Is Medicare for All the Answer to Sky-High Administrative Costs?

https://theincidentaleconomist.com/wordpress/is-medicare-for-all-the-answer-to-sky-high-administrative-costs/

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Calls for a Medicare for All system are growing louder. Many Democrats have embraced it, while President Trump said last week that it would raise health care costs drastically.

Democrats say that giving people the option to partake in Medicare — no matter their age — will actually cut costs.

American administrative costs for health care are the highest in the world, and they argue that one advantage of Medicare for All is that it would save money because Medicare’s administrative costs are below those of private insurers.

Does that argument hold up?

Medicare’s administrative costs were $8.1 billion last year, or 1.1 percent of total spending, close to the proportion it has been in recent years.

But some have argued that the actual cost is higher because of services performed for Medicare by other parts of the government that aren’t accounted for: The Social Security Administration collects premiums, the Internal Revenue Service collects taxes for the program, the F.B.I. provides fraud prevention services, and at least seven other federal agencies and departments also do work that benefits Medicare.

The claim that these administrative costs are overlooked is false. As annual reporting of Medicare’s finances plainly states, they are accounted for.

But there is something missing from the $8.1 billion Medicare administrative cost figure, as Kip Sullivan explains in a 2013 paper published in the Journal of Health Politics, Policy and Law. Although it accurately accounts for the federal government’s administrative costs, it does not include those borne by private plans that also offer Medicare benefits.

In addition to the traditional (public) Medicare plan, Medicare is also available from private plans through the Medicare Advantage program. Today, one-third of people using Medicare are in such plans, up from about one-fifth a decade ago. Moreover, all Medicare drug benefits are administered through private plans.

National Health Expenditure data shows both the government’s administrative costs for Medicare and those of Medicare’s private plans. Putting them together for the most recent year available (2016), they reach $47 billion, or 7 percent of total Medicare spending — well above the administrative costs borne directly by the Medicare program.

Medicare’s private drug benefit plans incur administrative costs that are about 11 percent of their spending. All of this additional, private administrative cost is paid for by taxpayers and, through their premiums, people who use Medicare.

Medicare’s direct administrative costs are not only low, but they also have been falling over the years, as a percent of total program spending. Yet the program’s total administrative costs — including those of the private plans — have been rising.

“This reflects a shift toward more enrollment in private plans,” Mr. Sullivan said. “The growth of those plans has raised, not lowered, overall Medicare administrative costs.”

Making an accurate estimate of the administrative costs of Medicare for All would depend, in part, on whether it would be more like an expansion of traditional Medicare (with its 1.1 percent administrative cost rate) or of all of Medicare, including its private plans (with a combined 7 percent administrative cost rate).

Yet both figures are well below private insurers’ administrative costs, which run about 13 percent of spending (this also includes profit), according to America’s Health Insurance Plans, an advocacy organization for the industry.

Some critics have argued that Medicare’s administrative cost rate appears artificially low because Medicare enrollees’ health spending is so high. Average Medicare spending per beneficiary is just over $12,000 per year; for an average worker in a private plan, it’s about $6,000. If you simply divide administrative costs by total spending, you will get a lower number for Medicare for this reason alone.

This is true, but the government’s administrative costs for Medicare are still below those of private plans. The government’s administrative costs are about $132 per person compared with over $700 for private plans. One reason Medicare’s are so much lower is that it reaps economies of scale. It also benefits from not needing to do much marketing, and it doesn’t earn profits.

4 Key Fact Checks on Trump and Medicare for All

https://www.thefiscaltimes.com/2018/10/10/4-Key-Fact-Checks-Trump-and-Medicare-All

President Trump published an op-ed in Wednesday’s USA Today, warning in dire language of the consequences of Democrats’ Medicare-for-all proposals. “Democrats would gut Medicare with their planned government takeover of American health care,” Trump says.

The problem: Nearly every line of Trump’s piece “contained a misleading statement or a falsehood,” writes Washington Post fact-checker Glenn Kessler.

We’ll provide a few examples below, but for a more complete analysis of Trump’s problematic, misleading or outright false claims, read Kessler’s piece or this Associated Press fact-check of claims the president has made in recent speeches at campaign rallies.

