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Center for Medicare and Medicaid Innovation

Posted on May 13, 2010 | Comments (13)

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Key Developments
Implementation Briefs


The Centers for Medicare and Medicaid Services (CMS) is the agency within the U.S. Department of Health and Human Services (HHS) that administers the Medicare, Medicaid, and CHIP programs. While HHS historically has undertaken far-reaching demonstrations, Congress never has vested the Department with explicit authority and direction to undertake wide-ranging testing of different Medicare service delivery and payment structures, including approaches that focus on the intersection between Medicare and Medicaid and the beneficiaries they serve both separately and jointly. Of particular importance are the 9 million individuals who are dually eligible for coverage (dual eligibles). These beneficiaries, who include some of the nation’s most vulnerable elderly and disabled populations, are poorer and sicker than the general Medicare population and account for some $250 billion in 2009 in combined Medicare and Medicaid spending.[1] Over the years this population has been a focus of attention, but the federal and state governments have undertaken no systematic effort to strengthen the quality of care it receives or achieve greater program integration.

CMS historically has relied on several research and demonstration authorities: §1115(a) of the Social Security Act (which authorizes the HHS Secretary to undertake demonstrations related to Medicaid program design and administration);[2] and other provisions of the Social Security Act which permit demonstrations related to payment, delivery systems, and benefits and coverage.[3]

Changes Made by the Health Reform Law
P.L. 111- 148, § 3021

The health reform law:

