NTU's Comments on Centers for Medicare & Medicaid Services

The Honorable Seema Verma

Administrator, Centers for Medicare and Medicaid Services

200 Independence Ave., SW

Washington, DC 20201

RFI: Innovation Center New Direction

Dear Administrator Verma:

On behalf of National Taxpayers Union’s (NTU’s) supporters across the nation, I am honored to submit the following comments in response to the Centers for Medicare & Medicaid Services’ (CMS) Request for Information (RFI) on “a new direction to promote patient-centered care and test market-driven reforms that empower beneficiaries as consumers, provide price transparency, increase choices and competition to drive quality, reduce costs, and improve outcomes.”

Since its founding NTU’s advocacy efforts on health care policy have centered upon several of the principles contained in this RFI. We are therefore supportive of numerous elements outlined in the “new direction” CMS is envisioning for its Innovation Center, which encompasses the Center for Medicare and Medicaid Innovation (CMMI). Based on CMMI’s performance so far, such a new direction would come none too soon for taxpayers.

CMMI was initially provided a large $10 billion infusion of taxpayer resources (not subject to annual Congressional appropriations) to create “demonstration projects” that would supposedly revolutionize the way Medicare and Medicaid operated.  With more than $6 billion in funds already allocated, the evidence is scant that the Congressional Budget Office’s (CBO’s) projections (net entitlement spending reductions of $27 billion from 2015-2025) due to CMMI initiatives will actually come true. Worse, an additional 10-year, $10 billion allocation from the Treasury will be funneled into CMMI beginning in Fiscal Year 2020. As Joseph Antos, a former CBO and Health Care Financing Administration official testified to Congress, the demonstrations “seem to be better at showing which strategies do not work rather than which ones do.”

The following NTU recommendations address not only the Guiding Principles but also touch upon the Potential Models outlined in the RFI. For the sake of brevity, these comments only summarize our recommendations. Additional details and background are available from NTU on each of these points.

1) Construct “Guardrails” on CMMI Demonstrations.

Guiding Principle #2 of the RFI calls for a “[f]ocus on voluntary models, with defined and reasonable control groups or comparison populations, to the extent possible, and [to] reduce burdensome requirements and unnecessary regulations …” NTU believes that this principle is key to beginning reform of CMMI’s practices.
In theory, CMMI’s reliance on its authority to conduct mandatory demonstrations, affecting wide swaths of the Medicare or Medicaid populations, was to yield larger and more frequently-recurring cost savings for taxpayers than voluntary, smaller-scale initiatives. Legitimate objections over the coercive nature of this authority (and its corrosive impact on separation of powers) aside, the evidence has yet to conclusively show that CMMI’s approach is yielding uniformly better results for taxpayers. Thus, at the current time at least, CMMI seems to be offering a “lose-lose” situation – a large budget for less than impressive results.

NTU believes that Congress should reconsider CMMI in its entirety. Until that time, CMS should take steps to implement administrative remedies, among them:

  • A presumption that future demonstrations will initially be designed as voluntary exercises. Without this presumption, the cooperation of private-sector providers on all types of cost-saving projects will likely diminish;
  • A limit on the percentage of beneficiary, provider, or other populations to no more than the proportion deemed statistically and economically sufficient to produce valid demonstration results;
  • A limit on the duration of most projects formally defined as demonstrations to no more than 24 months (however, see below);
  • A new set of guidelines for expansions or waivers of rules surrounding any demonstrations so as to require more consultation and collaboration with Congress.

The last of these points is very difficult for any executive branch entity’s leadership to contemplate, yet, doing so is vital going forward for reasons of accountability and transparency.

2) Reexamine Concepts of “Budget Neutrality.”

Prior to CMMI, most demonstrations undertaken within HHS required budget neutrality, i.e., federal expenditures over the life of the project should not be higher than what outlays would have been in the absence of the given demonstration. While waivers and modifications to those rules have been made, it wasn’t until CMMI’s advent that the budget neutrality requirement was negated (for its own demonstrations).

Budget neutrality is an important component for ensuring fiscal and managerial discipline in the conduct of federal health care demonstrations. Still, the Innovation Center can and should be part of a discussion that involves longer-term creative thinking about solutions to the challenges facing Medicare and Medicaid.

The recently-canceled Part B prescription drug payment demonstration is a case in point. Certain value-based strategies, such as those employed through pharmacy benefit managers, can be of service in controlling the growth of taxpayer-funded health programs. However, when government agencies rather than private actors attempt to set prices, the result can be a failure to appreciate the advantages of drug therapies in avoiding costlier testing, surgeries, and hospital stays. A National Bureau of Economic Research study put a fine point on this equation, concluding that every dollar spent on prescription drugs leads to a $2.06 reduction in overall Medicare expenditures. The Congressional Budget Office has also observed that simple policies designed to increase utilization of drugs that patients should take (but don’t for a variety of reasons) can pay off as well. For every 1 percent increase in prescriptions filled for Medicare participants, spending on medical services within the program falls by 0.2 percent. Even higher payoffs may be possible for those with chronic conditions.