Why it matters: Trump’s op-ed and other recent criticisms of Democratic health-care proposals echo other GOP attacks claiming that Medicare for all would destroy traditional Medicare. Combined, they read less like a serious policy critique and more like cynical scare tactics — a ploy to muddy the waters around an idea that’s growing in popularity but still poorly defined in voters’ minds.

“There definitely are serious questions about ‘Medicare for All,’ including the massive tax increases that would be needed to pay for it and longstanding differences in society about the proper function of government,” the AP piece notes. Trump’s attacks skirt those serious questions, and differences of opinions among Democrats on Medicare for all, in favor of false or misleading campaign-style attacks.

Will it work? It very well might, at least in the short run. But at the Washington Examiner, Philip Klein critiques Trump’s line of attack from the right, arguing that it will backfire on conservatives in the long run and actually make socialized healthcare more likely. … By perpetuating the idea that Medicare is a great program that needs to be protected at all costs (rather than an unsustainable entitlement) it only makes it easier for liberals to make the case for socialized medicine. It also makes it harder to make the case for overhauling entitlement programs to avert the looming debt crisis.”

The four key fact checks:

* “Dishonestly called ‘Medicare for All,’ the Democratic proposal would establish a government-run, single-payer health care system that eliminates all private and employer-based health care plans and would cost an astonishing $32.6 trillion during its first 10 years.”

The facts: There are numerous “Medicare for all” proposals. Some would eliminate private and employer-based plans in favor of a single federally run health insurance program, but others would introduce a public plan option alongside existing private coverage choices. A new Kaiser Family Foundation report provides a useful overview of eight different legislative proposals introduced in the current session of Congress.

Trump is right that studies, like the one he links to by the libertarian Mercatus Center, have estimated that Bernie Sanders’ plan would add more than $30 trillion to federal health care costs. Proponents of a single-payer system argue that those price tags simply represent a shift in spending from the private to the public sector — a change, they say, that will wring costs out of the system overall while also providing for universal coverage.

* “As a candidate, I promised that we would protect coverage for patients with pre-existing conditions and create new health care insurance options that would lower premiums. I have kept that promise, and we are now seeing health insurance premiums coming down.”

The facts: Trump’s Justice Department argued in an ongoing Texas court case that Obamacare’s protections for patients with pre-existing conditions should be invalidated, and his administration has pushed insurance options that could weaken such protections. Trump’s claim about premiums coming down applies only to benchmark Obamacare plans, and is based on recent comments by HHS Secretary Alex Azar. Experts say that Obamacare premiums are stabilizing in 2019, but would have fallen if not for Trump administration policies. Meanwhile, premiums for employer-provided insurance, by far the most common type in the U.S., are still rising.

* “I also made a solemn promise to our great seniors to protect Medicare. That is why I am fighting so hard against the Democrats’ plan that would eviscerate Medicare.”

The facts: “Under Trump, the date for when the Medicare Hospital Insurance (Part A) Trust fund will be depleted keeps advancing,” Kessler notes. “If the trust fund is depleted, that means the government would not be able to cover 100 percent of estimated expenses. Yet because of Trump’s tax cut, the budget deficit is soaring even as the economy is booming, in contrast to previous periods of under-4-percent unemployment. That leaves the government less prepared to deal with the consequences of baby-boom retirements.”

* “The Democrats’ plan means that after a life of hard work and sacrifice, seniors would no longer be able to depend on the benefits they were promised.”

The facts: Not true. None of the plans would cut benefits for seniors, and the most frequently cited promises to be more generous. “The Sanders plan would be a fundamental change, expanding Medicare to cover almost everyone in the country,” the Associated Press notes. “But current Medicare recipients would get improved benefits. Sanders would eliminate Medicare deductibles, limit copays, and provide coverage for dental and vision care, as well as hearing aids. A House single-payer bill calls for covering long-term care.”

