The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Medical Cost Savings Experiment Launches

Posted by Alan on January 29, 2010

In Washington, Democrats are contemplating ways to move health care reform forward in a filibuster-sensitive Congress and the White House is pivoting towards emphasizing job creation. Meanwhile, in the real world, Indiana and North Carolina are the site of two pilot projects that could have a significant impact on the quality and cost of medical care.

The Centers for Medicare and Medicaid Services (“CMS”) announced earlier this week the launch of what Health Data Management describes as “the first large-scale Medicare study of a multi-payer, quality reporting and improvement, and pay-for performance program. Data from Medicare, Medicaid, private insurers and employer-sponsored health plans will be combined with clinical data to test if quality improvement and pay-for-performance programs are more effective in a multi-payer environment.”

In other words, the folks who operate Medicare are testing a method of moving from paying medical providers for what they do to a means of compensating providers for what they accomplish. At the same time the program will “provide participating physicians with better information on the patients they are treating,” according to a press release issued by the CMS. This demonstration project will take place in Indiana.

In North Carolina, meanwhile, CMS is working with a group to test ways of better coordinating care, implementing performance incentives and measuring the quality of care received by low-income Medicare beneficiaries. The test is for model termed “medical home,” which Health Management Data describes as “redesigned practices that are more functional and workflow-friendly” and that “focus on quality, safety and alternative reimbursement methods.” The model also requires extensive use of health information technologies (think e-prescribing, clinical decision support, and electronic health records.)

My background is in selling health insurance and the politics and substance of health care reform. So I may be misinterpreting the import of these pilot projects, but my take is that they are baby steps down a very significant path: constraining the cost of health care. Most significantly, they are being done by the Obama Administration without the need for further Congressional authorization, without the need for bridging partisan chasms, and without a lot of fuss or bother. The CMS is just doing what the CMS is supposed to do. Their authority? According to the CMS press release,  the demonstrations are authorized by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. No new or additional authority required. 

Given the lack of fanfare and attention given to these efforts, this may or may not be a signal that President Barack Obama and his administration are launching a coordinated effort to implement meaningful health care reform on their own as I wrote about earlier this week. I’m not sure it matters, however. The key fact is that these experiments could identify methods of wringing savings from the current health care system without the political sausage making inherent in legislative undertakings. So even while health care reform is at a political standstill, the real work of reform seems to be moving forward.

That’s encouraging.

10 Responses to “Medical Cost Savings Experiment Launches”

  1. I don’t understand why unlike all other leading nations in this world, America can’t provide health care for a large percentage of its citizens. Can’t we take a hint from countries that have health care systems that work? Obviously Medicare and Medicaid don’t do their jobs as well as they should, so don’t bother with the experiments, get rid of them and start fresh!

    • Spencer Lehmann said

      Melany, America does provide health care for a large percentage of its citizens; in fact, 85% of Americans have good coverage. Medicare does a great job…and if you like, and via another venue, I’ll be glad to give you an education in just how terrific Medicare is. What other plan costs so little and provides virtually 100% hospital coverage after the first day deductible? In what other plan (other than PPOs or HMOs) are physicians limited to charging the patient no more than 15% of Medicare allowable additional, and then at deflated rates that are two years behind the current rates (and most doctors accept assignment)? I’ve been working with Medicare and Medicaid (pro-bono, as it is welfare) since 1969, three years after Medicare was implemented…I know what a fabulous program it is. Medicaid (Welfare) also does a good job, given that the providers make little and must fight for what they get (it is far more bureaucratic than Medicare, and all are run by the Gov’mint…is that what you would like to see? All Guv’mint, which gave us Social Security, Medicare (fabulous benefits, and flat broke, and Medicaid, the same, and VA…wanna go to a VA hospital and feed the rats running in and out of the rooms? How about that same government that failed to regulate the banks, securities companies, mortgage companies, insurance companies, and best of all, the Lawyers…oh, to breathe their sanctified air! No one, that is NO ONE, can be denied care in an ER, by Federal Law.

      I don’t know who has provided you your information, but they are simply, and factually, wrong.

      America has a 14% uninsured rate, and Canada, I’ll say it again, CANADA, that bastion of everything wonderful in health care, has a 7% uninsured rate. How can that be? Because in order to be covered, even in a socialized system, you have to sign up for it, and 7% of Canadians do not.

      It would behoove you to undertake some serious research (Google can provide it all) before condemning the American system out of hand.

  2. In other words, the folks who operate Medicare are testing a method of moving from paying medical providers for what they do to a means of compensating providers for what they accomplish.

    Certainly a nice idea, but it’s hard to believe that doctors are on board with this. And okay, they’ll be provided with better info on their patients, but why isn’t that already happening, if the possibility exists?

