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Path of Medicare Advantage changing
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As Medicare Advantage gains traction over traditional Medicare, there are several important potential issues that demand oversight, according to a paper published in The New England Journal of Medicine.
“The emerging role of Medicare Advantage, the private-plan alternative to traditional Medicare, is gradually changing the Medicare program in ways that have important implications for beneficiaries, providers and spending,” Patricia Neuman, ScD, and Gretchen A. Jacobson, PhD, both from Kaiser Family Foundation, wrote.
Enrollment in Medicare Advantage plans has increased threefold since 2005, and now includes approximately 20 million beneficiaries, according to Neuman and Jacobson. If enrollment continues to grow as expected, Medicare may change drastically in the future and function like a marketplace of private plans rather than a national insurance program, they wrote.
“This may or may not be the program that people envision when they talk about Medicare for All,” they wrote.
Generally, both Democratic and Republican policymakers support Medicare Advantage plans because their constituents favor them, according to Neuman and Jacobson. Medicare Advantage offers enrollees extra benefits, financial protection and a convenient “one-stop shop” for all coverage, which have attracted many seniors to enroll in the plan, they wrote. New health insurers are expanding into the Medicare Advantage market, indicating that it is one of the more lucrative health insurance products, they wrote.
However, these benefits to insurers and enrollees come “at a cost to taxpayers and may reemerge as an issue down the road, when federal spending becomes a more pressing policy concern,” according to Neuman and Jacobson.
Providing stronger financial protections and out-of-pocket limits for beneficiaries in Medicare Advantage vs. traditional Medicare may prove to be an equity issue as out-of-pocket spending rises, they wrote.
Neuman and Jacobson also noted concerns that Medicare Advantage varies widely across plans and lacks data for more vulnerable patients. An extremely high disenrollment rate among higher-need patients also warrants attention, they wrote.
“Still to be determined is how the growing role of private insurance in Medicare, and the diminishing role of traditional Medicare, is likely to affect beneficiaries’ out-of-pocket spending, satisfaction and health outcomes over time,” Neuman and Jacobson wrote. – by Alaina Tedesco
Disclosures: The authors report no relevant financial disclosures.
Perspective
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Alan Dow, MD, MSHA
As Neuman and Jacobson compare and contrast traditional Medicare and Medicare Advantage in their New England Journal of Medicine article “Medicare Advantage Checkup,” it is worth highlighting several themes from the article and how Medicare Advantage may help us with the challenges in front of us in health care.
The major benefit of Medicare Advantage plans is that they move insurance away from the federal government and into the private sector. The process of paying for care becomes less politicized, more innovative, and, most importantly, more focused on controlling costs. With deficits ballooning and health care spending now being about 25% of the federal budget, controlling costs is an imperative and the insulation of Medicare Advantage from political pressure relative to traditional Medicare is a distinct improvement in the financing of care.
An example of this is pharmaceutical spending. Drug costs now account for more than one-sixth of health care spending and have more than tripled over the past 20 years. Part of the reason for this price increase is that both traditional Medicare and Medicare Advantage have not been allowed to negotiate drug prices like other private insurers and government payers in other countries can. The Trump administration recently announced that they will allow Medicare Advantage — but not traditional Medicare — to negotiate these costs. If enacted, this will be boon to the ability of Medicare Advantage plans to control costs and further their competitive edge over traditional Medicare.
A similar issue is negotiating prices for hospital-based care. Consolidation in the hospital industry has driven up prices. Advantage plans are better equipped to negotiate lower prices with hospitals because they can threaten to exclude a hospital from their coverage network. Traditional Medicare does not have this capacity and instead relies on a centralized and highly-lobbied process for setting reimbursement rates across all facilities.
Medicare Advantage may also have an important benefit for patients and society beyond just controlling costs. Traditional employee-sponsored insurance has less incentive to invest in wellness and prevention than Medicare Advantage plans. Individuals with employee-sponsored insurance often change insurance (like enrolling in Medicare) before they get sick and need high-cost services. These insurers just need to keep individuals and their families healthy as long as the worker is employed. While some insurers laudably do invest in wellness and prevention, the business case for these activities is not always straightforward.
But people covered by Medicare Advantage are different. Most are over 65 and, by definition, closer to old age and its associated significant illnesses than the younger versions of themselves. In addition, more than 90% of Medicare Advantage enrollees stay on the same plan year over year. These Medicare Advantage plans will eventually be responsible for these higher costs. This provides an incentive for Medicare plans to invest in wellness and prevention. As noted in the article, compared to traditional Medicare, Medicare Advantage plans have been innovative at developing new approaches to improve and maintain health.
This flipside of this potential benefit is also the biggest risk of Medicare Advantage plans. In an effort to control costs, they may try to limit expensive care by restricting patient access or even “encouraging” them to transition to traditional Medicare. These actions can be bad for patients and the system overall and should be the source of tension between the federal government and these plans.
The role of the federal government, as charged by the creation of Medicare, is to ensure that all enrollees get the care they need as they age. The public-private partnership between the CMS and Medicare Advantage plans has proven to spur innovation and limit costs. With the challenges ahead of us in paying for health care and maintaining health, this collaboration is our best chance to meet our aspirations of a healthy and economically sound society.
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