 

 

 

Medicare for All, But All For Medicare?

https://mailchi.mp/burroughshealthcare/pc9ctbv4ft-1576037?e=7d3f834d2f

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It’s 2018 and health insurance remains a major conundrum for America’s leaders, one hot political potato. Our current health system is worth $3.2 trillion to our economy — the most “valuable” in the world — but nearly 44 million people are without health insurance and our life expectancy falls behind thirty-six other nations.

The question remains: How can that be? And is healthcare really “a right” of all Americans?

Many other countries have successfully adopted single-payer systems, which means that no one is without coverage. Sen. Bernie Sanders (I-VT) is busy answering questions about his Medicare for All (M4A) platform, joined frequently by supporter and fellow democratic socialist and New York Congressional candidate Alexandria Ocasio-Cortez (D-NY).

“Health care must be recognized as a right, not a privilege,” he writes on his platform’s web page. “Every man, woman, and child in our country should be able to access the health care they need regardless of their income. The only long-term solution to America’s health care crisis is a single-payer national health care program.”

Summing it all up that way sounds very appealing, but making such a change would entail a seismic shift.

How Do We Really Feel?

A new Reuters/Ipsos survey shares that most of us, 70 percent, are in favor of the single-payer system: 85 percent of Democrats and 52 percent of Republicans. Perhaps even more surprising is that a mere 20 percent of us actually dislike the concept.

Under this plan, we’d all be lumped into one communal pot, run by the government, and we’d no longer have to fret over those confounding deductibles and premiums. We’d experience improved benefits, he promises, such as dental, vision and hearing.

Major tax increases would fund the plan that includes the following:

  • A 6.2 percent income-based health care premium paid by employers.
  • A 2.2 percent income-based premium paid by households.
  • Progressive income tax rates.
  • Taxing capital gains and dividends the same as income from work.
  • Limiting tax deductions for rich.
  • Savings from health tax expenditures.

    The government’s costs would increase to nearly $33 trillion during its first 10 years (2022 to 2031) says a “working paper”reportfrom Charles Blahous at the Mercatus Center at George Mason University. That number assumes enactment this year.

Emory University health policy professor Kenneth Thorpe, who has also studied M4A, says annual costs to the federal government will average between $2.5 trillion to $3 trillion.

The idea of anything “for all” has enormous appeal, but wait just a minute, says The Atlantic. This whole idea of single-payer, “an indulgent fantasy,” evolved because Republicans sought to kill the Affordable Care Act (ACA), or Obamacare, but the party couldn’t unite around a coherent alternative.  What then?

Democrats want to sweep away the complexity of our current health policy status quo, says the author Reihan Salam, who’s not all that optimistic. “All health reformers in America must confront the hospital sector.” The Blahous report says Medicare for All would slice hospital and physician payments by up to 40 percent which would significantly impact physicians and hospitals’ willingness and ability to care for Medicare patients (Medicare currently only covers 92% of costs).

Which “M” Word?

The word “Medicare” may, in fact, be misused when applied to a single-payer program, because, says Politico, Medicare isn’t single payer at all, but a “bewilderingly complex” system, “a massive public-private hybrid coverage scheme, funded mostly by taxes.

Further, Medicare’s audience is specific: seniors who receive benefits when working-age people’s pay is taxed. We’re talking about greatly expanding the beneficiary pool here: “Paying for everyone’s health care that way would be a radically different proposition, and far more expensive.

What we’re really talking about is Medicaid for All, suggests the National Review, which reminds us that “the devil really is in the details.” Medicaid is not free and is funded significantly by the Federal Government inversely related to each State’s per capita income and doctors dislike Medicaid with its low reimbursements, and consumers complain about long lines and treatment delays.

Sanders’ plan would say bye-bye to all private health insurance and would mean all abortions are free and that illegal aliens will get free health care courtesy of the taxpayer; things that many Americans will not tolerate.

Comparing Apples to Apples

Looking at the much bigger picture, proponents on the “yea” side of M4A say that its benefits far outweigh the risks. First and foremost, the entire population would have the opportunity to be healthier, since having access to health care improves health.

Currently, under the ACA, employers with 50 or more full-time employees must provide health insurance to all of them. For mega-corporations, that expenditure isn’t a huge ask, but smaller companies may find it a stretch. If the government funds health insurance, that then lightens the load for all companies that may find they can increase employee pay as a result — if they choose to do so, of course.

