The crisis in management at the Centers for Medicare and Medicaid Services (Part I): Capacity

The role of the federal government in health care was radically altered on July 30, 1965, when President Johnson signed the Health Insurance for the Aged bill into law. In the half century since, Medicare and Medicaid have steadily expanded, adding new beneficiaries, new benefits, and new oversight responsibilities.

In this paper, the first of a two part series, Sheila Burke and Elaine Kamarck examine the ways in which the agency responsible for overseeing the programs—the Centers for Medicare & Medicaid Services (CMS)—has expanded over the years, with a particular emphasis on mission, responsibility, and capacity.  Since their creation, Medicare and Medicaid have grown to cost three quarters of a trillion dollars annually. Over the years, more and more people have become eligible for a growing list of Medicare and Medicaid benefits, and CMS has inherited greater oversight responsibility. At the same time that the federal health care programs have evolved, the health care industry itself has changed dramatically to become much more complex. Certain problems are to be expected in light of such rapid growth and increased complexity, but, according to Burke and Kamarck, such problems have been exacerbated by a growing crisis in management capacity within CMS.

Almost from the beginning, Burke and Kamarck demonstrate, the nation’s two largest health care programs have been administered in a way that short changes the importance of managing such large and complex programs. As the programs have grown tremendously over the decades, they have received very little additional funding to support administrative needs. In 1967, the first full year of the program, the federal government spent 1.4 billion dollars to run a program costing 18.2 billion dollars. In 2014, the federal government spent 5.9 billion dollars to run a program costing 639.2 billion dollars

Furthermore, the Patient Protection and Affordable Care Act placed an enormous new mandate on this already overworked federal agency—with very little new funding to make sure the work got done properly.

Having clearly established that CMS faces shortcomings in organizational capacity, Burke and Kamarck will explore in greater depth the consequences of such capacity issues in a forthcoming addition to this study. They will examine issues related to fraud, congressional interference, and leadership turnover, among others, and will offer potential solutions to these challenges.