Medicare Advantage

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Does getting cancer incentivize individuals to switch from Medicare managed care to FFS?

November 8, 2011 in Cancer, Medicaid/Medicare, Medicare Advantage, Quality | No comments

Medicare beneficiaries have a choice: pick the standard Medicare fee-for-service (FFS) benefit or rely on managed care plans to supply their healthcare through the Medicare Advantage (MA) program.  Many Medicare beneficiaries prefer MA because it offers them lower out-of-pocket costs and provide benefits not available in the traditional FFS Medicare program. Other beneficiaries prefer the FFS benefit because MA plans typically restrict provider choice in an effort to control costs.

The quality of care in Medicare MA relative to FFS, however, has still not yet been consistently evaluated.  Because beneficiaries can switch from MA to FFS each year, if quality is low, healthy individuals may prefer MA to reap the reduced cost sharing benefits, but when they become sick they may switch to Medicare FFS.

A study by Elkin and co-authors evaluates whether or not this is the case for beneficiaries who get cancer.

Data and Methodology

“We identified Medicare managed care enrollees aged 65 years or older who were diagnosed with a first primary breast (n = 28 331), colorectal (n = 26 494), prostate (n = 29 046), or lung (n = 31 243) cancer from January 1, 1995, through December 31, 2002, in Surveillance, Epidemiology, and End Results (SEER) cancer registry records linked with Medicare enrollment files. Cancer patients were pair-matched to cancer-free enrollees by age, sex, race, and geographic location. We estimated rates of voluntary disenrollment to fee-for-service Medicare in the 2 years after each cancer patient ’ s diagnosis, adjusted for plan characteristics and Medicare managed care penetration, by use of Cox proportional hazards regression.”

Results

The authors find that MA beneficiaries with cancer are less likely to switch to FFS than a cancer-free beneficiary. The hazard ratios range from 0.78 for colorectal cancer to 0.86 for prostate cancer. The results were consistent across various age, sex, race, cancer stage and region strata.

The likely reason for this finding is that people who have a serious disease do not want to change coverage. Even if the FFS benefit offers improved access to better care, there are significant costs of switching coverage. The new FFS providers may have less knowledge of the individual beneficiary’s health condition and the change can be stressful for the beneficiary as well. A worthwhile analysis to confirm whether this is the case would be to examine whether FFS beneficiaries who contract cancer are more likely to switch to a MA plan after contracting cancer. If the transaction cost/care coordination is driving Elkin’s results, then FFS beneficiaries with cancer should also be less likely to switch to MA than cancer-free FFS beneficiaries.

It could also be the case that MA provides high quality care for the most prevalent cancers (i.e., prostate, lung, colorectal, and breast), but there is a significant improvement in quality when beneficiaries visit FFS providers when they have rarer diseases. To confirm whether or not this is the case, the authors examine whether beneficiaries with non-Hodgkin lymphoma, acute leukemia, and soft tissue sarcoma are more likely to switch to FFS. The authors found no effect of these cancer diagnoses on the likelihood of disenrollment from a managed care plan.

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Do you support ACOs?

June 7, 2011 in Medicare, Medicare Advantage, Supply of Medical Services | 1 comment

Do you support Accountable Care Organizations?  Many policymakers think they are a great idea.  Why?  If ACOs better integrate care coordination between a variety of physician specialists and other providers, ACOs can increase the efficiency of the health care system.  Improving quality and reducing cost sounds like a great idea.

To implement these integrated care settings in practice, however, Michael Cannon notes that potential ACOs would be funded through savings they provide to Medicare.  This also sound pretty attractive.

If you are a provider, however, ACOs may be couched in a different light: lower reimbursement levels.  If the government believes ACOs can improve efficiency, Medicare can pay providers less for the same services (and ostensibly maintain the same quality level).

Robert Laszewski writes, “Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?”

In the short-run, the answer is no.  As I’ve mentioned in the past, however, in the long-run, ACOs can increase provider market share and give Medicare less bargaining power in the long-run.

Medicare’s short-run push to coordinate care and reduce cost may result in a more concentrated fee-for-service marketplace and higher Medicare cost in the long-run.  Medicare may want to stick with it’s existing form of ACOs: Medicare Advantage plans.

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Medicare Advantage Premiums

March 21, 2011 in Medicare Advantage | 1 comment

In 2010, one quarter of Medicare beneficiaries chose capitated plans through the Medicare Advantage (MA) program. According to MedPAC, “[MA] coverage must include all Medicare Part A and Part B benefits except hospice.  All plans, except PFFS [private fee-for-service] plans, must also offer an option that includes the Part D drug benefit.”

How do private health plans set premiums for their Medicare Advantage plans?  Can they charge any price they wish or are they regulated by the government?  How will Health Reform affect MA plans?

Today, the Healthcare Economist provides the answers.

