ECONOMIC REPORT OF THE PRESIDENT

example, through CMMI, the Administration tested the Medicare Diabetes
Prevention Program (MDPP), which provides coaching aimed at helping
participants transition to a healthier lifestyle and lose weight. The evaluation
of this initiative demonstrated that MDPP both reduced spending and
improved quality of care for Medicare beneficiaries, and the Chief Actuary
of the Centers for Medicare and Medicaid Services (CMS) has certified that
expanding the initiative would not increase Medicare spending (RTI 2016;
Spitalnic 2016; HHS 2016a). On this basis, CMS is now taking steps to begin
paying providers to deliver MDPP services to eligible Medicare beneficiaries
nationwide starting in 2018. The Administration has also used various
pre-ACA authorities to begin covering other high-value services under
Medicare in recent years, such as care management services for individuals
with chronic diseases and care planning services for patients with cognitive
impairments like Alzheimer’s disease or dementia.
Development and Deployment of Alternative Payment Models
Most important for the long term, the Administration has also
made substantial progress in deploying APMs that reorient payment to be
based upon the overall cost and quality of the care providers deliver. The
Administration has tested and deployed a range of different types of APMs
in Medicare. Two particularly important types of APMs are bundled payment
models and accountable care organization (ACO) payment models,
each of which is discussed in greater detail below.
Under bundled payment models, sometimes called episode payment
models, Medicare makes a single payment for all care involved in a clinical
episode, rather than paying for each of those services separately.20 Bundled
payment models use a range of different approaches to define clinical episodes,
but they generally start when a specified triggering event occurs and
then continue for a follow-up period. For example, in a bundled payment
model CMMI is currently testing for hip and knee replacement, the episode
begins when the patient is admitted to the hospital for surgery and continues
through 90 days after discharge. The bundled payment covers all the health
care services the patient receives during that time, including the initial hospital
admission, the surgeon’s services, post-discharge home health services,
20 Some bundled payment models literally make a single payment for the episode and rely on
the providers involved in the patient’s care to split that payment among themselves. However,
most bundled payment models being tested by CMMI instead pay for care on a fee-for-service
basis during the episode, and then “reconcile” these payments after the fact. If fee-for-service
spending falls below the episode price, CMS makes a payment to the provider equal to the
savings, while if the fee-for-service spending exceeds the episode price, the provider makes
a corresponding payment to CMS. Either approach to bundled payment creates similar
incentives.
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