Report Suggests Medicare Could Save Money by Providing as Little Care as Private Medicare Advantage Plans Do, While Ignoring the Harm to Beneficiaries, Overpayments to the Private Plans, and Damage to Medicare’s Solvency
On November 24, 2023, the Wall Street Journal published an op-ed titled “Nikki Haley’s Medicare Advantage” which touts the presidential hopeful’s “pitch to expand the Medicare Advantage program [which] could lower costs and improve care.” The op-ed cites a study by healthcare consulting firm Avalere, which
analyzed utilization rates in traditional Medicare versus Advantage plans. After adjusting for disease and demographics, Avalere found that fee-for-service utilization was 12% higher for skilled nursing homes and 37% higher for hospital inpatient care in 2019.
The op-ed notes that the study “doesn’t dissect why healthcare utilization is so much lower in Medicare Advantage” but suggests that private insurers’ “financial incentive to keep patients out of the hospital by improving adherence to treatments and coordination of care” is one reason.
The Journal highlights that Ms. Haley said at a recent presidential candidates’ debate that the Medicare Part A trust fund “would run dry by 2031” but observes that if utilization rates in traditional Medicare “were similar to those in the Advantage program, Avalere projects that the hospital trust fund would remain solvent until 2048.” Instead of expanding Medicare Advantage, the op-ed criticizes the Biden Administration for “trying to limit the program’s growth by restricting plan marketing and reducing payments for treating higher-risk patients under the guise of rooting out waste, fraud and abuse.”
The October 2023 Avalere report, funded by America’s Health Insurance Plans (AHIP), the national association of health insurance companies, is called “Medicare HI Trust Fund Solvency Estimates Assuming MA Utilization Levels” (also see a summary online). The report provides a comparison with traditional/original Medicare (sometimes called fee-for-service, or FFS) relating to Part A covered services in the hospital, skilled nursing facility (SNF) and home health (HH) care settings. (Note that hospice, covered under Part A, was excluded from the study because Medicare Advantage plans are not required to cover hospice services.) The report’s findings include:
- “MA vs. FFS Utilization Differences: For all Part A services analyzed, MA utilization, as measured by patient days, was lower than FFS. Between 2018 and 2019, the differences between MA and the alternative, utilization-based scenario were 36% for inpatient, 14% for SNF, and 28% for HH.
- HI Trust Fund Solvency Projection: The HI Trust Fund would remain solvent for an additional 17 years—until 2048—if FFS utilization levels were similar to MA utilization levels.”
Less Care in MA
In the AHIP/Avalere report, the industry clearly states that it covers less care in Part A care settings, and suggests that if traditional Medicare used the same utilization rates, the program would save money. While the “Limitations” section of the report notes that it does not assess “any connection between utilization and quality of care,” the implied assumption in the rest of the report is that less use of care equals better efficiency, presumably with no (or an improved) impact on health outcomes. There is no consideration given in the report that instead of efficiency, lower utilization could reflect stinting on appropriate, medically necessary care.
Over the last couple of years, inappropriate Medicare Advantage denials have received increased attention from the media and policymakers. For example, a Politico article titled “‘It was stunning’: Bipartisan anger aimed at Medicare Advantage care denials” by Robert King (Nov. 24, 2023) states that “a bipartisan group of lawmakers is increasingly concerned that insurance companies are preying on seniors, and, in some cases, denying care that would otherwise be approved by traditional Medicare.” The article outlines frustrations expressed by physicians:
A survey released earlier this month by the physicians’ trade group Medical Group Management Association found 97 percent of medical group practices said an insurer delayed or denied medically necessary care. Another 92 percent said they had hired staff specifically to process prior authorization requests. A December 2022 survey from the American Medical Association also found that 94 percent of physicians reported care delays due to prior authorization denials or processing.
Similarly, a series of articles in STAT News by Casey Ross and Bob Herman – most recently a report titled “UnitedHealth pushed employees to follow an algorithm to cut off Medicare patients’ rehab care” (Nov. 14, 2023) – highlighted how
“[t]he nation’s largest health insurance company pressured its medical staff to cut off payments for seriously ill patients in lockstep with a computer algorithm’s calculations, denying rehabilitation care for older and disabled Americans as profits soared […]”
In response to many concerns about MA plans’ inappropriate use of prior authorization, including Office of Inspector General (OIG) reports issued in 2018 and 2022 (see discussion of these reports here), in April 2023 CMS issued a final 2024 Part C &D rule that outlines new requirements for MA plans and their use of prior authorization (see the Center’s Special Report discussing these new rules here). If appropriately followed and implemented, these rules could go a long way towards curbing some of the worst MA plan behavior.
However, many provider groups are expressing concerns that MA plans do not intend to follow these new rules. As noted in a Washington Post article titled “Hospitals and doctors are fed up with Medicare Advantage” by Julie Appleby (Nov. 29, 2023):
Across the country, provider grumbling about claim denials and onerous preapproval requirements by Advantage plans is crescendoing. Some hospitals and physician practices are so fed up they’re refusing to accept the plans — even big ones like those offered by United Healthcare and Humana [emphasis in original].
Similarly, on November 16, 2023, Becker’s Hospital Review updated a previous article titled “Hospitals are dropping Medicare Advantage plans left and right: 13 updates” by Jakob Emerson, noting that “a growing number of hospitals and health systems nationwide are pushing back and dropping some or all contracts with the private plans altogether.” According to the article, “[a]mong the most commonly cited reasons are excessive prior authorization denial rates and slow payments from insurers.”
