CMMI Alternative Payment Models Won’t Save As Much as CBO Projects

January 17, 2020 - Medicare will save approximately $18 billion from alternative payment models run by CMS’ Innovation Center (CMMI) between 2017 and 2026, a $16 billion difference compared to predictions from the Congressional Budget Office (CBO), a recent Avalere analysis found.

The reason for the discrepancy? Avalere’s methodology for determining CMMI alternative payment model savings.

Overall, Avalere’s approach paralleled the CBO’s, with the exception that Avalere’s projected savings for CMMI alternative payment models relied on demonstration specific savings estimates which are based on program evaluation reports for existing demonstrations, the report stated. 

Avalere’s 2020 estimates included three key components. These components included the continuation of already existing CMMI demonstrations, which the firm estimated would generate $4.4 billion in gross Medicare savings during the budget window, existing demonstrations proven to generate accurate Medicare savings including the Maryland All-Payer Model, Next Generation Accountable Care Organizations (ACOs), Comprehensive Primary Care Plus (CPC+), and Comprehensive Care for Joint Replacement (CJR). 

Additionally, Avalere’s third component estimated that proposed demonstrations would generate $21.4 billion in gross Medicare savings from 2017 to 2026. Some proposed models slated to start in 2020 include the Radiation Oncology Model, End Stage Renal Disease (ESRD) Model, Treatment Choices (ETC) Model, and the International Pricing Index (IPI) for Medicare Part B Drugs.

Finally, future successful demonstrations were a main factor in Avalere’s analysis. Researchers assumed that CMMI will launch new demonstrations, which they predict to generate $3.3 billion in gross Medicare savings for 2017 through 2026.

Due to the uncertainty surrounding CMMI alternative payment model savings estimates in the future, Avalere also modeled alternative scenarios related to durability of savings to see if savings projections remained constant, increased, or decreased over time. Researchers modeled each scenario holding the baseline of $18 billion in savings.

The three alternative scenarios produced a range of CMMI alternative payment model savings estimates ranging from $19.4 billion in reduced costs to $2.8 billion in increased spending. 

CMMI alternative payment models could maximize savings if the demonstrations reduce costs by 50 percent over ten years, Avalere found. 

The alternative payment models would also save Medicare money if savings dissipated by 10 percent over ten years instead of remaining constant through the remaining budget window. In this scenario, net Medicare savings from 2017 to 2026 would total $15.7 billion.

The alternative scenario resulting in increased Medicare spending involved the cancellation of the International Pricing Index, which aims to lower prescription drug costs for Medicare Part B by tying prices to those paid abroad. The model was proposed by the Trump administration in 2018 but has yet to be finalized.

If the administration does not finalize the International Pricing Index, Medicare would spend $2.8 billion more. However, if finalized, Avalere estimated that CMMI would see 50 percent of the original estimated savings, which would result in budget window savings of $7.7 billion. 

CMMI’s impact on Medicare spending has not reached earlier projections from CBO, which shows the problem in projected savings from untested and future unknown alternative payment models.

CBO first predicted a $1.3 billion net federal government savings from CMMI over the 2010 to 2019 budget window. But in 2015, CBO projected more significant savings. The agency predicted $27 million in net federal government savings over the 2016 to 2025 budget window. In 2016, CBO estimated $34 billion net federal government savings over the 2017 to 2026 budget window.

Although ongoing CMMI demonstrations had not generated noticeable savings at the time, CBO believed that CMMI would see successful outcomes that would continue over the ten-year budget window. And the agency believed that demonstrations that did not generate savings would discontinue. 

New findings from Avalere throw light on savings projections and could spell trouble for CMMI alternative payment models.

Most recently, the Trump Administration announced last week that it has picked Brad Smith to serve as director of the CMMI.

Prior to this new role, Smith co-founded and led Aspire Health, a healthcare company dedicated to providing home-based palliative care services to patients with serious illnesses. As director of the CMMI, he will oversee the development and testing of value-based care transformation in Medicare and Medicaid

CMMI recently received criticism for its models from both the Government Accountability Office (GAO) and the Physician-Focused Payment Model Technical Advisory Committee. GAO said that only four of the 37 models had achieved spending and quality improvements. While the Advisory Committee voiced concerns that CMS and CMMI were opposed to implementing their ideas.

But Smith is excited for the future of CMMI and is confident that the center will bring innovation to healthcare.