Medicare Advantage Today

In fact, the answer is that although Medicare Advantage plans can charge any price they wish, the amount the beneficiary pays is somewhat regulated.  In each county, the Centers for Medicare and Medicaid Services (CMS) sets a benchmark premium based on are based on the county-level payment rates used to pay MA plans before 2006.

If a plan’s sets its bid (i.e., premium) above the CMS benchmark, then the plan receives the base rate and the enrollees have to pay the difference between the bid and the benchmark in their annual premium.  If the bid is below the benchmark, then the plan’s base rate is it’s standard bid and gets a rebate.  The rebate is 75% of the difference between the plan’s actual bid and its case mix-adjusted benchmark.  The plan must then return the rebate to its enrollees in the form of supplemental benefits, reduced cost sharing, or lower premiums.

Medicare uses beneficiary age, sex, Medicaid eligibility and prior health conditions to create a hierarchical condition category (HCC) score which is used to risk adjust base rate payments according to beneficiary case mix.

Post Health Reform

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Market Concentration in Medicare Advantage

November 23, 2010 in Medicare, Medicare Advantage | 1 comment

From the Commonwealth Fund:

“The analysis says people have many plans to choose from but that enrollment is concentrated in a handful. It notes, for example, that the average Medicare beneficiary in 2010 has 33 plans from which to choose. But in 14 states and the District of Columbia, a single company (not the same one in each state) accounts for more than half of all Medicare Advantage enrollment.

And in 27 states and the District, three companies account for 75 percent of more enrollees.”

The question is whether ex-ante competition (beneficiaries having a large number of options) or ex-post competition (the market for Medicare Advantage being less concentrated) is important.  If the non-selected plans are good substitutes for the plans with a large market share, then the lack of ex-post competition is not a problem.  Likely, large plans have more market power to negotiate lower rates with physicians (which is a good thing for consumers).  If the large plans started charging higher premiums, beneficiaries may switch to another option which currently has lower market share.  Thus, ex-post market concentration does not necessarily indicate a lack of competition.

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Medicare Reimbursement Information II

September 1, 2009 in Medicaid/Medicare | No comments

I will continue reviewing some Medicare reimbursement information as described in a variety of MedPAC reports.

Medicare Advantage

  • Medicare Advantage is a program where Medicare beneficiaries can receive private heath insurance, partially or fully funded by CMS.  The health insurance must provide coverage at least as generous as Medicare Parts A and B.
  • Private health plans bid to provide services to Medicare beneficiaries.  If a plan’s standard bid is above the benchmark, then the plan receives a base rate equal to the benchmark and the enrollees have to pay an additional premium that equals the difference between the bid and the benchmark. Ifa plan bid falls below the benchmark, the plan receives a base rate equal to its standard bid.
  • Medicare payments are also based on enrolled beneficiaries’ demographics and health risk characteristics. Medicare uses beneficiaries’ characteristics, such as age and prior health conditions, and a risk-adjustment model—the CMS–hierarchical condition category (CMS–HCC)—to develop a measure of their expected relative risk for covered Medicare spending.
  • Medicare Advantage Plans can be either local or regional.  Regional plans can be offered to any beneficiary of one of the 26 Medicare regions.   A region’s benchmark is a weighted average of the average county rate and the average plan bid.  The average plan bid is each plan’s bid weighted by each plan’s projected number of enrollees

PART D

  • Medicare Part D provides coverage for pharmaceutical expenses.
  • Overall, Medicare subsidizes premiums by about 75 percent and provides additional subsidies for beneficiaries who have low levels of income and assets.
  • The standard 2009 benefit includes: a $295 deductible; coverage for 75 percent of allowable drug expenses up to a benefit limit of $2,700; no coverage between $2700 and $6134, and about 5 percent coinsurance for drug spending above the catastrophic limit of $6154.
  • Individuals eligible for both Medicare and Medicaid with incomes up to 100 percent of poverty have no deductibles, nominal copays, and no coverage gap.
  • Medicare subsidies for Part D come in two forms: A direct, capitated payment to plans calculated as a share of the adjusted national average of plan bids, and individual reinsurance of 80 percent of drug spending above

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Medicare Advantage funding to be cut

April 4, 2008 in Managed Care, Medicaid/Medicare | Permalink

David Whelan chronicles the rise (and possibly future fall) of Medicare Advantage programs in his article “Unfilled Prescription” in Forbes.

Earlier laws privatizing Medicare, starting with a pilot program in 1985, were written to give insurance companies only 95% of the money otherwise spent per Medicare member. The insurers were supposed to figure out how to make up the difference. It was a blunt way to save the Treasury money, but few companies stepped up…

The 2003 law hiked the payments to lure more insurers into the market. In some counties minimum payments to these plans reached as much as 128% of the amount Medicare traditionally spends per patient. Insurers rushed in, and costs soared. In the most remunerative counties, two times as many old people are enrolled in Medicare Advantage as the national average. As a result, taxpayers now pay an average of 12% more per private-plan beneficiary, not 5% less.

