Federal Budgetary Effects of the Activities of the Center for Medicare & Medicaid Innovation

The Center for Medicare & Medicaid Innovation (CMMI) was created by the Affordable Care Act (ACA) in 2010. It conducts pilot programs, known as models, that test new ways to deliver and pay for health care in Medicare, Medicaid, and the Children’s Health Insurance Program, with the goal of identifying approaches that reduce spending or improve the quality of care.

In this report, the Congressional Budget Office presents findings from its analysis of CMMI’s activities during the first decade of operation and uses those findings to update its projections of CMMI’s effects on federal spending. The report explains changes to CBO’s analytic method based on those findings and discusses the agency’s revised approach to estimating the effects of legislative proposals that would change CMMI’s models or operations. CBO previously estimated that CMMI’s activities would reduce net federal spending but now estimates that they increased that spending during the first 10 years of the center’s operation and will continue to do so in its second decade.

CBO currently estimates that CMMI’s activities increased direct spending by $5.4 billion, or 0.1 percent of net spending on Medicare, between 2011 and 2020. (Most of CMMI’s models have focused on Medicare beneficiaries.) Specifically, CMMI spent $7.9 billion to operate models, and those models reduced spending on health care benefits by $2.6 billion. The estimates reflect CBO’s review of published evaluations of 49 models initiated over CMMI’s first decade as well as corresponding historical budget data.

By contrast, in 2010, when the ACA was enacted, CBO projected that CMMI would produce net savings over the 2010–2019 period. Extending that earlier approach to the 2011–2020 period, which spans the first full decade of CMMI’s operation, yields an estimated net reduction of $2.8 billion in federal spending, or 0.05 percent of net spending on Medicare during those years. That estimate reflects a projection that CMMI’s models would lower spending on benefits by $10.3 billion, more than offsetting the $7.5 billion that CMMI would spend to operate those models.

Looking ahead, CBO currently projects that CMMI’s activities will increase net federal spending by $1.3 billion, or 0.01 percent of net spending on Medicare, over the center’s second decade, which extends from 2021 to 2030. If CBO used its 2010 approach instead, it would estimate net savings of $77.5 billion, or 0.8 percent of net spending on Medicare, in the second decade of the center’s operation. The difference between CBO’s current projections for the second decade and projections using its 2010 approach largely reflects an update in the agency’s expectation about the rate at which CMMI will identify and expand models that reduce spending. For the period spanned by CBO’s current baseline projections, 2024 to 2033, CBO projects that CMMI will increase net federal spending by less than $50 million.

CBO’s current projections for CMMI’s second decade draw on the net increases in spending that occurred during the center’s first decade of operations and also reflect the expected accumulation of savings in the second decade from both previously and newly certified models. CBO’s findings about the budgetary effects of CMMI’s activities over the first decade and its updated projections are subject to considerable uncertainty.

In estimating the budgetary effects of legislation that would change CMMI, CBO evaluates each proposal individually. In general, legislative proposals fall into one of three categories: changes to specific models, modifications to the parameters within which CMMI operates, and repeal of CMMI’s statutory authority and rescissions of the agency’s funding. CBO’s estimates reflect its overall view of CMMI’s effects on federal spending for both administrative operations and benefits.

CBO will continue to monitor CMMI’s activities and will refine its approach as new information becomes available.