House Appropriations Bill Would Raise Health Costs, Stifle Innovation

A provision in a pending House appropriations bill to eliminate all funding for the Center for Medicare and Medicaid Innovation, which may get support from a House Budget Committee hearing this week that highlighted criticism of the Center, would seriously undermine efforts to slow health care spending growth and would boost Medicare and Medicaid costs by tens of billions of dollars over the next decade.  Congress should reject this provision when it finalizes 2017 Labor, Health and Human Services, and Education appropriations.

The Innovation Center, which health reform created within the Centers for Medicare and Medicaid Services (CMS), tests Medicare and Medicaid health care delivery system approaches and payment models to improve the quality of care while cutting costs.  Health reform initially gave the Innovation Center $10 billion over ten years to finance these demonstrations.  The  House Appropriations Committee’s Labor, Health and Human Services, and Education bill would rescind $5.2 billion in 2017, eliminating all of the Center’s remaining funding — and it’s not scheduled to receive more funding until 2020.  

Without current funding, the Innovation Center’s ongoing demonstrations likely couldn’t continue.  Current projects that show promise to improve care and cut costs, such as implementing payment models like Accountable Care Organizations and bundled payments, reducing unnecessary hospital stays and readmissions, increasing care coordination for “dual eligibles” (seniors and people with disabilities who are on Medicare and Medicaid), expanding access to primary care, and improving care in rural areas, likely would end or face multi-year delays.  Without funding, the Innovation Center also couldn’t support the development and testing of other delivery system changes and payment models.

As Congressional Budget Office Deputy Director Mark Hadley testified yesterday, the Innovation Center can likely identify cost-saving strategies and demonstration projects.  For example, it has a robust process to solicit, screen, and develop new approaches and models.  It also focuses on approaches that can be empirically evaluated, allowing for more accurate predictions of costs and the identifying of potential implementation challenges.  In addition, based on initial experience, the Innovation Center can modify ongoing demonstrations to make them more likely to produce savings.   

With all this in mind, CBO estimates that eliminating the Innovation Center’s funding would increase Medicare and Medicaid spending by about $39 billion over the next ten years (fueling a net deficit increase of about $34 billion over that time).  Savings that existing demonstration projects are producing (or will produce) would be lost, as would the future savings from applying some of these approaches more broadly within Medicare and Medicaid, as health reform permits. 

That doesn’t even count the potential longer-term effects.  Cutting Innovation Center funding now could prevent the testing of a highly effective delivery reform or payment model and delay or derail its broader adoption throughout the U.S. health care system, undermining further progress that we’d otherwise make in slowing health care cost growth over the long run.