The elusive quest for quality and cost savings in the Medicare program.

MEDICARE IS A DOMINANT FORCE IN THE HEALTH care system of the United States. When it was launched as a national social insurance program for elderly and disabled Americans in 1965, Medicare was grafted onto the existing health care delivery system. Over the past 40 years, most physicians and hospitals have continued to receive regulated payments from Medicare with no limits on the volume of services provided and minimal oversight or coordination of care. In 2009, Medicare expenditures will exceed $400 billion, representing 13% of the federal budget and about one-fifth of all US expenditures on health care. This status quo, however, is not sustainable for Medicare. Last year, the Medicare trustees projected that the Hospital Insurance Trust Fund will be exhausted in 2019 without new measures to increase payroll taxes or contain the growth of expenditures. In response to similar concerns during the past decade, policymakers have started to implement and evaluate numerous new approaches to contain costs while maintaining or improving the quality of care in Medicare. These demonstration projects have tried to modify how care is coordinated or instituted new financial incentives for physicians and hospitals. A study reported by Peikes and colleagues in this issue of JAMA presents one of the most comprehensive evaluations of a Medicare demonstration project to date. In 2002, 15 programs were independently funded by the Centers for Medicare & Medicaid Services (CMS) to participate in the Medicare Coordinated Care Demonstration. The goals of the project were to determine whether enhanced care coordination could improve the quality of care or reduce Medicare expenditures for participating beneficiaries with serious chronic health conditions. With voluntary enrollment of more than 18 000 participants from all US regions, these 15 programs implemented a varied set of approaches to improve care coordination. Common features of the programs included the use of nurses trained as care coordinators to interact on a regular basis with patients who had serious chronic health conditions. These nurses provided patients with health education and sent written reports to their physicians. Participants were substantially sicker than Medicare beneficiaries in general, with much higher rates of cardiovascular disease, diabetes, and chronic lung disease, and correspondingly greater monthly Medicare expenditures before enrollment ($1535 vs $551, respectively). The CMS paid each program a negotiated monthly fee that averaged $235 per participant to provide outreach, health education, and support to these chronically ill patients—and in some cases to their physicians. An independent evaluation of these programs was funded by CMS to assess their effects on quality of care, hospitalizations, and Medicare expenditures in a consistent and rigorous manner. The program evaluation reported in this issue of JAMA has several strengths that merit highlighting. First, participants in each program were randomly assigned to interact with a care coordinator or to receive their usual care, ensuring that observable and unobservable characteristics were well balanced between intervention and control groups within each program. Second, complete Medicare claims data and nearly complete patient survey data were available to assess hospitalizations, expenditures, participants’ functional status, and an array of technical and patientcentered measures of quality of care. Third, 12 of the 15 programs had sufficient numbers of enrollees to detect a 20% change in rates of hospitalization and in Medicare expenditures during a 4-year period with reasonable statistical power. The financial and clinical results of this careful evaluation were sobering. Only 2 of the 12 largest programs had a statistically significant effect on the annual number of hospital admissions. A hospital-sponsored program in Iowa (Mercy Medical Center) significantly reduced hospitalizations by 17%, with a nonsignificant 9% reduction in Medicare expenditures. In contrast, a retirement center program in Maryland (Charlestown) significantly increased both hospitalizations and expenditures by 19%. When program fees were incorporated in the analysis, total expenditures were 8% to 41% higher (P .10) in the intervention groups