Takeaway: This complimentary research note was written by Hedgeye Health Policy analyst Emily Evans.

Throwing Baby Out With the Bathwater: Politicizing of CMMI Risks Medicare Reform & Adds Uncertainty - z congress

The Center for Medicare and Medicaid Innovation (CMMI) finds itself in the political crosshairs this election season. The Obama administration has only itself to blame.

Late last week, 179 (mostly Republican) House members sent a letter to Andy Slavitt, acting administrator for the Centers for Medicare & Medicaid Services (CMS) and deputy director Patrick Conway accusing CMMI of exceeding its authority, being preoccupied with saving money and demanding that mandatory demonstrations like the Comprehensive Care for Joint Replacement bundled payment and the Part B Drugs Payment Model cease. This letter follows a call for repeal in the House Republican’s “A Better Way” policy platform.

We can only guess that House Republicans hope to leverage calls for repeal of the CMMI into election year victory. Demonizing changes to Medicare that might, under some interpretation, be considered a reduction in benefits is a time honored political tradition, reaching its apotheosis when Sarah Palin dubbed Independent Payment Advisory Board, a “death panel.” Palin’s characterization of that ACA provision and the way in which it resonated with Americans turned repeal of IPAB into a bipartisan issue.

The threat to CMMI could have been avoided.

Until early this year, CMMI had undertaken a number of initiatives that were either voluntary, or when mandatory, steeped in years of real-world practice. The mandatory bundled payment for hip and knee replacement began as a voluntary program in 2009 with five participating hospitals. That program, known as Medicare Acute Care Episode, known as ACE grew, into the larger Bundled Payments for Care Initiative in 2013. The most popular episode of care in the BPCI – hip and knee replacement -was ultimately selected for the CCJR mandatory bundle. By all accounts the CCJR’s implementation has been well received by clinicians and administrators.

Contrast the history of the CCJR to the Part B Drugs Payment Model. Before it was announced, CMMI had spent little time on evaluation of alternative payment approaches for Part B drugs or any drugs for that matter. What it had done is to rightly identify drug spending as a high growth area of national health expenditures. Congressional hearings revealed that CMMI had not included stakeholders in developing the proposal. Instead, CMMI seems to have looked largely to the practices of Pharmacy Benefit Managers for inspiration. Hospitals, physicians and drug manufacturers were caught off guard when CMMI proposed the Part B Drugs Payment Model.

Throwing Baby Out With the Bathwater: Politicizing of CMMI Risks Medicare Reform & Adds Uncertainty - z emily

Because the Part B Drugs Payment Model, lacked a foundation in clinical innovation and consensus on the problem it was meant to address, its flaws became apparent very quickly. The model promotes reference pricing for drugs that have no therapeutically similar counterpart. It favors hospital outpatient departments at major medical centers who would be more influential when negotiating drug prices in response to cuts in reimbursement. It ignores the implications for community oncologists with little drug market influence. The proposal does not account for the implications to 340B hospitals which rely on drug discounts, including Part B to support their income statements.

Such a poorly considered proposal for such an important issue was received largely as it was meant; to be a political statement and tool. Centrists Democrats under pressure from the Warren/Sanders wing of the party could point to the Part B Drugs Payment Model as evidence they were “doing something about drug prices.” Hearings on both sides of the Hill might yield good clips for social media and broadcast ads back home. Under a best case scenario, the Part B Drugs Payment Model would actually be implemented and called a victory for Democrats against drug manufacturers.

Unfortunately for CMMI, one of the guiding principles of politics is that for every action there is an opposite and often unequal reaction. This principle often turns elected officials into feckless figureheads whose every word, thought and action is buffed and waxed, teased into meaningless pabulum.

When applied by talented or even just sincere political leaders, the principle will yield quiet and thoughtful initiatives that clearly define problems and develop consensus around a solution. Such is the case of the 21st Century Cures bill that passed the House of Representatives overwhelmingly. MACRA which finally put an end to the Soviet-era Sustainable Growth Rate for determining the physicians’ fee schedule is another example. That legislation was the culmination of 12 years of work by Dr. Michael Burgess (R-TX-26).

The Part B Drugs Payment Model is none of those things.

With the vocal opposition of physicians, patient advocates, hospitals and drug manufacturers, Republicans, joined by more than a few Democrats, seized the opportunity to chastise the administration for poor policy development. The Part B Drugs Payment Model made its way into ads in the Ohio Senate race and in a number of Republican House races and has produced good results. Having found a wining issue, House Republicans upped the ante and called for full repeal of the CMMI provisions in their “A Better Way” policy platform. They piled on with last week’s letter.

The problem with politicizing the CMMI as both parties have done is that potentially Medicare loses one of its more important tools for reforming an entitlement. Mandatory bundled payments like the CCJR and the new cardiac demonstration allow Medicare to use its considerable market power to change practice patterns and encourage changes to care delivery. Those changes can in turn, be taken up by the commercial payers and spread across the country. Absent the CMMI, there is little evidence that Congress would go as far and as fast as the Obama administration has done toward needed payment reform. A threat to CMMI also creates uncertainty for health care market. Providers of all types have invested time and resources in meeting the challenges of new mandatory payment models. Physicians practices have been told they can rely on CMMI mandatory bundled payments for compliance with MACRA.

We won’t go so far as CMS Acting Director who called CMMI “a national treasure” – we reserve that honor for people like Aretha Franklin and places like the Grand Canyon – but it is very important to changing health care delivery in the United States. CMMI, Medicare and the U.S. Treasury would probably benefit from the quiet mothballing of the Part B Drugs Payment Model while CMMI works on another approach.

Or it can risk more activism from Congress.

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