One point that seems to go “either way”: health care spending per capita. The United States spends nearly twice as much as other wealthy countries, topping out at $10,348 per person, according to 2016 numbers from Peterson-Kaiser. Compare that to the United Kingdom at

$4,192 and Japan at $4,519.

Given our expenditures, this is one tough pill to swallow: According to the latest report from The Commonwealth Fund, even though we spend more, “the U.S. population has poorer health than other countries” and is “failing to deliver indicated services reliably to all who could benefit.

On the “nay” side of things, opponents cite those major tax hikes and longer waiting times to see a doctor, possibly extending into weeks and months. Add to that the elimination of innovations in the private sector that lead to breakthrough discoveries, all as a result of competition being removed from the medical technology playing field. Finally, funding all of this would require “shifting” funds from other priorities already deemed “urgent,” such as the nation’s infrastructure, those crumbling roads, and bridges now made more urgent due to the disastrous effects of climate change.

There’s no indication that this problem will be quickly solved, only that discussions will continue, while any momentum to effect positive change remains questionable. Americans would like to take the healthcare insurance coverage bull by the horns, but unfortunately, understand it’s just not within their power to do so. Until then, it’s a waiting game and may be for some time.

 

 

CHS subsidiary to pay $262M to settle fraud probe

https://www.beckershospitalreview.com/legal-regulatory-issues/chs-unit-to-pay-262m-to-settle-fraud-probe.html

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Franklin, Tenn.-based Community Health Systems subsidiary Health Management Associates has agreed to pay the federal government $262 million to settle fraudulent billing and kickback allegations.

The settlement resolves allegations that HMA billed government payers for inpatient services that should have been billed as less costly observation or outpatient services, paid physicians in exchange for referrals, and submitted claims to Medicare and Medicaid for falsely inflated emergency department facility fee charges.

HMA’s conduct occurred between 2003 and 2012, before CHS acquired HMA. HMA was facing multiple qui tam lawsuits and was the subject of criminal and civil investigations when it was acquired by CHS, and CHS cooperated with the government in its investigation.

“Since acquiring HMA in 2014, it has been our goal to resolve the government’s investigation into all of these allegations which occurred prior to the acquisition and which were already under investigation at the time of the transaction,” CHS said in a press release.

In addition to the $262 million settlement, HMA entered a nonprosecution agreement with the Justice Department. Under the NPA, the government agreed not to bring criminal charges as long as HMA and CHS cooperate with the investigation, report evidence of violations of federal healthcare offenses, and ensure their compliance and ethics programs satisfy the requirements of a corporate integrity agreement between CHS and HHS’ Office of Inspector General.

Under the settlement, Carlisle HMA, the HMA-affiliated entity that formerly operated Carlisle (Pa.) Regional Medical Center, agreed to plead guilty to one count of conspiracy to commit healthcare fraud. CHS divested Carlisle Regional in 2017.

“We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation,” said CHS. “As an organization, we are committed to doing our very best to always comply with the law in what is a very complex regulatory environment and to operate our business with integrity, ethical practices and high standards of conduct.”

 

Congress Is Making Quiet Progress on Drug Costs

https://www.commonwealthfund.org/blog/2018/congress-making-quiet-progress-drug-costs?omnicid=EALERT1477719&mid=henrykotula@yahoo.com

Progress on drug costs

While the Trump administration has taken small steps to implement its blueprint to lower prescription drug prices, Congress has recently made quiet progress on some policies that could help lower drug costs for patients.

First, both the Senate and House advanced legislation to ban “gag clauses” that prevent pharmacists from telling patients that they can save money on medications by paying for them out of pocket. Certain prescription benefit managers (PBMs) have used gag clauses as part of their formulary design. While this is not a widespread industry practice, a 2016 survey of community pharmacists found that nearly 60 percent had encountered a gag clause in the previous 10 months. Two bills (S. 2553 and H.R. 6733) would prohibit private Medicare plans from instituting gag clauses. A third, related bill (S. 2554) — passed by the Senate on Monday with overwhelming support — prohibits private health insurance plans from using them. While they enable pharmacists to advise patients on how to spend less at the pharmacy counter, these bans won’t necessarily lower the prices of drugs.

