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House Bill Would Raise Medicare, Medicaid Costs and Deficits, Stifle Health Care Innovation

The 2016 Labor, Health and Human Services, and Education bill that the House Appropriations Committee will consider tomorrow would seriously undermine efforts to slow health care spending growth — and, in doing so, increase Medicare and Medicaid costs by tens of billions over the next decade.  (In addition, as my colleague David Reich has written, the bill would cut billions from education and health programs and block the Department of Health and Human Services from using funds appropriated under the bill to continue to implement nearly all of health reform.)

Specifically, the bill would entirely defund the Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services.  The Innovation Center, created under health reform, tests Medicare and Medicaid health care delivery system approaches and payment models to improve the quality of care while lowering costs.  Health reform provided the Center with $10 billion over ten years to finance these demonstrations.  The House bill would rescind $6.8 billion, eliminating all of its remaining funding.  (Under health reform, the Center isn’t scheduled to receive additional funding until 2020.)

Without this funding, the Innovation Center’s ongoing demonstrations wouldn’t likely continue.  Current projects that show promise for improving care and lowering 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 on Medicare and Medicaid), expanding access to primary care, and improving care in rural areas — would likely be scrapped or delayed for many years.  Without funding, the Innovation Center also could not support the development and testing of other delivery system changes and payment models.

That’s why the Congressional Budget Office estimates that eliminating the Innovation Center funding would actually increase Medicare and Medicaid spending by $37.6 billion over the next ten years, generating a net deficit increase of about $31 billion over that time.  Savings that existing demonstration projects are accruing (or will eventually produce) would be lost, as would the future savings from expanding the application of some of these approaches 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 testing of a highly effective delivery reform or payment model and delay or derail its broader adoption, undermining progress we would otherwise be making in slowing the growth of health care costs over the long run.