By Alex Spanko | May
7, 2019
Conventional wisdom holds that Medicare
Advantage saves the government money by bringing a private-sector insurer’s
focus on efficiency to the more freewheeling federal Medicare program.
But that progress may have way more to do with
the types of people who elect Medicare Advantage coverage — and much less to do
with the cost-cutting strategies of insurers, according to a new study from the Kaiser
Family Foundation.
“This study suggests that differences in
health care use, and spending, are evident before beneficiaries decided to
enroll in Medicare Advantage plans or remain in traditional Medicare, raising
questions about the extent to which plans are actually lowering spending or
managing care,” the authors — Kaiser’s Gretchen Jacobson, Tricia Neuman, and
Anthony Damico — wrote in their findings, published Tuesday.
Using 2015 and 2016 Medicare data, the team
looked at the differences in spending between traditional Medicare and MA plans
across a variety of demographics and conditions. Overall, each person who
switched to a managed plan in 2016 had actually cost the government $1,253 less
than the average Medicare beneficiary in 2015 — meaning they were already a
lower-cost option regardless of their Medicare status. The effect holds for
beneficiaries with specific health conditions, including diabetes, asthma, and
even breast or prostate cancer, the researchers found.
The observation works in the other direction
as well. The Kaiser team took a dive into so-called dual-eligible
beneficiaries, or those who qualify for both Medicare and Medicaid. This
population represents a costly problem for the government and insurers to
solve, as dual-eligibles generally have multiple chronic conditions and more
precarious living circumstances.
The highest-cost dual-eligibles were more
likely to stay in traditional Medicare between 2015 and 2016, Kaiser found,
thus helping to reinforce the selection-bias effect of reduced Medicare
Advantage spending; lower-cost partial dual-eligibles were more likely to opt
into MA.
“The results suggest that favorable
self-selection into Medicare Advantage plans is occurring, even among
traditional Medicare beneficiaries with similar health conditions,” the team
concluded. “The findings raise questions as to why beneficiaries who are higher
utilizers are less likely to go into Medicare Advantage and instead remain in
traditional Medicare.”
The answer to that question could have
significant ramifications for the government and providers. If Medicare
Advantage continues to serve relatively healthier enrollees who cost the
government less money than their Medicare counterparts, the team argues, the
Centers for Medicare & Medicaid Services (CMS) could be overestimating
expected MA costs to the tune of billions.
“To illustrate, if the difference in average
Medicare spending ($1,253) applied to just 10% of all Medicare Advantage
enrollees in 2016, or 1.8 million enrollees, it would amount to more than $2
billion in excess spending in one year alone,” the group noted.
There were some regional wrinkles in the
analysis, however. In multiple large markets across the country, higher-cost
Medicare beneficiaries were the ones electing to switch to Medicare Advantage —
including Pittsburgh, Buffalo, Baltimore, and Charlotte, N.C.
Source: Kaiser Family
Foundation
The Kaiser researchers also identified a
potential opportunity for Institutional Special Needs Plans (I-SNPs), or
special Medicare Advantage plans designed to cover residents in nursing homes
and other institutional settings. Nursing facility residents who elected to
switch to MA in 2016 actually cost traditional Medicare $1,825 less than
average in the previous year, illustrating a potential reason why the plans
have risen in popularity in recent years.
“If higher-cost nursing home residents are
remaining in traditional Medicare while lower-cost residents are moving to
Medicare Advantage plans, it could make it easier for Medicare Advantage plans
serving the nursing home population to be profitable,” they wrote.
Alex Spanko covers the skilled nursing industry for Aging
Media Network, with a particular focus on the intersection of finance and
policy. Outside of work, he reads nonfiction, experiments in the kitchen,
enjoys pretty much any type of whiskey or scotch, and yells at Mets games from
his couch — often all at once.
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