Author’s note: Since the Center for Medicare & Medicaid Innovation (CMMI) released its ten-year strategy in October 2021, the agency has taken many actions to reach its objectives, including easing participation requirements in the redesigned ACO REACH (Accountable Care Organization Realizing Equity, Access, and Community Health) model to facilitate accelerated adoption, integrating health equity tools and measurement in its ACO models, and continuing multipayer alignment in its newest oncology model.
Innovation in healthcare is accelerating. Seismic changes include adoption of virtual health modalities spurred by the COVID-19 pandemic, disruption in the payer sector by tech-based upstarts, and the expansion of care settings outside the hospital. In this environment, in October 2021 the Center for Medicare & Medicaid Innovation (CMMI) published its innovation strategy for the next decade. The strategy contains valuable indicators of new federal government priorities for stakeholders across the healthcare landscape. In this report, the McKinsey Center on US Health System Reform examines the strategy’s objectives and their potential impact on the healthcare landscape (see sidebar, “About the McKinsey Center on US Health System Reform”).
CMMI was established through the Affordable Care Act “to test innovative payment and service delivery models to reduce program expenditures … while preserving or enhancing the quality of care furnished to individuals” across government healthcare programs.1 The CMMI has indicated that the following strategic objectives will govern its pursuits in the coming decade2:
- Grow and improve accountable care.
- Advance health equity.
- Support care innovations.
- Improve access by addressing affordability.
- Partner to achieve care transformation.
If CMMI realizes its vision, stakeholders may expect 30 million to 35 million additional Medicare lives covered in accountable care relationships by 2030; increased flexibility to broaden access and reduce consumer costs; greater support to reshape care delivery models; increased accountability for health equity; and increased coordination between public and private entities to deliver these changes to the system.
At the same time, this report’s analysis suggests that even if CMMI achieves its objectives, the cost trajectory in Medicare may not change meaningfully,3 and system savings may still be insufficient to mitigate projected depletion of the Medicare Hospital Insurance Trust Fund.4
Objective 1: Grow and improve accountable care
CMMI’s first objective is to transition virtually all Medicare and Medicaid beneficiaries into accountable care relationships by 2030. To reach the 100 percent objective, 23.8 million additional beneficiaries would need to be enrolled in accountable care-organization (ACO) models by 2030 (exhibit).5
While some Medicare ACO models have achieved targeted savings for the federal government,6 we find that scaling ACOs to all non-Medicare Advantage (MA) beneficiaries by 2030 may have only a limited impact on annual government expenditures.
Some studies suggest that increasing accountable care enrollment holds potential to improve quality and outcomes compared with Medicare Fee for Service (FFS).7 However, these studies have limitations; direct comparisons of quality across models is difficult due to substantially different approaches to performance evaluation.
Objective 2: Advance health equity
CMMI has stated a new objective of promoting health equity via its forward-looking models, noting that past and current demonstrations often include fewer beneficiaries from underserved groups. A clear strategy to advance health equity could create an impetus for stakeholders to build the capabilities necessary to address social needs in their patient populations.8
CMMI has identified data collection processes as an important enabler of widespread equity advancement. In future models, the center could consider several initiatives that stakeholders could prepare for:
- Align data collection requirements for demonstration participants with those of Medicare broadly.
- Adopt Centers for Medicare & Medicaid Services or Medicare data standards that allow for linkages among sociodemographic data, encounter-level claims data, and downstream outcomes.
- Expand the types of data collected to better understand and address health disparities.
CMMI may consider integrating incentives and stakeholder education to address barriers to adoption, while also using health equity tools that have demonstrated success in equity-focused programs.
Current CMMI models, state programs, and private-payer and provider initiatives provide a set of potential design choices that could better promote health equity. Several of these approaches have reduced disparities for specific populations; some have improved cost of care performance as well. Such approaches include provision of various social supports and wraparound services9; tying executive compensation to health equity metrics10; and providing up-front funds to providers serving underserved groups.11
Objective 3: Support care innovations
CMMI’s third objective is to promote innovative, patient-centered care. In its strategy refresh, CMMI communicated its intent to incorporate patient experience measures and patient-reported outcomes in performance measurement of future models. This new priority closely mirrors the doubled weight of member or patient experience in the Medicare Advantage Stars program that begins in rating year 2023.12
Based on our primary research with ACO participants, providers may have mixed reactions to the integration of patient experience into performance measurement. Such integration can create beneficial competitive opportunities but may also require investments in performance improvement plans.
CMMI articulated an additional goal of providing more real-time data and insights to ACO participants. Our primary research indicates that providers would find such support valuable to their care management programs since gaps in longitudinal patient data are a meaningful obstacle to succeeding in ACO models, particularly in management of the highest-risk beneficiaries for whom quality and equity of care is also a challenge. Because of the open network of Medicare FFS, most of the ACO executives we have interviewed said they struggle to capture more than two-thirds of patient encounter data. This dynamic creates discontinuities in management of attributed lives, which in turn can result in care gaps and missed intervention opportunities, worsened patient experience and care quality, and financial losses for the ACO.
A more exhaustive and native source of real-time patient data could create substantial value for patient care and ACO performance. Providers under MA contracts often receive such measures from plans within 72 hours via web-based portals. CMMI could take a similar approach in the future.
Objective 4: Improve access by addressing affordability
The second objective is to improve affordability for beneficiaries by reducing out-of-pocket (OOP) costs, with the ultimate goal of increasing access to care.
In 2017, approximately one-quarter of all Medicare beneficiaries spent 20 percent or more of their income on medical care.13 High OOP costs can cause beneficiaries to forgo necessary care and prescription drugs.14 OOP costs tend to be highest for beneficiaries in Medicare FFS without supplemental coverage such as Medigap; those in MA plans often face a lower cost burden.
Transitioning to 100 percent accountable care enrollment by 2030 could create cost reductions for beneficiaries, but the overall level of relief depends substantially on ACO savings performance and the extent to which these efficiencies are passed on to consumers.
Given the limits to influencing affordability purely via ACO efficiencies and the particular tradeoffs to doing so via MA, CMMI has indicated that it is considering broader opportunities to reduce the average beneficiary cost burden. For instance, targeting price rather than quantity may be an effective approach to lowering overall healthcare costs; several studies have found that price differences could drive a majority of differences in health spending between the United States and peer countries.15
Objective 5: Partner to achieve care transformation
CMMI’s final objective is to promote partnerships across public and private stakeholders and better align payers and system incentives. Partnerships with organizations beyond demonstration participants may facilitate the scaling of accountable care, particularly partnerships that ease barriers to model participation and collaboration. CMMI partnerships with public- and private-sector stakeholders would provide different strategic value to demonstration participants. Case studies of prior partnership strategies may serve as a guide for future partnerships.
For the past decade, CMMI has provided signals of what lies ahead for US healthcare. It has helped spur trends including an emphasis on population health, investments in primary care, and increases in home health. The organization’s renewed strategic vision for the next decade contains valuable indicators for what US stakeholders could expect next. In particular, the broadened aspirations of this vision convey the heightened importance of newer areas such as care innovation and health equity, and a movement from primary care into a focus on specialty care.
These new imperatives create new opportunities. In the wake of the COVID-19 pandemic, consumer expectations and behaviors have evolved, some permanently. Providers, payers, and innovators can adapt their models to deliver and pay for care that meets top-down signals from the federal government and bottom-up expectations from their own patient populations. Realizing these opportunities will require organizations to build the leadership, knowledge, and capabilities to make and direct this change across the US healthcare system.