  • Adds a new §1115A to the Social Security Act, establishing a Center for Medicare and Medicaid Innovation (CMI) and empowering and directing the CMI to “test innovative payment and service delivery models to reduce program expenditures under the applicable titles [Medicare and Medicaid] while preserving or enhancing the quality of care furnished to individuals under such titles.”[4]
  • Instructs the HHS Secretary, in selecting payment and service delivery models, to “give preference to models that also improve the coordination, quality and efficiency” of care for Medicare beneficiaries, Medicaid beneficiaries, and dual eligibles.[5] The law also allows the Secretary to test models within geographic areas.
  • Requires the CMI to test certain payment and service delivery models during Phase I, using selection criteria specified in the legislation. The selection criteria specified in the law require that the Secretary determine that there is “evidence that the model addresses a defined population for which there are deficits in care leading to poor clinical outcomes or potentially avoidable expenditures” and specify a focus on models that are expected to “reduce program costs . . . .while preserving or enhancing the quality of care. . . .”[6]
  • Establishes a Phase I testing of models, specifying that during this phase, consideration be given to models that include a process for updating care plans, are patient-centered, provide for in-person contact with patients, use health information technology, use a team-based approach to care delivery, and involve the exchange of information between providers and suppliers.[7]
  • Specifies that Phase I selected models should improve the quality of care without increasing spending, reduce spending without reducing quality, or improve the quality of care and reduce spending.
  • Specifies 20 “Phase I testing” candidate model “opportunities:”[8]
    • Promoting “broad payment and practice reform in primary care, including patient- centered medical home models for high-need Medicare and Medicaid beneficiaries, medical homes that address women’s unique health care needs, and models that transition primary care practices away from fee-for-service based reimbursement and toward comprehensive or salary based payment.”
    • Contracting directly with provider groups to promote innovative care delivery such as through “risk-based comprehensive payment” or salary-based payment.[9]
    • Using geriatric assessments and comprehensive care plans to coordinate the care (including through interdisciplinary teams) of Medicare and Medicaid beneficiaries with multiple chronic conditions and either an inability to perform 2 or more activities of daily living or cognitive impairment, including dementia.
    • Promoting care coordination between providers of services “and suppliers” that “transition health care providers away from fee-for-service based reimbursement and toward salary-based payment.”
    • Supporting care coordination for “chronically-ill applicable individuals at high risk of hospitalization through a health information technology-enabled provider network that includes care coordinators, a chronic disease registry, and home tele-health technology.”
    • Varying payment to physicians who order advanced diagnostic imaging services according to “adherence to appropriateness criteria for the ordering of such services, as determined in consultation with physician specialty groups and other relevant stakeholders.”
    • Using medication therapy management services.
    • Establishing community-based health teams to support “small-practice medical homes” by assisting the primary care practitioner in chronic care management, including patient self-management activities.
    • Assisting Medicare and Medicaid beneficiaries in “making informed health care choices” by paying providers for using “patient decision support tools” that meet PHS Act standards and that “improve applicable individual and caregiver understanding of medical treatment options.”
    • Allowing states to “test and evaluate fully integrating care for dual eligible individuals” including the “management and oversight of all funds” under Medicare and Medicaid.
    • Allowing states to “test and evaluate” systems of “all-payer” payment reform for the medical care of residents of the state, including dual-eligible individuals.
    • Aligning “nationally recognized, evidenced based guidelines of cancer care with payment incentives” under Medicare in the area of treatment planning and follow-up care planning, including the “identification of gaps in applicable quality measures.”
    • Improving “post-acute” care through “continuing care” hospitals that offer inpatient rehabilitation, long-term care hospitals, and home health or skilled nursing care during an inpatient stay and for 30 days immediately following discharge.
    • Funding home health providers who offer “chronic care management services . . . in connection with interdisciplinary teams.”
    • Promoting “improved quality and reduced cost” by “developing a collaborative of high-quality, low cost health care institutions” responsible for “developing . . . implementing, documenting, and disseminating best practices” in order to demonstrate “further improvements in quality and efficiency” and “providing and care methods.
    • Facilitating inpatient care, including intensive care, through the use of “electronic monitoring by specialists, including intensivists and critical care specialists, based at health care systems.”
    • Promoting greater efficiencies and access to outpatient care (such as outpatient physical therapy services) through “models that do not require a physician or other health professional to refer the service or be involved in establishing the plan of care. . . when such service is furnished by a health professional who has the authority to furnish the service under existing state law.”
    • Establishing “comprehensive payments to Healthcare Innovation Zones, consisting of groups of providers that include a teaching hospital, physicians, and other clinical entities that, through their structure, operations, and joint activity, deliver a full spectrum of integrated and comprehensive health care services” to Medicare and Medicaid beneficiaries “while also incorporating innovative methods for the clinical training of future health care professionals.”
