Recently, Kaiser Family Foundation (KFF) issued an update on Medicare Advantage (MA) plan enrollment trends vs traditional FFS Medicare enrollment. In 2022, nearly half (48%) of all eligible Medicare beneficiaries are enrolled in MA plans, more than double the level in 2007. This represents 28.4 million people and $427 billion (55%) of Medicare spending (net of premiums.) The Congressional Budget Office (CBO) estimates MA enrollment will reach a 61% share by 2032. MA enrollment is concentrated among roughly 7 insurers with 2 companies, UnitedHealthcare and Humana, accounting for 46% of the total 2022 MA enrollment. But are these plans better for patients and their health outcomes?
Overall satisfaction with MA plans is relatively high. Insurers use celebrities to promote MA plans and benefits like no- or low-cost premiums, included dental, vision, hearing aids, gym memberships, prescriptions savings, and even dollars added back into Social Security checks to entice members. According to a 2022 J.D. Power survey, satisfaction rose 3 points from last year, and up 15 points over 5 years, with the highest ratings for Kaiser Foundation Health Plan, Humana, and Highmark.
On the other hand, MA plans employ utilization management to deliver low premiums and savings to Medicare, which may lead to dissatisfaction. While MA enrollees do save money on premiums, they generally exchange some access vs traditional coverage, potentially leading to dissatisfaction. This spring, OIG reported examples of MA plans denying/delaying approval for services even though they were covered under Medicare. Among PA requests that MA plans denied, 13% met Medicare coverage rules. The federally funded Health Insurance Counseling & Advocacy Program noted increased complaints regarding MA protocols to deny/delay care and aggressive sales brokers. CMS has also seen complaints rise from 15,497 in 2020 to 39,617 in 2021, excluding December. To address some of the concerns raised, CMS recently announced that as of January 2023 all television ads for MA plans must be approved prior to airing, and existing ads will be reviewed to ensure they are not confusing, misleading, or inaccurate.
While Medicare Advantage was designed to create savings for Medicare, MedPAC estimated 2021 payments per MA enrollee were 104% of spending in traditional Medicare. Lack of savings may be driven by the bid process and risk adjustment programs, which has led to increased scrutiny. CMS pays plans a set amount per enrollee determined through an annual bid process where plans estimate their cost to deliver the Medicare Part A/B services to an average beneficiary. Bids are compared to a benchmark. Plans bidding below benchmark receive a rebate, with adjustments for the quality Stars and risk programs. Rebates can be used to offset cost shares/premiums, fund services, and even cover some administrative costs or drop to the profit line. Plans can use limited networks and management tools as well, which they do as 99% of MA plans require PA for services. Lack of health cost reductions in MA may be driven in part by the rebate increase from plans bidding below benchmark and increased payments from the Stars quality and risk adjustment programs. Further, MedPAC noted more comprehensive coding of diagnoses in MA plans through the risk adjustment program, which increased risk scores 9.1% relative to traditional Medicare in 2019, increasing plan payments. This diagnosis coding and billing has faced scrutiny with several insurers called out according to a recent New York Times article. It noted some MA plans may have overbilled Medicare between $12 and $25 billion in 2020, and
MA plans may earn twice the profit as other types of plans. Plans defend their approach by countering that CMS rules are vague.
Future implications: CMS and the MA plans
· MA plans have not provided significant savings vs traditional Medicare; in fact spending is higher per enrollee. The forecasted growth to that 61% share will lead to higher Medicare spending and increased Part B premiums for all Medicare beneficiaries, including those not in an MA plan. This may create disparities in care for traditional Medicare beneficiaries
· CMS has yet to address ambiguities in the program and has initiated a Stars quality methodology change, which may impact plans in the near term. To protect the Medicare Trust Funds, CMS may need to revisit the bid/rebate and risk-adjustment features to potentially share in some of the savings commercial insurers appear to be reaping
Future implications: beneficiaries
· Satisfaction is high, yet trade-offs are real, with complaints rising. Saving money on premiums, cost shares, and having OOP max limitations, while getting additional services, is appealing. Yet, if access to care is not available when needed, it can impact outcomes and potentially create 2 service classes. Beneficiaries need education on how to evaluate whether an MA plan or traditional Medicare with a supplement is the better option to meet their care needs
Future implications: pharmaceutical manufacturers
· As MA plan enrollments swell, commercial payers will face increasing pressure to share some of their profits back with CMS. Additionally, payers will see new pressure on their bottom line from other areas like the Inflation Reduction Act. Plans may react by stepping up negotiations with drug makers to provide additional contracted savings
KFF. Medicare Advantage in 2022: enrollment update and key trends. August 25, 2022. Accessed October 14, 2022. https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/
KFF. Medicare Advantage in 2022: premiums, out-of-pocket limits, cost sharing, supplemental benefits, prior authorization, and star ratings. August 25, 2022. Accessed October 14, 2022. https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-premiums-out-of-pocket-limits-cost-sharing-supplemental-benefits-prior-authorization-and-star-ratings/
Abelson R, Sanger-Katz M. ‘The cash monster was insatiable’: how insurers exploited Medicare for billions. The New York Times. October 8, 2022. Accessed November 16, 2022. https://www.nytimes.com/2022/10/08/upshot/medicare-advantage-fraud-allegations.html
Clark C. The Medicare Advantage trade-off: saving money, losing access. MedPage Today. October 13, 2022. Accessed October 14, 2022. https://www.medpagetoday.com/special-reports/exclusives/101213?utm_source=Sailthru&utm_medium=email&utm_campaign=Daily%20Headlines%20Evening%202022-10-16&utm_term=NL_Daily_DHE_dual-gmail-definition
KFF. Higher and faster growing spending per Medicare Advantage enrollee adds to Medicare’s solvency and affordability challenges. August 17, 2021. Accessed October 14, 2022. https://www.kff.org/medicare/issue-brief/higher-and-faster-growing-spending-per-medicare-advantage-enrollee-adds-to-medicares-solvency-and-affordability-challenges/
Customers perceive shortfall in Medicare Advantage plan coverage of mental health and substance abuse services, J.D. Power finds. News release. J.D. Power. August 18, 2022. Accessed October 14, 2022. https://www.jdpower.com/business/press-releases/2022-us-medicare-advantage-study
King R. CMS to restrict Medicare Advantage TV ads, scrutinize brokers and agents amid high complaints. Fierce Healthcare. October 26, 2022. Accessed November 10, 2022. https://www.fiercehealthcare.com/payers/cms-restrict-medicare-advantage-tv-ads-scrutinize-brokers-and-agents-amid-high-complaints