It will improve education, make government at all levels more cost-effective and user friendly, reduce health-care costs while improving quality, and give communities new ways to address problems such as crime and pollution.
The sentence states that something addressed by pronoun ‘it’ would do things so a parallel list is required. Non-underlined part uses simple present form of verb ‘give’, so the underlined part must have verbs in that form only with sentencing making a logical meaning.
A. It will improve education, make government at all levels more cost-effective and user friendly, reduce health-car costs while improving quality, - CORRECT. Will improve, will make, will reduce and will give are parallel. Clause ‘while improve quality’ is a consequence of something done by ‘it’ and properly modifies ‘reduce … costs’.
B. It will improve education, make government at all levels more cost-effective and user friendly, health-care costs will be reduced while improving quality, - WRONG. With active voice passive voice is used ‘health ... quality’.
C. It will improve education, make government at all levels more cost-effective and user friendly, reduce health-care costs while improve quality, - WRONG. Comes close but quality improvement as per ‘while improve quality’ is a consequence not something that ‘it’ is meant to do directly.
D. It will improve education, make government at all levels more cost-effective and user friendly, reducing health-car costs while improving quality, - WRONG. Modifier ‘reducing health-car costs..’ modifies previous clause illogically.
E. It will improve education, making government at all levels more cost-effective and user friendly, reducing health-care costs while improving quality – WRONG. Same error as in option ‘D’ along with clause ‘making..’ modifying the previous clause.
IMO Answer (A).