Private Efforts Not Public Committees Will Generate Healthcare Savings

Forbes

6 days ago

Bureaucracy
Passed as part of the Affordable Care Act (ACA), the Center for Medicare & Medicaid Innovation (CMMI) was allocated $10 billion in 2011 for the first decade of its existence. It has been allocated hundreds of millions more since. The purpose of the program is to create payment models that reduce spending and/or improve the quality of care for patients enrolled in Medicare, Medicaid, and the Children's Health Insurance Program (CHIP).
You would hope that having spent so much money that the CMMI would have developed meaningful reforms that justify all this money spent. Such hopes have been dashed unfortunately. Judged against its achievements not its purpose, CMMI is a failure.
In its 2023 assessment, the Congressional Budget Office (CBO) now estimates that, due to the operations of the CMMI, total federal spending 'increased during the first 10 years of the center's operation and will continue to do so in its second decade.'
According to the CBO, CMMI spent $7.9 billion developing and implementing pilot payment projects between 2011 and 2020 but it was only able to generate $2.6 billion in savings – it imposes a net cost on taxpayers. Avalere Health's 2022 evaluation concurred with the CBO's 2023 results finding that, between 2017 and 2021, CMMI's payment models increased total federal spending by $1.7 billion.
These are damning assessments. Any private organization that earned $2.60 for every $7.90 it spent would soon be out of business, and for good reasons. Ventures that lose this much money are destroying value.
Of course, saving money is only one of CMMI's goals. The other goal is to improve the quality of healthcare patients receive. If CMMI were developing models that significantly improved outcomes or patients' satisfaction, then that could potentially justify their efforts. Alas, as confirmed by a 2025 Avalere analysis, any potential quality improvements are minimal at best.
Of the 18 models Avalere evaluated, only four models showed improved quality. The remaining models had either mixed or minimal quality impact. The study also found that 'there was little-to-no impact reflected in patient experience surveys and, where available, there were mixed results in outcomes across patient demographics.'
Perhaps more important, CMMI rarely deems their payment models a success based on a core metric – whether a model meets the spending or quality criteria to expand. Since 2011, only four of the forty-nine models (or 8%) have met the criteria to be certified for expansion. The unwillingness of CMMI to expand the vast majority of its programs is an implicit admission that the programs do not save money or sufficiently improve outcomes for patients.
Clearly, these negative results do not justify the billions of dollars that have been allocated to CMMI. Despite this evidence, faith persists that CMMI will eventually discover the right payment models. We just need to keep investing in the effort.
This strategy is akin to a gambler chasing his losses. Chasing your losses violates the very definition of responsible gambling. As Kenny Rogers would say, you got to know when to fold 'em, and it's time to fold 'em.
Rather than continuing to look toward government bureaucracies to generate savings and improve patient outcomes, policies should focus on creating a patient-centric healthcare system. Such a strategy would begin by closing down CMMI.
The next step is to learn from CMMI's failures. CMMI failed, despite spending billions of dollars, because policymakers believed in the fallacy that central planning committees can devise a higher quality lower cost payment model. They can't. Experience demonstrates that empowering patients and incentivizing competition is a more effective pathway to generate budgetary savings and improve the quality of care.
Bolder reforms would comprehensively address Medicare's broader deficiencies by turning Medicare into a cash-based benefit system that funds health savings accounts (HSAs) for seniors – provide Medicare benefits in the same manner as Social Security. At current spending levels, Medicare could give each beneficiary a bit more than $15,000 annually to cover their insurance and healthcare costs.
Short of comprehensive reforms, there are large potential benefits from introducing competition into key portions of the healthcare system, as the success of Medicare Part D exemplifies.
Created in 2003 as part of the Medicare Modernization Act, the program established a decentralized marketplace where private insurers design their own benefit packages to compete for enrollees. The law's non-interference clause prohibited the federal government from setting prices, ensuring that commercial dynamics, not bureaucracy, ruled the market.
Over its first two decades, Medicare Part D spending was below the Congressional Budget Office's initial projections, average monthly premiums for standalone prescription drug plans remained under $40 (as of 2023), and surveys consistently showed high beneficiary satisfaction.
Discouragingly, recent policy changes are undermining these reforms. The Inflation Reduction Act passed in August 2022 introduced what is essentially government-imposed price controls on select innovative drugs. The maximum fair prices on the first 10 drugs under Part D will become effective as of January 2026. If allowed to persist, these changes will undermine the benefits Medicare Part D has been able to create.
It should not have been surprising that CMMI has failed to discover more efficient payment models. Centrally planned healthcare never produces the results its advocates expect. Rather than continuing to throw good money after bad, policymakers should wind down the CMMI and empower patients, providers, and private insurers to discover payment models that reduce costs while improving care.