Medicare Pilot Program Illustrates Difficulties of Reducing Costs

The preliminary results of a three-year pilot project that sought to reduce costs for Medicare indicate "how difficult it can be, politically and practically, to make fundamental changes in the sprawling $400 billion" program, the New York Times reports. Medicare Health Support, which began in mid-2005, sought to reduce the number of Medicare beneficiaries who require hospitalization for chronic conditions.

Under the project, companies seek to better manage the care of beneficiaries with chronic health conditions like congestive heart failure and diabetes. Among the steps taken, nurses every few weeks called Medicare beneficiaries with chronic conditions to ensure that they took their medications and visited the proper physicians to prevent complications. Medicare paid eight companies about $360 million to administer the project.

CMS has not determined whether the project improved the health of Medicare beneficiaries with chronic conditions, but the preliminary results indicate that the project failed to meet a target of a 5% reduction in costs for the program. Final results of the project likely will become available next year.

Implications
According to the Times, experts maintain that "Medicare and the companies alike were too optimistic about how easy it would be to prevent costly complications and hospital visits by patients who are very sick." The companies argue that Medicare "signed up patients who were much sicker than they had expected" and "failed to make good on its promise to give them timely information about the use of prescription drugs ... or lab results that would have allowed them to help direct the patients' care." However, CMS maintains that "it had worked extensively with the companies to address their concerns and that its final analysis would take into account how sick the patients initially were," the Times reports.

CMS officials said that they cannot continue the project after December without evidence of budget neutrality. Herb Kuhn, acting deputy administrator for CMS, said, "We're not giving up on this stuff," adding, "We definitely want these programs to work."

Arnold Milstein, chief physician for the consulting firm Mercer Health and Benefits, said, "Medicare is doing exactly what we should want Medicare to do - to test different life forms of disease management and see what works best," adding, "This particular form of disease management is not looking promising."

George Bennett -- CEO of Health Dialog, one of the companies involved with the project -- said, "Medicare actually has the possibility of saving $20 billion to $30 billion if they undergo what is being done in the private sector."

Some lawmakers, such as Sens. Lamar Alexander (R-Tenn.) and John Kerry (D-Mass.), have lobbied to have CMS continue the project. Health Dialog is located in Massachusetts, and Healthways, also one of the companies involved with the project, is located in Tennessee (Abelson, New York Times, 4/7).