Second, a lesser-known provision of S. 2554, added by the Senate Committee on Health, Education, Labor and Pensions (HELP), could help lower drug prices by shedding light on patent-settlement agreements between drug manufacturers. Brand-name manufacturers sometimes use these agreements to extend their monopolies and keep drug prices higher by directly and indirectly compensating generic manufacturers for voluntarily delaying generics from coming to market. The Congressional Budget Office has found that setting a standard to rein in these types of settlements would produce $2.4 billion in savings over 10 years.

The HELP committee provision would require manufacturers of biologics (large-molecule drugs) and biosimilars (nearly identical copies of original biologics) to report patent-settlement agreements to the Federal Trade Commission (FTC) — an important step in understanding and preventing abuse of what is sometimes referred to as “pay for delay.”

Pay-for-Delay Stalls Drug Competition, Costing Patients Billions

In 2003, Congress required patent-settlement agreements between brand-name and generic small-molecule drug manufacturers to be filed with the FTC for review after they are made. (Currently most drugs sold are small-molecule drugs, but the biologics market is growing rapidly.) Such agreements effectively delay the sale of lower-cost generic drugs by nearly 17 months longer than agreements without payments, according to a 2010 report by the FTC. These anticompetitive agreements cost taxpayers approximately $3.5 billion each year.

In 2012, the U.S. Supreme Court decided in FTC v. Actavis that a brand-name drug manufacturer’s payment to a generic competitor to settle patent litigation can violate antitrust law. After the Court’s decision, the number of pay-for-delay agreements declined two years in a row. With drug companies now required to report these settlements to the FTC, the agency has been able to act to protect patients from anticompetitive deals that delay cheaper, generic drug products from coming to market. The FTC reviews reported settlements and, if it determines an agreement violates antitrust law, the agency challenges the agreement in the courts.

For example, in 2008 the FTC sued Cephalon, Inc., for paying four generic companies $300 million to delay marketing of their generic versions of Cephalon’s sleep-disorder drug, Provigil, until 2012. In 2015, the FTC reached a settlement with Cephalon’s owner, Teva Pharmaceutical Industries, Ltd., which agreed to ending pay-for-delay agreements for all their U.S. operations. The company also paid $1.2 billion in compensation for Cephalon’s anticompetitive behavior.

FTC Reporting Requirement Does Not Apply to Biologic and Biosimilar Manufacturers

The FTC reporting requirement applies only to small-molecule drugs, however, and not to far more expensive biologics and biosimilars. The potential savings of having biosimilars available for sale are significant: even one biosimilar competing against a brand-name biologic can result in a 35 percent lower price for patients and payers. Without delays in competition with brand-name biologics, biosimilars could save $54 billion to $250 billion over 10 years.

But there are concerns that manufacturers are entering into pay-for-delay agreements to keep prices for these drugs artificially high. Since 2015, when the biosimilar pathway was implemented, the FDA has approved 12 biosimilars, yet only three are currently available to patients — likely because of patent litigation and pay-for-delay agreements.

FTC Review Is Part of the Solution

In his remarks upon releasing the U.S. Food and Drug Administration’s Biosimilars Action Plan in July, FDA commissioner Scott Gottlieb noted the FTC’s key role in monitoring U.S. markets to protect consumers from anticompetitive behaviors, including those of prescription drug manufacturers. He also pointed out the patent litigation tactics manufacturers use to delay biosimilar competition.

As it does for the small-molecule drug market, the FTC can play a proactive role in monitoring what is happening in the biologic and biosimilar markets. At a workshop on drug pricing held last year, acting FTC chair Maureen Ohlhausen said that while her agency has been making progress in eliminating pay-for-delay agreements, it has not seen the last of them. She said they will remain a target. But to move forward, the FTC needs clearer authority to review patent settlements between biologic and biosimilar manufacturers.