The November 29, 2023 Post article referenced above cites an American Hospital Association (AHA) letter to CMS “warning that some insurers seem intent on circumventing new rules put in place by the Biden administration aimed at reining in some prior authorization and claim denials.” Urging CMS to “conduct rigorous oversight to monitor compliance” particularly in the face of certain MA plans indicating that “they do not intend to make changes to their utilization management programs in response to the new rule”, the AHA letter states:
We are deeply concerned that these practices will result in the maintenance of the status quo where [Medicare Advantage organizations] apply their own coverage criteria that is more restrictive than Traditional Medicare proliferating the very behavior that CMS sought to address in the final rule, resulting in inappropriate denials of medically necessary care and disparities in coverage between beneficiaries in MA and those in the Traditional Medicare program [emphasis in original].
As discussed in a MedPage Today article titled “Hospitals Say Some Medicare Advantage Plans Are Skirting CMS Rules” by Cheryl Clark (Nov. 29, 2023), the Federation of American Hospitals (FAH) also sent a letter to CMS expressing similar concerns based on reports from their members. Similarly, an article published by Fierce Healthcare titled “Hospitals: UHC’s 2024 MA coverage policy ‘blatantly violates’ new CMS coverage requirements” by Dave Muoio (Nov. 22, 2023) describes how both AHA and FAH specifically “pointed to a coverage policy for inpatient hospital care distributed by UnitedHealthcare and set to go into effect Jan. 1.”
In addition to hospital groups, associations of providers in the nursing home, home health, long-term care hospital and other settings have expressed concern with MA plans’ coverage in these areas, and the need to ensure that plans follow the new prior authorization rules. The Center for Medicare Advocacy recently joined several provider organizations, including LeadingAge, American Health Care Association (AHCA), National Association for Home Care & Hospice (NAHC), American Medical Rehabilitation Providers Association (AMPRA) and The National Association of Long-Term Care Hospitals (NALTH) in sending a letter (dated November 29, 2023) to CMS requesting additional sub-regulatory guidance to clarify provisions of the final 2024 Part C &D rule that outlines new requirements for MA plans and their use of prior authorization. As noted in a McKnights Long-Term Care News article titled “Medicare Advantage plans intent on skirting new rules, providers fear” by Kimberly Marselas (Dec. 1, 2023) which describes this letter, “Aging services providers are increasingly concerned that powerful Medicare Advantage plans will not fall into line under new federal rules, which were once seen as the possible beginning of a tide change for beneficiary rights.”
While the insurance industry touts in the AHIP/Avalere report that it provides less care in Medicare Part A settings than traditional Medicare, it is these very care settings that have received some of the most attention recently concerning inappropriate MA plan denials and premature terminations of care. At best, the assumption that less utilization equates with more efficient and better care is suspect. At worst, the industry is suggesting that traditional Medicare withhold medically necessary care, to the detriment of Medicare beneficiaries.
When touting the potential savings to traditional Medicare if the program restricted care to the same degree that MA plans do, the AHIP/Avalere report does not point out that none of these “savings” achieved by MA plans due to providing less care accrue to the Medicare program itself and instead contribute to industry profit. As enrollment in MA continues to grow, and the pool of traditional Medicare beneficiaries becomes smaller, such potential savings endorsed by the report shrinks at the same time that other costs to the Medicare program increase due to increased enrollment in MA plans.
In addition to burdensome prior authorization employed by MA plans, wasteful overpayments to MA have also gained increased attention over the last couple of years. As noted by KFF in a 2021 report,
Medicare spending is higher and growing faster per person for beneficiaries in Medicare Advantage than in traditional Medicare” and the MA program “has never generated savings relative to traditional Medicare. In fact, the opposite is true.
Researchers continue to shed light on the scale of such overpayments. For example, as discussed in previous CMA Alerts, including this one, in July 2023 the Committee for a Responsible Federal Budget (CRFB) posted research suggesting that MA plans might be overpaid by between $180 billion and $1.6 trillion over the next decade. As discussed in a CMA Alert (Oct 5, 2023), more recently, Physicians for a National Health Program (PNHP) released a report stating that MA plans are overpaid by as much as $140 billion a year.
Perhaps understandably, these massive and wasteful overpayments, as well as the positive impact on the Medicare Trust Fund if they were reined in, get no mention in this report funded by the insurance industry.
Given the pressures facing the Medicare Trust Fund “and renewed public focus on addressing it”, the AHIP/Avalere report notes that one of its study objectives is “to assess how changes in FFS utilization may prolong HI Trust Fund solvency.” It is not too much of a stretch to assume that an unspoken objective of the study is to also distract attention from wasteful overpayments to MA plans, which are greatly exacerbating financial challenges for the Medicare program. Further, given all of the evidence-based concern that MA plans often inappropriately stint on necessary care in the very settings in which they proudly promote providing less care, policymakers should not be swayed by diversionary industry pronouncements. In short, this report reinforces the fact that we (taxpayers, through the Medicare program) pay more to private Medicare Advantage plans to provide less care – harming Medicare beneficiaries, American taxpayers, and Medicare’s financial solvency.
December 7, 2023 – D. Lipschutz