Avalere: CMMI will not generate as much savings for Medicare as CBO projected

Calculator that says "Medicare" on it on top of money, next to bottle of pills
A recent analysis from Avalere found the Center for Medicare and Medicaid Innovation may not save Medicare as much as previously thought. (Getty Images/liveslowv)

The Center for Medicare and Medicaid Innovation (CMMI) will only save Medicare nearly half of what the Congressional Budget Office (CBO) projected, according to a new analysis.

The analysis, released Wednesday from consulting firm Avalere Health, estimates that CMMI’s payment demonstrations will save Medicare $18 billion from 2017 through 2026, compared to $34 billion projected by CBO back in 2016. The study comes as the Trump administration is increasingly turning to CMMI to spearhead new payment models to shift Medicare payments to value-based care.

The key reason for the difference is likely a lack of experience at CBO on how to evaluate payment models, Avalere researchers say.

“When CBO put out their number there hadn’t been any experience with CMMI programs yet,” said John Feore, associate principal at Avalere. “Programs had started but we didn’t have results from them yet.”

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Another key reason is that Avalere considers the difficulties with designing and getting demonstrations off the ground.

“This is a government program so it has to go through a review process at [the Office of Management and Budget] and looked at by actuaries,” Feore said.

The programs also must be submitted for public comment, which can delay any release.

CMMI was created under the Affordable Care Act to set up and run demonstrations on changing how Medicare and Medicaid pay providers.

CBO projected in 2016 that CMMI would provide $34 billion in net federal government savings from 2017 to 2026. At the time, while ongoing CMMI demonstrations hadn’t yet generated “noticeable savings, it believed that CMMI would identify successful demonstrations and continue them over the 10-year budget window.”

But, Avalere projects in the study, which was funded by the Pharmaceutical Research and Manufacturers of America, that will not be the case.

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To estimate projected future CMMI savings, Avalere looked at expanding successful demonstrations including the Next Generation Accountable Care Organization (ACO) model and the Comprehensive Care for Joint Replacement model.

Both Avalere and CBO projected that these successful demonstrations would continue to expand; however, both the joint replacement and next-gen ACO models are expected to sunset at the end of this year. While the Centers for Medicare & Medicaid Services (CMS) has proposed a three-year extension of the joint replacement demonstration, it has not decided on extending next-gen ACOs.

Avalere also looked at potential savings from models expected to start this year, including end-stage renal disease and radiation oncology models.

The firm factored in any savings from future unknown demonstrations by “assuming that CMMI would continue to create a similar number of successful demonstrations as it has so far,” the analysts said.

Last year, CMMI has proposed major demonstrations for kidney care and primary care.

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The Trump administration recently selected Brad Smith, formerly chief operating officer of Anthem’s Diversified Business Group, as the new head of CMMI.

The analysis comes as CMMI is shifting its priorities for developing and implementing demonstrations. Feore said that new payment models released or proposed over the last two years require more downside financial risk from providers, meaning they must pay back CMS if they don’t meet certain spending or quality targets.

The goal behind the shift is that demonstrations will be more successful in “saving Medicare money because it is going to take a strong effort by participants to succeed and if they don’t [then] they are going to be on the hook for some overruns,” he said.