Whenever we talk about cost we also need to talk about quality.  Are people who opt for Medicare Advantage plans getting higher quality care than in traditional Medicare?  Are they able to see doctors in a more timely manner?  Is care more coordinated?  If this is the case, then the extra costs may be worth the money.

Nevertheless, an economist would guess that Medicare Advantage plans should be cheaper.  Even though the private plans have higher administration and advertising costs, they likely are more efficient than the government plans.  Further, one would anticipate that healthier seniors would choose the Medicare Advantage plans and sicker senior would be more likely to choose traditional Medicare.  This selection problem should make Medicare Advantage cheaper.

I agree that the federal government should not pay more money for private plans than it does for traditional Medicare.  It should reimburse the plans the same (or less if there is adverse selection) as it costs for the government to administer traditional Medicare and if firms want to increase the price, than seniors can pay the difference.  If seniors do not want to pay the difference, they can always opt for traditional Medicare.

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Picking a Medicare Plan

November 5, 2007 in Medicaid/Medicare | Permalink

Which Medicare plan should you choose? Health journalist Charles Ornstein of the L.A. Times was making just this choice for his mother in “Puzzling out plan option for Medicare.” Even for a veteran health journalist, the choice is not as easy as it seems.

Below, I will give some background information which will help people like Mr. Ornstein’s mother better understand the choices she is facing.

  • Medicare Advantage plan (Part C): “These programs are designed to provide full coverage — replacing traditional Medicare — and include HMOs and preferred provider organizations.” The CHA Medicare Advantage fact sheet states that “In order to join one of these plans, you have to have both Medicare Part A and Part B and you must continue to pay the Part B premiums ($93.50 in 2007). You receive all Medicare-covered benefits through the private plan chosen.” There are 5 types of plans.
    1. Medicare Health Maintenance Organizations (HMOs)
    2. Medicare Preferred Provider Organizations (PPOs)
    3. Medicare Private Fee-for-Service Plans (PFFS)
    4. Medicare Special Needs Plans (SNPs)
    5. Medicare Medical Savings Accounts (MSAs)
  • Medigap plan: “Also known as supplemental plans, these cover co-pays and deductibles that patients normally pay under Medicare.” Medigap benefit packages are labeled A through L. Each letter represents a different standardized benefit package mandated by law. According to the CHA Medigap fact sheet, all Medigap plans must offer the following benefits.
    • Co-insurance for hospital days 61-90 ($248/day in 2007) and co-insurance for the 60 lifetime reserve days ($496/day in 2007).
    • 100% of the cost of hospital care beyond 150 days covered by Medicare, up to a maximum of 365 lifetime days.
    • 20% co-insurance for Medicare approved charges after the $131 annual Part B Medicare deductible has been met.
    • The first three pints of blood in each calendar year.
  • Medicare Drug Plan (Part D): These are the Medicare prescription drug plans. Standard Part D coverage according to the CHA Medicare Part D fact sheet includes:
    • An initial $265 deductible.
    • Then, Part D covers 75% of the cost of all drugs between $265 and $2400 spent per year.
    • There is a doughnut hole between $2401-$5451 where Medicare Part D offers no coverage.
    • Above $5451, Part D pays 95% of drug costs.
    • After the consumer has spent $3850 in out of pocket costs, Part D will cover all drug costs.

There are so many options, what is a person to do?

First do some research to help you understand what Medicare will cost and what benefits will be included. The California Health Advocates is a good place to start. For instance, you can learn about Medicare Part A hospital benefits. Some of the benefits included are as follows:

Medicare Benefits for 2007
Service Medicare Pays You Pay
Days 1-60 Everything After Deductible $992 Deductible
Days 61-90 Everything After co-payment $248 per day co-payment
60 Reserve Days Everything After co-payment $496 per day co-payment
Beyond 150 Days Nothing All Costs Beyond 150 days
Source: California Health Advocates
     

The Medicare.gov website also has some tools to help you choose a plan. The Medicare Personalized Plan Search seems like a useful tool. Depending on your trust level in the federal government, you may or may not believe that the Plan Search is constructed in an unbiased manner. Since I do not have a Medicare claim number, I could not try out the service.

If you trust your state government more than the feds, you can look at California’s Department of Insurance rate comparison website at www.insurance.ca.gov.

You can also seek more information from one of the Patient Advocacy websites recommended by Dr. Richard Fogoros of GUTHealthcare.

Just like making any big purchase, you need to do some research, shop around, and try to find an unbiased source of information to help you find the ideal plan to meet your individual needs. Good luck!

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