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Medicare Advantage Delivers Better Care And Saves Money

Medicare Advantage Delivers Better Care And Saves Money

MA has now enrolled more than 40 % of the people with Medicare coverage in the USA. 

The plans’ profits run slightly over 4 percent. There was a time, early in the development of the Medicare capitation programs, when some plans generated profits upwards of 20 percent, in part by enrolling the healthier seniors when they could achieve that goal. Some plans engaged in risk selection and even some level of risk skimming. However, that sort of gaming is now prevented by the Affordable Care Act’s (ACA’s) medical loss ratio (MLR) requirement, which caps the combined amount of administrative costs and profits at 15 % of premium for plans in the large group and MA markets.

Administrative costs for most plans run about 10 percent. MA plan profits run about 4.5 percent. We can argue about whether 4.5 percent profit is a good number—but it’s clearly inaccurate to say that it is an “extraordinary number.” Most businesses in most industries would see their stock prices dropping with only 4.5 percent profits. The hospice programs for Medicare that provide good care to some of our neediest patients have a 12 percent profit level built into their financial reality. The average profit levels for businesses of all types in America currently runs about 11.5 percent

Medicare Advantage Has An Extensive Quality Program

MA has an extensive, well-structured, and strongly administered five-star system that measures plan performance on more than 40 categories of quality and service and rates every plan based on their most recent performance levels. The program pays plans 5 percent more in most counties if they achieve at least four stars. Plans work hard to achieve those performance goals—and being a Five Star care site has become a mark of honor for many care systems and sites. The care improvement spillover from that process actually extends to millions of people—when you measure provider performance for multiple areas of care, then care gets better and more efficient for other, non-MA patients who are also seeing the same providers.

We know the five-star systems works well because only a few plans achieved four or five stars when the program began, while this year 80 percent of MA members were able to enroll in plans with four or more stars. That’s a highly functional proof of success because the expectations are high and measurement process is well regulated.

MA team care has brought down the number of congestive heart failure events—an area traditional Medicare has struggled with—by significant levels for many sites because plans make that condition a priority for improving care. That’s part of an overall care delivery agenda. MA plans have diagnostic information on every patient. The plans can use that information to know who is likely to have a heart crisis, or the kind of diabetic damages that double the death rate for cardiac patients who are also diabetic. 

Team care is created by plans at multiple levels because team care makes care better. When you are paid a capitation for each member rather than a fee for each piece of care, you can invest some of that available cash flow in ways to make care less costly and more effective, and you are incentivized to do so.

And, indeed, MA plans get better results. For example, compared to FFS Medicare, on a risk-adjusted basis, a 2018 study found that MA members have 33 percent fewer emergency department admissions and almost 23 percent fewer standard hospital admissions because of the better care that plans deliver in a wide range of areas.

Plans do sometimes send people into homes to welcome new members and do home safety and context gathering surveys for the members. Having a home survey can help the members bond with the plan and their care team and structure, and the survey process gives the plans important information to use to deliver care to those members. The nurses who do the visits are sometimes also asked to provide input into the diagnosis record-building process because the plans build records on each patient to help support their care and it’s an easy addition to ask those nurses to provide that information.

The plan had direct, in-home support in place and was using nurses and processes that were already set up to provide care. They did not send nurses into new homes; they sent them back into homes where they had already been to support patient care. This sort of team support does not exist at any level in FFS Medicare. (That particular care team was also the first major care team in the country to get functional COVID-19 tests into all of their owned care sites, very early in the process.)

There Is A Finite Number Of Diagnoses For Each Person

If a plan does have an AI-enabled platform in place in some setting to support care, one of the least important and least useful things that platform would be doing would be to discern previously undiscovered diagnoses for the purpose of improving risk scores.

Each person has only a finite number of diagnosis. There are only a small number of diagnoses that we can possibly find for any individual even if we use artificial intelligence to look for them. 

Finding more codes isn’t a business plan; it’s a care improvement plan. The truth is that we want every diagnosis code to be found. We very much want our care teams to know every diagnosis for every person because that information and knowledge is extremely useful, indeed necessary, for optimal care delivery.

Plans Have Both Quality Programs And Financial Rewards

It is important to understand how the payment model actually works for MA. This model is very different from the Medicare FFS program that has been our standard approach to Medicare since the program began.

MA plans are paid a flat capitation amount per month for every member and they use that money to deliver and improve care. The MA quality program changes the payment level a bit in a useful and important way. As mentioned, the MA star ratings program measures more than 40 areas of quality and service, rates the plans based on their performance in those areas, and then pays up to 5 percent more to plans each month if they achieve at least four stars. Thus, MA plans have a major and measurable overall quality improvement agenda; they also have an inherent focus on both quality and effectiveness of care because they are paid a capitation and they need to provide effective, efficient care to make the capitation model work and to continue to exist.

