Fact Sheets

CMS CONTINUES EFFORTS AS A COST-EFFICIENT PAYER FOR QUALITY HEALTH CARE FOR MEDICARE BENEFICIARIES

The Medicare Modernization Act (MMA) improved the Medicare program by adding a vital new prescription drug benefit for all Medicare beneficiaries.    The law also included a number of innovative and important cost saving measures.

• Competitive Markets:   Competition among plans providing the drug benefit and the Medicare Advantage package of services is expected to drive prices for drugs downward and control costs for hospital and physician services as well.  The Medicare prescription drug discount card has already proven the effectiveness of the competitive approach and we expect that competitive markets, coupled with publicly available measures of costs and benefits, will do the same for the new Medicare prescription drug benefit and Medicare Advantage.

• Reduced Costs in Traditional Medicare:   In addition to the prudent purchasing of drugs under the new Medicare drug benefit, a number of sections within the MMA include significant cost reductions.  For example, required the competitive acquisition for durable medical equipment; made significant reforms to the purchasing of outpatient drugs under Part B; limited Medicare payments for ambulatory surgical centers, clinical diagnostic laboratory tests, and home health agencies; the MMA improved CMS’ ability to make collections from other payers; and indexed the Medicare Part B deductible to inflation.

• Health Information Technology:   CMS is leading the health insurance industry in promoting the use of health information technology to provide better quality of care, avoid unnecessary costs, and improve the efficiency of the Medicare program.  Championing and testing the use of advanced information technology, Medicare is focusing on facilitating the widespread adoption of electronic prescribing as well as modernizing Personal Health Records for beneficiaries.  Under the e-prescribing authority granted by the MMA, CMS will be able to provide an even higher quality of care to beneficiaries by reducing medication errors while making it easier and potentially more affordable for beneficiaries to access the medications they need. CMS is now offering incentives in the form of higher reimbursement rates to encourage hospitals to adopt electronic data systems.   CMS expects that plans will adopt e-prescribing standards by January 2006 when the Medicare drug benefit begins.  As part of this effort, CMS will also review existing e-prescribing programs nationwide, to identify the most promising pilots that can be adopted more widely in conjunction with the new drug benefit.  CMS is also providing technical assistance to a wide range of health care providers through its Quality Improvement Organizations.

• Pay-For-Performance:   CMS has also undertaken various administrative initiatives to be a cost-efficient payer for high quality health care for Medicare beneficiaries.  For example, CMS recently began a significant effort to encourage improved quality of care in all health care settings where Medicare beneficiaries receive services, including physicians’ offices and ambulatory care facilities, hospitals, nursing homes, home health care agencies and dialysis facilities. 

The foundation of effective pay-for-performance initiatives is a collaboration with providers and other stakeholders that improve the quality of health care provided to Medicare beneficiaries, while also improving the cost-effectiveness of the Medicare program.   Such collaboration will ensure that valid quality measures are used, that providers aren’t being pulled in conflicting directions, and that providers have support for achieving actual improvement.   Consequently, to develop and implement these initiatives, CMS is collaborating with a wide range of other public agencies and private organizations who have a common goal of improving quality and avoiding unnecessary health care costs, including the National Quality Forum, the Joint Commission on Accreditation of Healthcare Organizations, the National Committee for Quality Assurance, the Agency for Health Care Research and Quality, the American Medical Association, and many other organizations.  Through these collaborative efforts, CMS is developing and implementing a set of pay-for-performance initiatives to support quality improvement in the care of Medicare beneficiaries, while making the Medicare program a more cost-efficient purchaser of health care services.

• Disease Management:   Recognizing that many of the best opportunities for quality improvement are patient-focused and cut across settings of care, CMS is pursuing initiatives to support better care coordination for patients with chronic illnesses.  CMS has also begun major efforts to use disease management programs as a tool to improve the quality of care and quality of life for people living with multiple chronic illnesses.   These programs will help participants adhere to their physicians’ plans of care and obtain the medical care they need to reduce their health risks.

• Preventive Benefits:   Medicare has added three new significant benefits in 2005: cardiovascular screening blood tests and diabetes screening tests for all Medicare beneficiaries; and the “Welcome to Medicare” preventive physical examination for new Medicare Part B enrollees.   All Medicare beneficiaries who are newly enrolled in Part B will be covered for an initial physical exam.  The “Welcome to Medicare” physical is a comprehensive examination to detect problems early so the treatment can be more effective.

CMS is working to ensure that its benefits and its outreach efforts reinforce the best ways to promote an environment that encourages primary prevention of diseases as well as secondary prevention of disease complications.   The new benefits offered under MMA are a step in the right direction to improving quality of care, while potentially achieving significant savings in medical expenses.