With Senate passage of S. 2554 and its FTC reporting provision, Congress has taken an important step in encouraging a robust biosimilar market. (While the House has not passed a similar measure, the Senate bill could be added to a reconciliation of the House and Senate gag clause bills.) Engaging all the relevant market regulators — including the FTC, the U.S. Patent and Trademark Office, the Centers for Medicare and Medicaid Services, and the FDA — will inject needed competition into this nascent market and help lower drug prices for U.S. consumers.

 

How hospitals protect high prices

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Large hospital systems don’t command high prices just because patients like them, or just because they have strong market share. There’s also another big reason: their contracts with insurance companies actively prohibit the sort of competitive pressures a free market is supposed to support.

“The free market has been distorted in an unhealthy way,” health care consultant Stuart Piltch told the Wall Street Journal’s Anna Wilde Mathews for this deep dive into hospitals’ pricing practices.

How it works: Hospital systems are consolidating rapidly and buying up physicians’ practices (which charge higher prices once they’re part of a hospital).

On top of that, per WSJ: Hospitals’ deals with insurance companies “use an array of secret contract terms to protect their turf and block efforts to curb health-care costs.”

  • Some hospitals do not allow their prices to be posted on the comparison-shopping sites insurers provide to their customers.
  • They often require insurers to cover every facility or doctor the hospital owns, and prohibit insurers from offering incentives — like lower copays — for patients to use less expensive competitors.
  • When Walmart, the country’s biggest private employer, wanted to exclude the lowest-quality 5% of providers from its network, its insurers couldn’t do so because of their hospital contracts.

The other side: Hospital executives told the Journal that mergers don’t drive higher prices, and reiterated their position that hospitals have to collect higher payments from private insurance to make up for the lower rates they get from Medicare and Medicaid.

My thought bubble: High-deductible health plans are increasingly popular, in part, because of the idea that patients will use their purchasing power to drive a more efficient system overall.

  • But if Walmart doesn’t have enough market power to actually penalize low-quality providers, you and I definitely don’t, either — especially if we can’t find out what the prices are, and especially if we only have one hospital to choose from in the first place.

Go deeper: Think drug costs are bad? Try hospital prices

 

 

Can Paying for a Health Problem as a Whole, Not Piece by Piece, Save Medicare Money?

https://theincidentaleconomist.com/wordpress/can-paying-for-a-health-problem-as-a-whole-not-piece-by-piece-save-medicare-money/

Among the standard complaints about the American health care system is that care is expensive and wasteful. These two problems are related, and to address them, Medicare has new ways to pay for care.

Until recently, Medicare paid for each health care service and reimbursed each health care organization separately. It didn’t matter if tests were duplicated or if a more efficient way of delivering care was available — as long as doctors and organizations were paid for what they did, they just kept providing care the way they always had.

But ordinary people do not think this way. We focus on solving our health problem, not which — or how many — discrete health care services might address it. New Medicare programs are devised to more closely align how care is paid for with what we want that care to achieve.

One of these programs is known as bundled payments. Instead of paying separately for every health care service associated with a medical event, you pay (or Medicare pays, in this case) one price for the entire episode. If health care providers can address the problem for less, they keep the difference, or some of it. If they spend more, they lose money. Bundled payment programs vary, but some also include penalties for poor quality or bonuses for good quality.

Medicare has several bundled payment programs for hip and knee replacements — the most common type of Medicare procedures — and associated care that takes place within 90 days. This includes the operation itself, as well as follow-up rehabilitation (also known as post-acute care). In theory, if doctors and hospitals get one payment encompassing all this, they will better coordinate their efforts to limit waste and keep costs down.

Do bundled payments work? They certainly appear promising, at least for some treatments. But it’s important to conduct rigorous evaluations.

Previous studies for Medicare by the Lewin Group and other researchers suggest that Medicare’s Bundled Payments for Care Improvement program has reduced the amount Medicare pays for each hip and knee replacement.

But that doesn’t mean the program saved money over all.

One possible issue would be if, despite saving money per procedure, health care providers wastefully increased the number of procedures — replacing hips and knees that they might not otherwise. A related concern is if hospitals try to increase profits by nudging services toward patients who may not need a procedure as much as patients with more severe and more expensive conditions. An average joint replacement costs $26,000, split almost equally between the initial procedure and post-acute care. But more expensive cases can be $75,000 to $125,000 — a costly proposition for hospitals.

