What Is a Medicare Demonstration Plan?

Medicare is a federally-funded insurance plan offered to those over age 65, and to certain disabled individuals. Constant evaluation ensures the program's effectiveness with regard to cost and quality of care.

Definition

• Demonstration plans are experiments the Centers for Medicare and Medicaid Services use to evaluate potential changes to Medicare. The goal is to learn whether proposed changes will make the program more efficient and cost-effective. Even if the results of the demonstration plan show the government will save money, federal law prohibits changes reducing quality of care.

Examples

• Examples of Medicare demonstration plans include changing how the program pays for care provided by medical residents, interns and nurse practitioners; testing new ways to manage chronic diseases; and trying new methods to control costs for very expensive care required by some patients.

Limitations

• Before a demonstration plan can begin, federal law states CMS must consult experts to determine whether the study has appropriate goals and its likelihood of being useful. Experts must also determine whether there have been similar demonstration plans in the past, or if the plans are already in progress. If they do not recommend the demonstration plan, it cannot move forward.

Implementation

• If approved, CMS does not carry out the actual demonstration plans. It awards grants or enters contracts to outside parties to perform the experiments. Most commonly, public or private organizations and institutions implement demonstration plans.