WSJCapture400When I first saw the Wall Street Journal op-ed attacking the Center for Medicare and Medicaid Innovation (CMMI) for many purported sins, my first thought was that I should just congratulate CMMI for having arrived. After all, in our hyper-partisan environment, you aren’t anybody unless you are considered worth bashing by someone.

CMMI was set up and funded as part of the Affordable Care Act under section 3021of Title III, the hitherto relatively noncontroversial part of the law aimed at “IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE.” The agency’s goal is one that the John A. Hartford Foundation  has pursued on behalf of older Americans for 30 years and one that we feel passionate about:

The purpose of the CMI is to test innovative payment and service delivery models to reduce program expenditures under the applicable titles while preserving or enhancing the quality of care furnished to individuals under such titles. In selecting such models, the Secretary shall give preference to models that also improve the coordination, quality, and efficiency of health care services furnished to applicable individuals defined in paragraph (4)(A).

And the mechanisms used by CMMI, grants and grant-like awards, are the same tools that the Foundation uses. So, as I thought about some of the specific critiques, I realized that our own efforts at the Foundation could offer insights into the strengths and weakness of CMMI’s work and might be a contribution to the debate. So here goes  . . .

The WSJ op-ed authors, Lanhee J. Chen and James C. Capretta—who are health policy scholars at the Hoover Institution and American Enterprise Institute, respectively, and worked in the Bush administration and advised the Romney campaign—obviously have a very different political and economic orientation than the current administration. Many of their critiques seem to proceed from deeply held beliefs about the superiority of private markets over government activity and skepticism of unaccountable “government technocrats,” which I don’t feel qualified to discuss.

But based on our experience as a funder trying to improve health care for Medicare beneficiaries, albeit on a much, much, much, smaller scale than CMMI, and having closely watched CMMI and interacted with it around programs like the Community-based Care Transitions Program, the Innovation Advisors, and the two rounds of Innovation Challenge Grants, I have my own concerns about CMMI’s work, which I have expressed previously. (Read CMS Needs Better Interventions, Not Better Research Designs and Groundhog Day.)

However, my analysis leads me to recommendations that are 180 degrees from those of Mr. Chen and Mr. Capretta, who call on Congress to abolish CMMI.

For example, they clearly feel that $1 billion dollars in CMMI spending a year is a lot and imply that the 10-year commitment of funds is a long time. However, the Medicare program alone spends more than $500 billion a year on care, and I think in this moment of crisis, spending 5 percent--or $25 billion—annually on research and development to try to improve health care quality and efficiency would not be inappropriate.

But even if you thought an appropriate R&D rate was 1 or 2 percent and you wanted to subtract from CMMI’s budget some of what is allocated to the Agency for Health Care Quality and Research, you would find that far from being over-funded, CMMI’s mission is substantially underfunded. Moreover, as a program person still working on spreading innovations, such as collaborative mental health care and the IMPACT model that we started in the first years of my foundation career, 10 years is not a long time horizon to try to make change in the health care sector.

The editorialists also are critical of the number of staff (68 FTE in 2012 and forecast to rise to 440 in 2015) and the share of CMMI’s spending that goes to salaries and “administrative” costs (10 percent). This is a very familiar concern in philanthropy and the non-profit sector, where staff and non-program expenditures often are criticized as being at the expense of the people we hope to serve. But the current consensus is that it is misguided to try to apply a blanket rule without real consideration of what staff do and that starving organizations of essential infrastructure is no way to make them strong, innovative, and nimble.

I have argued previously that CMMI is understaffed to perform its functions and monitor its many large and complex programs. If we take the Hartford Foundation’s staffing and administrative cost ratios (which are at the median of our peer organizations), one would conclude that CMMI should have 800 employees and spend 20 percent of its budget on administration. (And perhaps next week I will offer some suggestions as to what CMMI might productively do with that money and those staff.)

Finally, Mr. Chen and Capretta argue that many of the innovations that CMMI is supporting are things that are already common in the Medicare Advantage program and that expanding such private market solutions is a better way of reaching CMMI’s goals. (Medicare Advantage is the program where the Centers for Medicare and Medicaid Services (CMS) pays a capitated monthly fee to a health insurer on behalf of a Medicare beneficiary and that insurer becomes responsible for all subsequent health care costs, as well as meeting certain quality and access standards. Currently, about 30 percent of beneficiaries receive their care through Medicare Advantage plans.)

At the Foundation, we too have long been very sympathetic to managed care and capitated systems because they offer incentives to improve quality and efficiency that regular fee-for-service providers do not have. We are currently very excited about the potential of the new integrated plans that will get capitation payment from both Medicare and Medicaid for the full range of needs of some of the most frail and vulnerable older adults and disabled people, the so-called “duals.”

And these plans have had some flexibility as to how they spend their money that have made them natural laboratories and partners in our work. (So the critique that it is a bad thing for the government to try to spread more widely payment innovations developed in the private sector strikes me as odd.) However, having worked with many of the long-time Medicare Advantage players and given them grants for innovation, I do have some specific thoughts.

First, Medicare Advantage plans are often not very good at innovating. Their organizations generally lack the spare capital for research and development and tend to be very conservative about trying new things. For example, despite the demonstrated cost and quality benefits of the Hospital at Home program, which provides an alternative to in-hospital treatment for some of the most common conditions leading to Medicare admissions, there have been few adoptions even within Medicare Advantage, and relatively little interest until recently, when CMS/CMMI began to change the incentives.

Second, most managed care plans are often only another payer among many for hospital and professional providers who actually deliver the care. Outside of the fully integrated plans where the plan owns the hospitals and “employs” physicians and other providers, such as Kaiser and Group Health Cooperative, a Medicare Advantage plan can lack the market power to really drive change.

And last, despite the claims the authors make about the demonstrated “efficiency” of Medicare Advantage plans (i.e., their ability to deliver full Medicare benefits at only 92 percent of the costs of comparable fee-for-service care), in my experience, health plans are very leery of the Medicare population, where the costs and complexity of care are very high. Before the 2000s, back when Medicare Advantage plans were actually offered payments of 95 percent of fee-for-service in recognition of their expected efficiencies, Medicare Advantage did not grow and many managed care plans wanted to avoid older adult members.

In fact, the current 92 percent cost ratio is deceptive insofar as Medicare Advantage HMO plans are actually paid 103 percent of fee-for-service, costing the taxpayer more than beneficiaries in fee-for-service would. (See Chapter 13, page 295, of MedPAC’s 2013 report.) It is unclear how plans will actually act if and when government tries to realize some of the benefits of these efficiencies for the taxpayer.

Fundamentally, I don’t believe that changes in payment policy alone can make the real changes we need to improve quality and efficiency of care. Financial support and intellectual leadership to advance actual innovations in how care is delivered are also necessary. On balance, CMMI reflects an appropriate participation of the federal government, which is after all the largest single payer for health care in America, in what has to be one of the most urgent challenges of our time: improving the quality of health care and reducing its costs, particularly for older adults who are disproportionately the population that need and use health care and where the highest costs of care are to be found.

I think there is room for vigorous debate in how CMMI pursues its work and I wish that it was more transparent and a great deal faster in carrying out its mission. Still, we are better off with CMMI than without it.