By contrast, standard FFS Medicare has no quality agenda at any level. The care teams that are created by MA plans using the revenue flow from capitation do not exist in FFS Medicare. The patient chart information is extremely incomplete in FFS settings; information is siloed and not shared between caregivers. 

Low-Income People Are Twice as Likely to Join Medicare Advantage

Low-income people, defined as those making under $30,000 a year, are twice as likely to join MA as FFS Medicare. Rates of Hispanic and Black enrollment in MA are higher than before and growing. It’s not surprising that MA enrolls twice as many low-income people. Low-income people tend to both need and value team care. 

COVID gave us a harsh awakening. The COVID death rates for our African American and Hispanic patients were more than double death rates for other patients in most settings. The science now tells us that disproportionate levels of chronic conditions drove those much higher death rates. 

Forty-two percent of our total population has joined MA. We just reached the point where more than half of the African Americans on Medicare have joined the plan and about sixty percent of the Hispanic Medicare beneficiaries are in the plans. That number will probably continue to grow. All-told, minorities make up twice as large of a percentage of MA enrollment as traditional Medicare enrollment, 33.7 percent versus 16 percent.

Patients with low income and patients who have not had access to team care and coordinated care from the traditional, FFS Medicare doctors in their communities tend to find MA to be a good choice—and they tend to report high levels of satisfaction with their plans. Those members also appreciate how much money they save as MA members.

Medicare Advantage Members Save Over $1,600 On Care

The combination of better benefits and better care for MA members means that the average MA member saves more than $1,600 a year on personal health care costs, as compared to traditional Medicare enrollees. That’s is up from $1,400 in savings in health care costs per MA member last year.

Those savings have very real, positive, direct impacts on the lives of real people. The importance of these savings are shown by both the high MA enrollment levels from our very lowest-income Medicare Members and the focus on care for our most medically complex seniors, those dually eligible for both Medicare and Medicaid. More than three million enrollees in D-SNPs, the Special Needs Plans for dual eligibles, make it very clear as a significant component of the patients for MA plans that skimming risk is not the reason for MA plans to exist. Enrollees in Special Needs Plans tend to be institutionalized, to have extremely low income, and to have disabling conditions. For many of those patients, the team care they get from their MA plan is the first team care of their life, as standard FFS Medicare refuses to pay for that care.

A Path Forward

As a nation, we should build on MA and the capitation method it employs. Health care in this century should be a process, not just as an avalanche of unrelated economic events and a cascade of unrelated piece-by-piece care purchases and encounters. We should want team care and continuously improving care for everyone getting care in America. The only way to achieve that is to put a cash flow in place to pay for our care that rewards and enables a cost-effective, quality-oriented process—in short, to adopt capitation for everyone.

ACOs fall short of full capitation and thus are not as good as MA in promoting high-value care, but they are certainly far better than traditional, FFS Medicare. Accountable Care Organizations should be encouraged for those who are not willing to join MA.

The original deal between CMS and health plans more than two decades ago was that the plans would provide more complete benefits than FFS Medicare and would be paid 95 percent of the costs of FFS Medicare in each market. 

In contrast to MA data, FFS Medicare does not include anywhere near complete diagnostic information. This creates uncertainly in calculating relative risk profiles for MA and FFS Medicare, and we should be open to better ways to calculate those risk profiles and, by extension, relative payment levels. The key for future design is to look at exactly what future behaviors we want to incentivize in the delivery of care and the creation of health and to make sure the calculations are by groups such as independent actuaries, rather than politically involved stakeholders.

The presence of capitation is far more important than the precise amount of the capitated payment. Capitation is the most powerful tool we have to improve quality and to control costs. Thus, questions about the details of payment calculations should not cause us to back away from capitation; instead, we should expand its use. We actually could make the MA capitation system available to employers, and through them to working Americans, as part of an overall health improvement plan for the country.

By charging employees a flat 15 percent of their paycheck, we could create a capitation fund that the plans could use to provide the same system-based care offered through MA. If a large percentage of employers signed on, we could certainly make this work and put universal coverage in place. We would not need to invent anything new—we could retrofit pieces that we already have.

But for now, we need to get the numbers right for MA. We need to make sure we alleviate the key concerns about the accuracy of the data behind the payment amounts. We need capitation coupled with us functioning as a prudent and competent buyer—not just as an indiscriminate payer—for care.

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