By MICHAEL ADELBERG and KRISTIN
RODRIGUEZ
APRIL 3, 2019
Nearly a
quarter century ago, then Speaker of the House Newt Gingrich said this about
the original Medicare program:
“We believe it’s going to wither on the vine because we think people are
voluntarily going to leave it — voluntarily.”
Gingrich
argued that original Medicare — based on a 1960s-style fee-for-service benefit
package with a confusing set of deductibles, co-insurance, and copays — was
stuck in the past. He saw a day when Medicare-contracted private health plans
would prove so attractive that Medicare beneficiaries would have to choose
them.
It’s
taken a generation, but Gingrich is on the verge of being right about Medicare.
Medicare
began experimenting with managed care as an alternative to the original program
in the 1970s, and annually contracted health plans — called Medicare+Choice —
were made a permanent part of the program in the 1990s. Because of funding reductions,
it initially floundered.
That
changed in 2003 with the passage of the Medicare Prescription Drug, Improvement, and
Modernization Act, which renamed the program Medicare Advantage,
raised payment rates, and added risk adjustment to the payment methodology.
Leading managed care companies, such as UnitedHealth Group, Humana, Aetna, and
Blue Cross Blue Shield companies, began marketing Medicare Advantage products
every fall. So did dozens of smaller and health system-owned health plans.
Enrollment in these plans has increased every year since then. Today, more than
22 million beneficiaries choose Medicare Advantage,
about 35 percent of all people with Medicare, up from about 11 million people a
decade ago. This has occurred despite a gradual phase down in funding put in
place by the Affordable Care Act.
In 2019,
Medicare Advantage plans stepped up their coverage to include the delivery of
meals, rides to physician appointments and pharmacies, home safety
improvements, and a host of other new benefits. As described in a new report on Medicare Advantage
plans that one of us (M.A.) co-authored, 153 Medicare Advantage
plans are now leveraging new Trump administration guidance and experimenting
with 842 “flex benefits” this year. These benefits fall into two broad
categories: reducing costs to encourage members to receive preventive care,
such as free primary and podiatry care for people with diabetes; and
non-medical benefits, such as home-delivered meals following a hospital
discharge, home safety interventions, and non-skilled in-home caregiving.
Medicare
beneficiaries select Medicare Advantage for a variety of reasons.
These include catastrophic cost protection, care management programs, and a
range of mainly health-related supplemental benefits such as dental checkups,
eyeglasses, hearing aids, over-the-counter drugs, and gym memberships. The
trade-off for these extras is limited choice of providers and managed care
tools like prior authorization. These limitations put off some Medicare
beneficiaries, but have not dampened the high overall satisfaction with
Medicare Advantage or its continued growth.
Medicare
Advantage’s competitive edge over original Medicare will take another step
forward in 2020 when plans are expected to gain additional flexibilities in
offering non-medical benefits for people with chronic diseases. The next wave of
new benefits can include anything that the Centers for Medicare and Medicaid
Services deems “has a
reasonable expectation of improving or maintaining the health or overall
function” of enrollees with chronic diseases. While CMS has not yet offered its
final guidance, this will likely include meals, transportation, pest removal,
and activities that combat social isolation and depression, which could include
companionship services and pet therapy.
Some of
the brightest minds in managed care are working to determine whether relatively
inexpensive, newly permissible benefits like these will pay for themselves by
reducing the number of expensive medical procedures. Actuaries at Wakely Consulting, for
example, have modeled the value of a falls reduction benefit. Using Medicare
claims data, they determined that injury-causing falls are associated with
spikes in medical costs that average about $10,000 compared to pre-fall costs.
So an intervention that reduces falls by even 10 percent would likely pay for
itself if it costs less than $1,000 per fall-prone member receiving the
service. Hiring a handyman for a couple hundred dollars to install grip bars in
a shower or modify cabinetry would be a bargain.
How does
original Medicare stack up in comparison to Medicare Advantage? The Affordable
Care Act and the Medicare Access and CHIP
Reauthorization Act(MACRA) introduced value-based reimbursement
reforms into original Medicare. These may make the program a more efficient
payer, but they do not necessarily improve benefits for
Medicare beneficiaries. Medicare Supplement Insurance (Medigap) continues to be
purchased by roughly 13 million Medicare beneficiaries. It plugs gaps and
simplifies original Medicare’s idiosyncratic coverage, but it is too expensive
for lower-income beneficiaries. In addition, state and federal laws prevent
Medigap from keeping up with
Medicare Advantage.
A 2017 report by
the National Association of Insurance Commissioners demonstrates that only a
handful of states permit Medigap carriers to offer any “innovative” benefits.
And the modest flexibilities permitted — such as eye exams — pale in comparison
to the richness and diversity of Medicare Advantage benefits.
In subtle
and unsubtle ways, the Trump administration has seeded the ground for massive
gains in Medicare Advantage enrollment. These include loosened
restrictions on marketing Medicare Advantage plans, new consumer tools that
accentuate the advantages of these plans, greater use of telehealth than
permitted in original Medicare, the elimination of “meaningful
difference” tests that limit the number of Medicare Advantage
plans in a given market, and extra time for plan sponsors to secure a provider
network. Meanwhile, the administration has finalized a regulation that may
substantially lessen the number of accountable care
organizations participating in original Medicare — the original
Medicare reform with the greatest potential to align providers in reimbursement
systems outside of Medicare Advantage.
Congress
has also quietly added tools to Medicare Advantage that aren’t available in
original Medicare. A little-noticed MACRA provision will remove two of the most popular Medigap plans from
the market in 2020, further weakening its value proposition versus Medicare
Advantage. This is not an accident: Many conservatives have long disliked
original Medicare’s centralized pay schedules and the perverse incentives of
fee-for-service medical care. And many liberals are willing to strengthen
Medicare Advantage if that’s the only way to offer more generous health care
coverage to seniors.
Intentionally
or not, Congress and various administrations have created two Medicare
programs: the original fee-for-service program with rules and coverage that the
private market largely abandoned decades ago, and a managed care program that
has just benefited from another set of favorable legislative and regulatory
tweaks. Maybe it is unfair that policy makers are favoring Medicare Advantage.
But if this is the only way to deliver modern and more generous health benefits
to Medicare beneficiaries, then a thumb on the scale is better than denying
beneficiaries access to 21st-century benefits.
It’s no
wonder that Medicare beneficiaries are voluntarily leaving original Medicare —
voluntarily.
Michael
Adelberg is a principal at Faegre
Baker Daniels Consulting. Kristin Rodriguez is the chief
knowledge officer for the Health Plan Alliance.
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