disappointing. A large federal-government study conducted over the past decade--a follow-up to the highly positive, highly publicized Gautreaux study of 1991--produced results that were "puzzling," said Susan Popkin of the Urban Institute. In this study, volunteers were also moved into low-poverty neighborhoods, although they didn't move nearly as far as the Gautreaux families. Women reported lower levels of obesity and depression. But they were no more likely to find jobs. The schools were not much better, and children were no more likely to stay in them. Girls were less likely to engage in risky behaviors, and they reported feeling more secure in their new neighborhoods. But boys were as likely to do drugs and act out, and more likely to get arrested for property crimes. The best Popkin can say is: "It has not lived up to its promise. It has not lifted people out of poverty, it has not made them self-sufficient, and it has left a lot of people behind."

Researchers have started to look more critically at the Gautreaux results. The sample was tiny, and the circumstances were ideal. The families who moved to the suburbs were screened heavily and the vast majority of families who participated in the program didn't end up moving, suggesting that those who did were particularly motivated. Even so, the results were not always sparkling. For instance, while Gautreaux study families who had moved to the suburbs were more likely to work than a control group who stayed in the city, they actually worked less than before they had moved. "People were really excited about it because it seemed to offer something new," Popkin said. "But in my view, it was radically oversold."

Ed Goetz, a housing expert at the University of Minnesota, is creating a database of the follow-up research at different sites across the country, "to make sense of these very limited positive outcomes." On the whole, he says, people don't consistently report any health, education, or employment benefits. They are certainly no closer to leaving poverty. They tend to "feel better about their environments," meaning they see less graffiti on the walls and fewer dealers on the streets. But just as strongly, they feel "a sense of isolation in their new communities." His most surprising finding, he says, "is that they miss the old community. For all of its faults, there was a tight network that existed. So what I'm trying to figure out is: Was this a bad theory of poverty? We were intending to help people climb out of poverty, but that hasn't happened at all. Have we underestimated the role of support networks and overestimated the role of place?"

The initial study was small and involved highly screened people with a lot of support. And it seems to have suffered from publication bias--the most spectacular results got the most attention, even though these might just have been outliers.

This is distressingly common--not just in government or social-do-gooding research, but in organizations of all kinds--including corporations.  (Hello, Pepsi Clear!)

However, I'm a skeptic of the health care bill, so naturally, I'm going to be skeptical of the potential of pilot programs.  I can understand why those who supported the bill would rather wait for data.

Well, today we have some.  The Congressional Budget Office has evaluated 10 demonstration projects aimed at reducing costs and improving quality of care through paying for performance, and better co-ordination of disease management for chronic patients.  The results?

The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating orga- nizations were considered. Programs in which care man- agers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other pro- grams, but on average even those programs did not achieve enough savings to offset their fees.

Results from demonstrations of value-based payment sys- tems 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.

Nor is this a case of "spending more but getting more":

  
The 34 programs did not have systematic effects on mea- sures of the process of delivering health care. Those measures varied from one demonstration to another but typically included the percentage of beneficiaries who received general preventive services (such as influenza vaccinations) and services recommended for people with a given condition (such as annual eye examinations for people with diabetes). Although the programs increased the percentage of beneficiaries who reported being taught self-management skills, they had little or no effect on the percentage who reported that they were adhering to prescribed self-care regimens.
In fact, the report is incredibly depressing. Some measures do seem to have controlled hospital admissions and spending--but they cost more money than they saved.  It's always tempting to celebrate being right, but in this case, there's nothing to be happy about.  What this report really says is that we're on a crash course towards fiscal disaster, and the steering wheel's broken.
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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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