Medicare Advantage: Positioned to Expand Rapidly?

Despite debates over Medicare Advantage (MA) costs and benefits vs. traditional Medicare, MA continues to expand. CMS just announced that the average MA plan premium will decrease in 2017 vs. 2016 (to $31.40 from $32.59) and current projections are for 18.5 million enrollees in 2017, nearly one-third of total Medicare.

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Total Medicare Private Healthcare Enrollment, 1999-2016

In 2017, MA will cover 60 percent more beneficiaries than it did in 2010, with premiums that are 13 percent lower on average. Current projections are that MA will represent more than 40% of Medicare by 2026, and that could be conservative.

Medicare Advantage Attractive to Insurers

While insurers receive a capitated payment (per enrollee) for MA, they have traditionally found the business very attractive (i.e. profitable) even with ACA-imposed reductions. One of the reasons is the ability to attract healthier enrollees.

Going forward, with MA payments increasingly based on quality and adjusted for patient risk, insurers see MA as a natural extension of their ACO efforts. After all, a MA plan promises comprehensive coverage and can evolve easily into primary care coordination and other aspects of an ACO framework. Even today, nearly two-thirds of MA plans are HMOs.

To keep MA premiums attractive (the primary reason that consumers sign up for MA), insurers increasingly rely on narrow networks. A recent Kaiser Foundation analysis found that 16% of MA plans had narrow networks in 2015 and 23% had broad networks (see graph). It is expected that MA networks will become increasingly narrow to support care coordination, ACO and efficiency objectives.

Hospital Networks Vary Across Medicare Advantage Plans: 16% Have Narrow Networks and 23% Have Broad Networks

 

Other findings from the Kaiser study include:

  • On average, Medicare Advantage plan networks included about half of all hospitals in their county.
  • Most plans (80%) included an Academic Medical Center in their network, but one in five did not.
  • Two in five plans in areas with an NCI-designated cancer center did not include the center in their networks.
  • In 9 of the 20 counties studied, none of the plans offered in 2015 had a broad network of hospitals within that county.
  • Among HMOs, which comprised the majority of the plans in the study (75%), broad and narrow network plans had similar average premiums ($37 vs. $36 per month) and similar quality ratings (3.8 vs. 4.1 stars).

Provider-Sponsored Medicare Advantage

A significant factor driving MA growth comes from provider-sponsored plans (e.g. Kaiser, Geisinger, SummaCare, etc.). Between 2012 and 2015, provider sponsored plans represented 54% of MA entrants.  According to an Avalere Health analysis, 58 percent, or 11 out of 19, new MA parent organizations in 2016 are provider-sponsored. As shown in the figure, 70 provider parent organizations offer 403 MA plans in 41 states to 35 million Medicare beneficiaries in 2016. In total, 64 percent of Medicare beneficiaries have access to a provider-sponsored MA plan in 2016.

Medicare Advantage Provider Sponsored Plans

Provider-sponsored MA plans have been successful signing up consumers. In 2015, almost 6 percent of all Medicare beneficiaries were enrolled in a provider-sponsored MA plan. This means one in every five MA enrollees. The impact is even more striking when looking at specific geographies. Provider-based MA plans, almost by definition, have a limited geographic footprint. Within those footprints, the largest provider-based plans have MA penetration that ranges from 15 to 55% of MA enrollees. Some smaller plans have even higher penetration, but in a small footprint.

It seems highly likely that we will see more provider-based plans, both for MA and in other markets. In fact most existing provider-based MA plans are part of a broader set of plans that include commercial, Medicaid and, in some cases, exchange plans. Pressures to expand alternative payment models, such as ACOs and medical homes, will continue to position providers to become payers, despite the challenges involved. The natural result will be more provider-based MA plans and enrollees, especially in their targeted geographic area.

The Cost & Quality Debate

Presently, there is debate within the industry around whether or not MA effectively saves Medicare money and the overall quality of MA programs. A Kaiser study shows provider data often is very difficult to review, can be out of date and frequently contains inaccurate information about the quality of providers in some MA provider networks, making evaluation of MA programs more difficult.

