Leading health economists support creation of new federal center for Medicare and Medicaid innovation

March 08, 2010

Despite the loss of the Democrats’ supermajority necessary to pass comprehensive national healthcare reform, new federal legislation is needed to promote greater efficiency in the medical delivery system.

Comprehensive reform of Medicare’s provider-payment system would accelerate delivery system change but would be highly disruptive for many hospitals and physicians. However, congressional proposals that provide new authority for the Centers for Medicare and Medicaid Services (CMS) to implement alternative payment structures through voluntary pilot projects could spur significant delivery system innovation, write two leading Brandeis University health policy analysts in the March 4, 2010 issue of the New England Journal of Medicine.

Such pilots would be managed by a newly created Center for Medicare and Medicaid Innovation (CMI) that would have authority to implement innovative payment system pilots and expand those that are shown to reduce Medicare expenditures and improve quality. Such pilots will be particularly beneficial for health care organizations that are motivated to reduce excess clinical spending but have been held back by the negative financial implications of doing so under fee-for-service reimbursement, contend Robert Mechanic, Senior Fellow and Director of the Health Industry Forum at Brandeis University’s Heller School for Social Policy and Management, and Stuart Altman, Professor of National Health Policy at the Heller School.

In their commentary, the authors detail specific changes the CMI could bring about to improve healthcare delivery and slow spending growth. They urge Congress to enact CMI legislation along with other good proposals introduced over the past year that should have bipartisan support, regardless of the fate of comprehensive health reform.

While legislative language creating the CMI would “reduce important historical barriers to innovation within the CMS,” the authors write, success is ultimately about execution. “The first step is to select a leadership team that understands health care delivery and federal government operations, thinks outside the box, and is willing to accept occasional failures as it pursues its objectives,” Mechanic and Altman write.

At the end of the day, “successful innovation is essential to the long-term sustainability of Medicare and Medicaid,” according to the authors.

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