    Regardless, let’s hope it does lead to some cost savings, and if so, is expanded to other areas.

  3. Stephen said

    Agreed. Although this may ultimately lead to some cost-savings, it cannot be considered reform. Given previous statistics posted by CMS and the CBO, these cost-savings will only be a scratch on the surface. This does not mean that we should not seek to achieve all the savings we can, but we cannot stop short of reform.

  4. Spencer Lehmann said

    While this specific comment is “Off-topic”, and I’ll have more to say on this topic tomorrow, let’s make all Public Teachers, via the NEA and its state and local chapters, all of its members, subject to Pay for Performance.

    Maybe, just maybe, we will then not be held hostage to this “pseudo” criminal organization that strikes at the first opportunity to receive more pay while being satisfied with leaving our children #26th in the world rankings of education. That’s # 26TH IN THE WORLD, folks. And that is criminal.

    Regarding Pay for performance for physicians, JimK, I haven’t yet read all of the material Alan has provided, however, I can see that this can be an area fraught with legal implications. Medicine is really more of an “Art” than a “Science”, and without the 100% cooperation of the patient the physician is helpless to alter the outcome. My father was a cardiologist and had a practice that included a family practice. I met many of his colleagues, and some of his patients (many others) wouldn’t follow dad’s advice (quit smoking, quit drinking, don’t eat crap) and were in ill health their entire lives. Even if those patients are in a special group and they don’t follow orders, strictly, they may be in for serious trouble. Is it appropriate to hold the physician accountable for the bad actions of the patient? I think not. It’s kind of like the fellow who called me one day to tell me he was going to sue me because I did a bad job trying to convince his mother to keep her LTC insurance. I keep immaculate records, a hard copy of every business email. I faxed him, while he was on the phone, four copies of her written and typed cancellation requests. Then I asked him if I should now call my lawyer and sue him for threatening me with a nonsense suit? He apologized and hung up. How many in our field, or in a physician’s practice, keep detailed copies of everything, knowing that lawyers have no controls, no regulations, and can rob us all blind? NOt many, I’ll wager. Everyone seems to think that with Computer backups, and advanced technology they don’t need to do simple, though time consuming, file and record keeping. Bad thinking. The Obama Administration can’t even find all of the data to give an accurate picture of the results of the Stimulus Bill. And we should trust the “Guv’mint” with this kind of record keeping? How have they done with Social Security? Medicare? Medicaid? ERISA? COBRA? The Congress abusing the taxpayer (you do know that Nancy Pelosi, that paragon of virtue, spent $2.1Million of the taxpayer’s money on private and military jet flights, including on her jaunt to Copenhagen for the Climate Conference, yes?)?

    I am not willing to allow the government to abuse the taxpayers anymore than they already have, and find it difficult to believe that you would trust them to adjudicate and manage a plan such as this, that is fraught with ambiguities, is open to subjective conclusions and provides opportunities for the government to mismanage and commit even more malfeasance with another government run program.

    • Mark Goodman said

      So if I understand you correctly our leading science and engineering companies should be able to get away with paying their point people less and still expect great results. Paying K-12 teachers more will attract better people going into the field. I know of no other profession that expects so much and pays so little.

  5. Sean said

    I don’t support the notion of paying for outcome as opposed to services. What happens to a Doctor’s reimbursement if he/she diagnoses what I have properly, gives me the proper steps to fix my health issue but I just choose not to or am lazy and only do half of what I’m supposed to? Then my situation gets worse and I still only go half way. Then I end up in the Hospital. How does the insurance company or government insurance judge how and the amount to pay for the care the Doctor gave me?
    What if I don’t tell the Doctor I drink or smoke or do drugs that could inhibit my recovery? Now the insurance company is holding my Doctor responsible for my decisions.

    • JimK said


      The participants in the plan design the format that was approved by HHS. I am sure in the design of their systems they have taken into account the actions of patients in determining whether or not the there was some culpability on the part of the patient that led to a less than desired outcome.

      The following links were obtained through a link provided by Alan and provide additional information on this subject.

      Click to access MMA646_Solicitation.pdf

      Click to access MMA646_Federal_Register_Notice.pdf

      • Nosedoc said

        Paying for outcomes shifts a great deal of the risk of insuring the public to the providers. This concept hasn’t worked out well for capitation, and I don’t imagine it will work out well in this sort of model. I can only see providers working under either a fee-for-service model as independent contractors, or as salaried employees. There are other ways of providing incentives for quality care, and I certainly wouldn’t trust government or corporate administrators to decide where the bar is going to sit–my guess is that the bar would be continually raised to ensure that some percentage of deserving providers would always be shortchanged on reimbursement.

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