    • Utilizing tele-health services “in particular in entities located in medically underserved areas and facilities of the Indian Health Service (whether operated by the HIS or by a tribe or tribal organization” in treating behavioral health issues and stroke and to improve the capacity of non-medical providers and non-specialized medial providers to provide health services for patients with chronic, complex conditions.
    • Utilizing a diverse network a diverse provider, supplier, and service network to “improve care coordination of Medicare beneficiaries with 2 or more chronic conditions and a history of hospitalization through interventions developed under the Medicare Coordinated Care Demonstration Project developed special demonstration authority under the Balanced Budget Act of 1997.
  • Sets forth additional factors that CMI “may consider” in selecting models, specifically, whether the model:[10]
    • “includes a regular process for monitoring and updating patient care plans” in a “manner that is consistent with the needs and preferences of” Medicare and Medicaid beneficiaries.
    • “places” Medicare and Medicaid beneficiaries’ “family members and other informal caregivers” at the “center of the care team.”
    • provides for “in-person contact” with the patient.
    • “utilizes technology such as electronic health records and patient-based remote monitoring systems, to coordinate care over time and across settings.”
    • “relies on a team-based approach to interventions, such as comprehensive care assessments, care planning, and self management coaching.”
    • allows providers and suppliers to share information with patients, caregivers and other service providers “on a real-time basis.”
    • demonstrates “effective linkages with other public sector or private sector payers.”
  • Specifies that the Secretary “shall not require” as a condition for testing a Phase I model that the design of such model ensure that such model is budget neutral “initially.”[11]
  • Provides that the Secretary “shall terminate or modify the design and implementation of a model unless the Secretary determines (and the Chief Actuary [of CMS] certifies), after testing has begun, that the model is expected to (i) improve the quality of care (as determined by the Administrator) without increasing spending; (ii) reduce spending under the applicable title without reducing the quality of care; or (iii) improve the quality of care and reduce spending.” Termination may occur any time after testing has begun and before completion of the testing.
  • Provides for “evaluation” of each Phase 1 model tested, which must include an analysis of the quality of care “including the measurement of patient-level outcomes and patient centeredness criteria determined appropriate by the Secretary” and “changes in spending under” Medicare and Medicaid. The Secretary must make evaluation information “available to the public” and “may” establish requirements for states and other entities participating in the testing of models to collect and report information that the Secretary determines is necessary to monitor and evaluate such models.”
  • Provides for a Phase II expansion of models “taking into account the evaluation” requirements of the law. Under Phase II, the Secretary may, through rulemaking and “to the extent determined appropriate by the Secretary” expand (including implementation on a nationwide basis) the duration and scope of a model that is being tested under Phase I” or a Medicare Coordinated Care demonstration.[12] The expansion may occur only if (1) the secretary determines that the expansion is expected to reduce spending without reducing the quality of care or improve the quality of patent care without increasing spending and (2) the Chief Actuary for CMS certifies that the expansion would reduce or would not result in any increase in net program spending under Medicare and Medicaid and (3) the Secretary determines that the expansion would “not deny or limit the coverage or provision of benefits” to Medicare or Medicaid beneficiaries.
  • Gives the Secretary the power to waive “such requirements of titles XI [quality, fraud]and XVIII [Medicare] and of §§1902(a)(1), 1902(a)(13), and 1903(m)(2)(A)(iii) as may be necessary to . . . test models.”[13]
  • Prohibits both administrative and judicial review under Medicare of “selection of models, the selection of organizations, sites or participants to test these models, the elements, parameters, scope and duration of such models for testing or dissemination, determinations regarding budget neutrality, the termination or modification of the design and implementation of a model, and determinations about the expansion of the duration and scope of a model, including that a model is not expected to meet the criteria for expansion.”[14]
  • Specifies that in developing and testing these models, all requirements under Title XI (administrative requirements) and Title XVIII (Medicare) may be waived. The law also specifies that under Title XIX (Medicaid), HHS may waive requirements related to “statewideness” (i.e., the statewide application of Medicaid eligibility and coverage standards),[15] requirements related to the use of a public process to set payment rates,[16] and actuarial soundness requirements.[17]
  • Extends the demonstration authority of §1115A to the Children’s Health Insurance Program [CHIP].
  • Requires the Secretary to report to Congress biannually beginning in 2012. Each report must describe the models tested including the individuals participating, payments made for services under models chosen for testing, and the results of evaluations and recommendations for further legislative reforms to “facilitate the development and expansion of successful payment models.”
  • Amends Medicaid to add as a state plan amendment requirement “implementation of the payment models specified . . . for implementation on a statewide basis unless the state demonstrates to the satisfaction of the Secretary that implementation would not be administratively feasible or appropriate to the health care delivery system of the state.”
  • Extends the term specified for the Medicare Coordinated Care Demonstration Project to go beyond the 5-year term initially provided.


