Time to Increase Your MA IQ
Thursday, November 16, 2017 | Larry Sobal
A growing number of Medicare beneficiaries are opting out of the government-run Medicare program and choosing one of the private Medicare Advantage (MA) alternatives. MA plans have played an increasingly larger role in the Medicare program over the last 10 years as the share of Medicare beneficiaries enrolled in MA has continued to climb. Currently, just under 35% of Medicare beneficiaries, or about 20 million Americans, are enrolled in MA plans. Some experts, particularly large insurers, are banking on continued MA enrollment growth and predict MA participation could quickly grow to 50% of all Medicare enrollees.
MA participation could quickly grow to 50% of all Medicare enrollees.
That type of growth would typically attract a lot of attention, but I have found an alarming number of organizations and physicians who are very uninformed about the MA program. Unfortunately, this ignorance may come at a high cost, either through provider-owned health plans losing money or health systems and their physicians losing out on incentive bonuses offered by MA.
Let’s get informed—here are some MA basics. Since the 1970s, Medicare beneficiaries have had the option to receive their Medicare benefits through private health plans, mainly HMOs, as an alternative to original Medicare parts A and B. The Balanced Budget Act of 1997 named Medicare’s managed care program Medicare+ Choice, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 renamed it Medicare Advantage.
- Since the ACA was passed in 2010, MA enrollment has grown 71 percent.
- At least 40 percent of Medicare beneficiaries are enrolled in Medicare private plans in six states: CA, FL, HI, MN, OR, and PA. In contrast, fewer than 20 percent of Medicare beneficiaries are enrolled in MA plans in 13 states, plus the District of Columbia.
- As has been the case each year since 2007, 63% of MA enrollees are in HMOs. One-third of enrollees are in PPOs – with more in local PPOs (26%) than regional PPOs (7%) – and the remainder are in Private Fee-For Service (PFFS) plans (1%) and other types of plans (3%), including cost plans and Medicare Medical Savings Accounts (MSAs).
- MA participation can be quite high in certain locations: Allegheny, PA; Monroe, NY; and Miami-Dade, FL all have MA participation exceeding 60% of all eligible Medicare participants.
- MA enrollment tends to be highly concentrated among a small number of firms. In 2017, UnitedHealthcare, Humana, and the BCBS affiliates (including Anthem BCBS plans) together account for 57% of national MA enrollment. Eight firms or affiliates accounted for 77% of the market; they include UnitedHealthcare, Humana, Blue Cross Blue Shield (BCBS) affiliated plans (excluding Anthem), Kaiser Permanente, Aetna, Anthem, Cigna, and Wellcare.
- In 17 states, one MA administrator has more than half of all MA enrollment.
- Although large, investor-owned insurers continue to dominate the market share of providing MA plans, with UnitedHealth Group being the largest, provider-owned health plans are increasingly becoming MA insurers, with nearly 60% of new MA plans sponsored by a health system.
What is it that makes MA plans attractive to Medicare eligible seniors?
- Over 95% of MA plans offer vision, dental or hearing benefits. Eligible individuals can usually choose between multiple MA plan designs, with more than 90% of MA members having a choice of a plan with no monthly premium.
- MA enrollees are responsible for paying the Part B premium, in addition to any premium charged by the plan; in 2017, as in prior years, most Medicare beneficiaries (81%) had a choice of at least one “zero premium” plan that charges no additional premium for coverage of Medicare Part A, B, and D benefits, other than the monthly Part B premium.
- The average MA enrollee who chooses a plan with prescription drug benefits paid a monthly premium of about $36 in 2017, approximately $1 per month less than in 2016.
- Monthly premiums can vary widely, with weighted average monthly premiums for MA plans that offer prescription drugs being $6 per month in Florida to $131 in Minnesota.
- MA plans are required to provide all Medicare covered services, and have some flexibility in setting cost-sharing for specific Medicare-covered services. Since 2011, and unlike traditional Medicare, MA plans have been required to limit enrollees’ out-of-pocket expenditures for Part A and B in-network services to no more than $6,700 annually.
This CMS summary of MA plans offers additional information.
Conclusion: for the young and healthy senior, MA plans will be an attractive choice. And with more than 10,000 baby boomers turning 65 every day, the potential growth is significant.
What I find most interesting is that with all the emphasis on moving from volume to value, MA has already been operating on a capitated basis for many years since Medicare pays the administrating health plan a set amount every month for each MA member. In other words, any health plan with a MA population is taking all the risk! And since 2000, CMS pays the MA plan risk-adjusted premiums based on the risk pool served by that plan (or, for new plans, in that plan’s service area) in a prior year. Sure it has its flaws, but it is a pretty progressive payment model that should be a great incubator for learning how to manage populations for a fixed fee.
If you are an accomplished MA plan contracted operator (private or provider-owned), you can do quite well financially in the MA program. But many organizations are still not optimizing what MA has to offer them. Here’s an example. The premium payments made by CMS to the MA-sponsoring health plan are 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 (HCCs)—to develop a measure of their expected relative risk for covered MA spending. Typically over 50% of the payment to the plan is based on the HCCs, so it can easily mean a difference of thousands of dollars a year for each patient.
In addition, if you are a MA plan administrator, you need to be an astute cost estimator to successfully “bid” for your MA payments for the coming year. In June of every year, each MA plan is required to submit data to CMS on the costs to the plan in the previous calendar year of providing its enrollees with the same Medicare benefits (risk-adjusted to control for beneficiaries’ health status) provided by traditional Medicare. This amount is then trended forward to the following year by the projected inflation in Medicare costs as determined by CMS. CMS uses these data, termed the plan’s “bid,” to calculate the amount of Medicare payments to the plan in the following calendar year.
Each MA plan’s bid is then compared with a MA county-level benchmark payment amount set by CMS as the projected average cost of benefits in traditional Medicare in the county in the following year, as provided by the Medicare statute. Each MA plan receives a payment rate equal to: 1) the plan’s bid plus a “rebate” that is equal to a proportion of the difference between the county benchmark amount and the plan’s bid, if the plan’s bid is less than the county benchmark amount; or 2) the benchmark payment amount for the county, if the plan’s bid is not less than the benchmark amount.
Therefore, it is in the best interest of a provider-owned MA plan to work closely with its physicians and hospitals to accurately document patient conditions to impact HCCs, which can dramatically impact how much Medicare pays the Plan Administrator to care for that patient. Or if the MA plan is operated by a national payer, its contract will likely include attractive incentives to reward providers for capturing that information fully and correctly. However, I repeatedly see organizations that are not aware of these incentives and not working to educate their clinicians and their staff on the importance of HCCs. This not only has negative financial implications for MA, but HCCs are also the basis for how other plans, including Medicare, assess the relative health risk of your patient population. Erroneously low HCCs will cause others to assume that your population is healthier than it really is.
What amazes me is how poorly understood all of this is and how much money is being left on the table by health plans and providers alike. I’m talking millions of dollars of lost opportunity in some cases. And in an era when reimbursement and margins are being squeezed, not being rewarded for the work that was actually done is a painful form of ignorance.
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Larry Sobal is Executive Vice President and a Senior Consultant at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and health insurance. Larry consults, writes and presents on topics relevant to transforming physician practices and health systems. His weekly blog post comes out on Thursdays and can be accessed at www.medaxiom.com.
About the Author
Larry Sobal, MBA, MHA, is CEO of a yet-to-be-named cardiology practice which is transitioning from employment to an independent physician group effective January 1, 2019. He has a 37-year background as a senior executive in physician practices, consulting, medical group leadership, hospital leadership and health insurance.
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