A recent study published in JAMA examined whether the volume of Medicare-financed hip and knee replacements changed in the markets served by hospitals that volunteered for a bundled payments program, relative to markets with no hospitals joining the program. It found no evidence that the bundled payment program increased hip and knee replacement volume, and it found almost no evidence that hospitals skewed their services toward patients whose procedures cost less.

“These results suggest bundled payments are a win-win,” said Ezekiel Emanuel, a co-author of the study. “They save payers like Medicare money and encourage hospitals and physicians to be more efficient in the delivery of care.”

But Robert Berenson, a fellow at the Urban Institute, urges some caution. “Studying one kind of procedure doesn’t tell you much about the rest of health care,” he said. “A lot of health care is not like knee and hip replacements.”

Michael Chernew, a Harvard health economist, agreed. “Bundles can certainly be a helpful tool in fostering greater efficiency in our health care system,” he said. “But the findings for hip and knee replacements may not generalize to other types of care.”

Christine Yee, a health economist with the Partnered Evidence-Based Policy Resource Center at the Boston Veterans Affairs Healthcare System, has studied Medicare’s previous efforts and summarized studies about them. (I and several others were also involved in compiling that summary.) “Medicare has tried bundled payments in one form or another for more than three decades,” Ms. Yee said. “They tend to save money, and when post-acute care is included in the bundle, use of those kinds of services often goes down.”

One limitation shared by all of these studies is that they are voluntary: No hospital is required to participate. Nor are they randomized into the new payment system (treatment) or business as usual (control). Therefore we can’t be certain that apparent savings are real. Maybe hospitals that joined the bundled payment programs are more efficient (or can more easily become so) than the ones that didn’t.

Another new study in JAMA examines a mandatory, randomized trial of bundled payments. On April 1, 2016, Medicare randomly assigned 75 markets to be subject to bundled payments for knee and hip replacements and 121 markets to business as usual. This policy experiment, known as the Comprehensive Care for Joint Replacement program, will continue for five years. The JAMA study analyzed just the first year of data.

“In this first look at the data, we examined post-acute care because it is an area where there is concern about overuse,” said Amy Finkelstein, an M.I.T. health economist and an author of the study. “In addition, prior work suggested that it’s a type of care that hospitals can often avoid.”

The study found that bundled payments reduced the use of post-acute care by about 3 percent, which is less than what prior studies found. “Those prior studies weren’t randomized trials, so some of the savings they estimate may really be due to which hospitals chose to participate in bundled payment programs,” Ms. Finkelstein said. Despite reduced post-acute care use, the study did not find savings to Medicare once the costs of paying out bonuses were factored in. The study also found no evidence of harm to health care quality, no increase in the volume of hip and knee replacements, and no change in the types of patients treated.

“Savings could emerge in later years because it may take time for hospitals to fully change their behavior, “ Ms. Finkelstein said. In addition, the program’s financial incentives will increase over time; bonuses for saving money and penalties for failing to do so will rise.

On the other hand, Dr. Berenson said, health care providers could figure out how to work the system: “In three to five years, we may see volume go up in a way that offsets savings through reduced payments for a procedure. We’ll wait and see.”

Medicare put its best foot forward by using a randomized design. Not only were the markets selected in a randomized fashion, but providers in those markets were also required to participate. Though common in medical studiesrandomization is rare in health care policy, as is mandatory participation. Nearly 80 percent of medical studies are randomized trials, but less than 20 percent of studies testing health system change are. Organizations that would be subject to the experiments often strongly resist randomizing health system changes and forcing providers to participate.

Unfortunately, the randomization of the Comprehensive Care for Joint Replacement program will be partly compromised in coming years. The Centers for Medicare and Medicaid Services announced last year that hospitals in only half of markets under the program would have to stay in it. Participation is voluntary in the other half, and only one-quarter of hospitals opted in.

Going to a partly voluntary program will make it harder to learn about longer-term effects, Ms. Finkelstein said, and to get at the answers we’re seeking.