There are parallels to this situation throughout government, whereby bureaucratically directed, command-and-control mechanisms are intended to produce better fiscal outcomes but instead produce unintended consequences. The Independent Payment Advisory Board (IPAB), also created by the Affordable Care Act, is another example of an entity whose parameters focus too narrowly on remedies that ultimately do not take a longer view on potentially much greater cost savings. The result is a reliance on anti-market, anti-patient schemes such as price controls and rationing.

In the final analysis, CMS’s new direction is an opportunity to reintroduce long-term cost-benefit analysis not only to demonstrations but also to other federal health policies. For instance, telehealth programs could provide access to preventative care that obviates the need for much more expensive taxpayer-funded treatments many years from now. Unfortunately, CBO’s scoring outlook toward telehealth may not be sufficiently farsighted to capture such effects.

3) Open Up the Process.

CMS is to be commended for recognizing that broader and more frequent input from stakeholders and neutral observers alike can be helpful in designing demonstrations and correcting their flaws as they are underway. How should such a framework function? In NTU’s view, at least three essential elements would be:

  • Greater use of economic analysis from agencies such as the Office of Management and Budget and its Office of Information and Regulatory Affairs (OIRA). To be certain, health care policy often involves highly technical and specialized observations. On the other hand, OIRA has often provided solid guidance in designing federal information collection activities that inflict less of a burden on those subject to new rulemakings.
  • A more nimble and adaptable framework for feedback. If demonstrations are to be limited in scope and duration, it is critical that parties outside government be able to offer timely advice and evaluation of data as it is being accumulated. Strong periodic review processes as demonstrations are occurring could (with proper safeguards against premature conclusions) help to contribute toward their refinement.
  • Creative adaptation of successes. One category of the RFI’s potential models involves program integrity – an area with major prospects to reduce the burdens of many federal programs on taxpayers. In the Medicare space, for example, the Recovery Audit Contractor (RAC) program has been successful in returning to the Treasury more than $10 billion in improper payments. Though CMS has been under constant pressure to curtail the RAC process, NTU is especially supportive of its expansion since it involves no initial taxpayer outlay to function properly. Tools such as these could be fashioned for other uses rather than limited or discarded.

In closing, we wish to point out that this RFI could, depending upon how public responses are internalized, have an influence well beyond CMS. A forthcoming paper from NTU’s research arm will explore in-depth CBO’s flawed judgments regarding the future budgetary impact of CMMI’s initiatives. By essentially assuming that the vast powers undergirding CMMI’s projects (as compared to previous demonstrations) will constantly expand on success across administrations and without regard to stakeholder input, CBO has concocted a bizarre policymaking dilemma for Congress. Using a circular logic, the budget agency assumes hypothetical, massive savings from CMMI that are part of a policy baseline. Any attempt by Congress to modify CMMI’s mission or create programs of its own that CMMI might contemplate for a future demonstration are “scored” as an increase in federal outlays.

CMS is hardly in a position to change CBO’s scoring conventions. Nonetheless, this experience is still relevant to the RFI. For the sake of government-wide innovation and cooperation between the legislative and executive branches in controlling Medicare and Medicaid outlays, it is vital that CMS clarify and limit CMMI’s prerogatives. In addition, other executive branch agencies can provide valuable input to the Innovation Center’s operation that will maximize desirable outcomes both for patients and for taxpayers. Finally, it is important that the new direction CMS intends to take is informed by solid analysis and constant evaluation.

Some 40 years ago, National Taxpayers Union’s Task Force on Health Care released a report that observed:

Government intervention in the health care delivery process throughout the course of this century is the major cause of high prices and inefficiencies in the health care industry today. Twentieth-century medicine has been regulated by government to such an extent that it has failed to respond to the needs and demands of twentieth-century America.

Nearly two decades into the 21st century, the statement above has even greater relevance. The regulatory and other reforms proposed in the report were aimed at encouraging “competition and innovation, and thus lower prices and better care.” So it must be today.

Our members are encouraged that CMS’s new direction could, properly designed and implemented, bring about the positive changes they have sought in the past and – more fervently than ever – hope to effect for the future. Accordingly, we hope these views are useful as you continue to define CMS’s role in transforming health care policy. Our staff stands ready to assist you with these urgent steps forward. Thank you for your consideration.


Pete Sepp, President