In 2014, Medicare paid about $160 billion to MA organizations to provide health care services for approximately 16 million beneficiaries. CMS, which administers Medicare, estimates that about 9.5 percent of its payments to MA organizations were improper, according to the most recent data—primarily stemming from unsupported diagnoses submitted by MA organizations. CMS currently uses RADV audits to recover improper payments in the MA program.

In terms of quality, healthcare consumers often link health care quality with their choice of doctor. MA plans with limited provider networks, or with inadequate information about which providers are in-network, cause consumers to feel they have limits on their options and therefore may not have access the best possible care.

However, significant changes in how all health insurance plans create and manage their provider networks are changing how health care consumers perceive a provider network. Advocates attest that well-managed health care provider networks are changing how customers are experiencing health care by enabling providers to connect with each other and help deliver better health outcomes and a more satisfying experience for patients.

For example, UnitedHealthcare provides financial incentives to health care providers who meet or exceed industry benchmarks for health care quality. Additionally, the federal government now rates and provides financial bonuses to MA plans that exceed health care quality and customer satisfaction benchmarks. Called the Star Ratings program, this pay-for-performance system means that the best-performing Medicare Advantage plans are able to offer more benefits even as they improve the overall quality of the health care their members receive.

Advocates claim that the higher efficiency of such private options should push the government towards expanding the role of managed care plans. But opponents say the sizeable positive selection faced by MA plans to support claims of over-reimbursement is costing the government money, instead of saving.

Insurers have also chimed in on the debate, claiming the MA star ratings are unfair and leave insurers with a high proportion of dual-eligible members at a disadvantage, in addition to unfairly penalizing plans focused on serving low-income, medically complex members.

A 2015 study from The National Bureau of Economic Research (NBER) which analyzed quality of care at the hospital level, found that private MA plans provide greater efficiency and lower costs by reducing unnecessary hospitalizations and elective care. In the report’s conclusion, NBER says it found “no evidence that this is accompanied by reduced quality of care for Medicare patients when enrolled in MA; quality indicators, if anything, deteriorate when MA plans exit.”

A report published by the Government Accountability Office (GAO) in April, titled Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments, concluded that CMS needs to improve its oversight of Advantage plans to assure that provider networks are robust. The report also criticized CMS for doing too little to assess the accuracy of Advantage plan provider lists.

Following the GAO’s report, CMS has put the industry on notice that it will levy sanctions against MA carriers that do not meet its standards and has foreshadowed requiring machine readable directories in the future.

The agency has published its network adequacy review requirements for the first time and established new requirements for consumer notices and surprise bills. Plans must now create “machine readable” provider directories which can be checked regularly by regulators and researchers, and facilitate inter-plan comparison. Additionally, CMS recently published other new requirements regarding provider network directories, consumer notices, and special enrollment periods for midyear network changes.

Looking Ahead

Currently in 2016, 31% of Medicare enrollees are in Advantage plans, up 11% since 2010. With conservative projections, that number is expected to hit 41% by 2026, according to Congressional Budget Office (CBO) predictions. Insurers have many incentives today to make MA more attractive and that trend is unlikely to change, despite recent debates about MA costs and quality. In addition, as providers gain experience bearing risk and develop better care delivery models, they will continue to expand their MA offers.  The result is that we should expect to see an increasingly diverse set of MA plans over the next several years which will drive increased MA penetration.

Source(s): “Provider-Sponsored Health Plans: Enrollment, Quality, and Future Impact,” Avalere, January 2016; “Does Medicare Advantage Cost Less Than Traditional Medicare?The Commonwealth Fund, January 28, 2016; Moody, Katherine, “A Look at States’ Efforts to Coordinate Care for Medicare, Medicaid Populations,” FierceHealthPayer, March 21, 2016; “MEDICARE ADVANTAGE: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments,” Government Accountability Office, April 2016; Miller, Mark, “Medicare Advantage Grows, But Provider Choice Is Limited,” Reuters, July 11, 2016; Herman, Bob, “More Tweaks Coming For Value-Based Medicare Advantage ProjectModern Healthcare, August 11, 2016 Herman, Bob, “Cigna’s Medicare Problems Won’t Be Fixed By Annual Enrollment,” Modern Healthcare, September 6, 2016