Agency and Timeline

The Centers for Medicare and Medicaid Services is responsible for developing the CMI and overseeing the testing of innovative payment and delivery models. The law requires that the CMI be operational by January 1, 2011.


The Secretary has authority to implement the CMI through regulation or through policies, guidance, and grant-making authority.

Key Implementation Issues

  • Prioritization of models: Given the large number of “opportunities,” the requirement that any model whose testing is not terminated or modified be evaluated, and the relatively modest evaluation budget in relation to the total number of possible test model opportunities, how will possible opportunities be prioritized? What process and approaches might CMI use to generate multiple types of testable models given the agency’s overall budget? By what process will potential models be prioritized and what will the criteria for prioritization be?
  • Scope and duration: In light of the fact that the testing of models must be sufficiently robust to be evaluated, how many models within each potential category of testable opportunities must be implemented in order to permit the development of meaningful and reliable evidence? How long must the testing period run before a model potential is a candidate for bringing to national scale?
  • Demonstration authority: Will the Secretary permit models that combine the demonstration authority established under §1115A with the demonstration authority that exists under §1115(a) and other demonstration authorities? In view of the fact that models cannot, if brought to scale, result in the diminution of benefits and coverage, will model testing allow alterations in benefits and coverage?
  • Terms and definitions: How will the Secretary define the numerous terms and definitions found in the models, such as “patient centered,” “patient based remote monitoring” and the like?
  • Budget neutrality: How will budget neutrality be defined by the Secretary and the Chief Actuary in order to assure long-term savings or avoidance of additional spending without limiting the ability to spend higher than expected in the short term?
  • Other demonstrations: How will the CMI demonstrations align with other CMS demonstrations related to accountable care organizations and medical homes?
  • Beneficiary matters: The models assume extensive beneficiary participation; will participation be voluntary or mandatory, and what patient safeguards and participation incentives will be established for each tested model, particularly in the case of beneficiaries with serious and chronic health conditions?
  • Involvement of states: How will states be involved in the prioritization of models, the development of testable models, and the evaluation of models and their scaling up? Will states be permitted to independently regulate certain types of service delivery models (e.g., through the imposition of licensure requirements on models that involve the assumption of financial risk or limits on the extent to which medical practice laws might be altered or beneficiary protections revised?) Will the federal government take a more preemptive approach to the models, that is, viewing the models as empowering the federal government to supersede limitations that otherwise might constrain the reach of the model under state law?

Recent Agency Action

No action has been taken as of this writing.

Authorized Funding Levels

The law provides $5 million for the “design, implementation, and evaluation of models” and $10 billion for CMI activities from 2011 to 2019.[18]

[1] Center for Health Care Strategies, Options for Integrating Care for Dual Eligible Beneficiaries, (Accessed May 3, 2010).
[2] 42 U.S.C. §1315(a).
[3] SSA §402(a) as amended by SSA §222(b); 42 U.S.C. section 1396b-1.
[4] 111-148 § 3021(a)adding SSA §1115A(1).
[5] Id. at § 3021(a), adding SSA §1115A(a)(1) and (4)(A)(i)-(iii).
[6] Id. at § 3021(a), adding SSA §1115A(b)(1) and (2).
[7] Id. at § 3201(a), adding new §1115A(b)(2)(C) into the Social Security Act.
[8] Id. at § 3021(a), adding SSA §1115A(b)(2)(B), describing 20 separate models.
[9] Id. at § 3021(a), adding SSA §1115A(b)(2)(B)(ii).
[10] Id. at § 3021(a), adding SSA §1115A(b)(2)(C).
[11] Id. at § 3021(a), adding SSA §1115A(b)(3).
[12] Id. at § 3021(a), adding SSA §1115A(c).
[13] Id. at § 3021(a) adding §1115A(d)(1).
[14] Id. at § 3021(a) adding §1115A(d)(2).
[15] Id. at § 3021(a), adding new § 1115A(d) into the Social Security Act, which authorizes the Secretary to waive requirements of § 1902(a)(1) of the Social Security Act.
[16] Id. at § 3021(a), adding new § 1115A(d) into the Social Security Act, which authorizes the Secretary to waive requirements of § 1902(a)(13) of the Social Security Act.
[17] Id. at § 3021(a), adding new § 1115A(d) into the Social Security Act, which authorizes the Secretary to waive requirements of § 1903(m)(2)(A)(iii) of the Social Security Act.
[18] Id. at § 3021(a), adding new 1115A(f) into the Social Security Act.

Comments (13)

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