The Center has previously written about how legislative and regulatory policy changes are tipping the scales in favor of Medicare Advantage (MA) over traditional Medicare. For example, coverage expansions such as the ability to provide new supplemental benefits have been advanced in MA but not in traditional Medicare. In recent years, this has been exacerbated by a concerted effort on the part of the Medicare program to steer beneficiaries toward enrollment in MA plans rather than providing objective, neutral information about coverage options.
At the same time, the Medicare program has been spending more money per MA plan enrollee than on those in traditional Medicare, for decidedly mixed outcomes. Overpayments to MA plans could instead be used to expand benefits in traditional Medicare – which, by default, would also apply to MA plans.
A recent Kaiser Family Foundation report entitled “Financial Performance of Medicare Advantage, Individual, and Group Health Insurance Markets” (August 2019), “examines and compares the financial performance of insurers in the Medicare Advantage, individual, and fully-insured group markets” including an analysis of “how insurers’ gross margins vary across the three markets, over time, and among insurers. Gross margins are the difference between premiums collected and medical expenses and do not account for administrative expenses.”
The report found that “[a]nnual gross margins in the Medicare Advantage market averaged $1,608 per covered person between 2016 and 2018, about double the margins in the individual and group markets” that “[w]hen aggregated across all plans in this analysis, annual gross margins sum” to $23.9 billion for Medicare Advantage for 2016-2018 [emphasis added].
The report notes that the “federal government makes risk-adjusted payments (higher payments for sicker enrollees and lower payments for healthier enrollees) to plans (averaging $11,545 per enrollee in 2019) to cover the preponderance of the cost of Medicare benefits for plan enrollees, with some plans charging enrollees an additional premium. […] In 2019, the federal payments to Medicare Advantage plans are about the same as what it would cost to cover the same people under traditional Medicare. When health risk coding differences are fully taken into account, payments to plans are 1-2% higher than traditional Medicare. Selection bias has been estimated to result in annual spending that is $1,253 lower for each Medicare Advantage enrollee compared to similar people who remain in traditional Medicare, suggesting that pegging payments to the costs of people in traditional Medicare overpays plans” [emphasis added]. (Note that in May 2019 Kaiser issued a report that suggests this conclusion – see, e.g., our previous Alert.)
As we noted in another Alert, according to a July 2019 Kaiser Health News article, MA plans have overcharged the Medicare program and American taxpayers by nearly $30 billion dollars in the last three years alone, in part, by manipulating risk scores. The Center asserts that recovering these funds – and making the payment system more accurate – should be a priority for policymakers, particularly those who focus on Medicare programmatic spending.
While the Affordable Care Act significantly reined in Medicare Advantage overpayments, the August 2019 Kaiser report states that “[t]he increase in average gross margins in the past few years has primarily been due to a sharp increase in the size and number of plans receiving bonus payments for high quality ratings, with total bonus payments more than doubling between 2015 and 2018.”
In 2019, when more than two-thirds of Medicare Advantage enrollees are in plans with quality ratings of 4 or more stars that qualify for bonus payments, questions should be raised about the utility of, and benefits derived from, a system that rewards most plans for quality.
At the very least, there must be payment parity between traditional Medicare and the MA program. As we have stated elsewhere, wasteful spending on MA should be reinvested into the Medicare program to the benefit of all enrollees, not just those who choose to enroll in private plans.
What have MA enrollees gotten in return for higher spending on the MA program? As noted in a 2018 New England Journal of Medicine article, discussed in a previous Alert, MA plans “tend to score better than traditional Medicare on some quality metrics, but the results are mixed and data are limited;” while MA plans “generally score better…on preventive services and screening measures” and “appear to use post-acute care less intensely with better outcomes…[s]omewhat counterintuitively, there seems to be no difference between Medicare and [MA] plans with respect to care coordination, receipt of needed prescriptions by beneficiaries, and adherence rates for diabetes and cholesterol medications.” Further, “[l]ittle is known about the quality of care for [MA] enrollees with serious illnesses” but “[s]everal studies have flagged concerns about the quality of care received by high-need, high-cost enrollees, on the basis of disenrollment rates and other measures.” In other words, at best, outcomes have been mixed.
Senate “Dear Colleague” Letter Promotes Traditional Medicare
In honor of the 54th anniversary of the passage of the Medicare program, Senators Sherrod Brown, Richard Blumenthal and Debbie Stabenow sent a Dear Colleague letter to their fellow senators inviting them to “advance legislation that strengthens traditional Medicare.”
As stated in the letter, “[i]t is time to extend the same out-of-pocket limit and guarantee issue protections granted to those with private insurance under the Affordable Care Act (ACA) to traditional Medicare, and ensure guaranteed issue of Medigap policies for all Medicare eligible individuals. Benefits like hearing, vision, and dental should be a fundamental part of the program – not extra benefits at extra out-of-pocket cost.”
“For years, Congress has acted to strengthen and add benefits to the Medicare Advantage program, neglecting to take the same opportunities to strengthen traditional Medicare, on which the majority of people with Medicare across the country […] depend. We invite you to work with us to modernize and strengthen the entire Medicare program for our nation’s older adults and inviduals with disabilities.”
The Center could not agree more, and urges Congress to take up these and other bills that would improve the Medicare program overall and help level the playing field with the MA program.
Included in the list of bills is the Medigap Consumer Protection Act of 2019 (S.2428), recently introduced by Senator Brown. Among other things, Senator Brown’s bill would expand guaranteed issue of Medigap policies to:
- Individuals with Medicare under age 65;
- Individuals enrolled in Medicare Advantage who choose to switch to fee-for-service Medicare after 12 months of being enrolled in an MA plan;
- Individuals enrolled in Medicare who qualify for Medicaid through a spend down;
- Individuals enrolled in Medicare who lose Medicaid coverage;
- Medicare eligible individuals who receive military retiree benefits who lose access to health care services because the uniformed services facility where they receive care closes, no longer offers services, or because the individual relocates; and
- Medicare eligible individuals who drop COBRA coverage, either by actions of the insured person, the plan, or the employer.
This month, the publication INQUIRY: The Journal of Health Care Organization, Provision, and Financing published an article submitted by the Center for Medicare Advocacy entitled “Commentary: Don’t Further Privatize Medicare” (August 2019).
As summarized in the Abstract, “The Medicare program is quietly becoming privatized through increasing enrollment in Medicare Advantage (MA) plans, even though MA has not lived up to its promise of delivering better care at lower cost. Policymakers must reverse this trend and ensure parity between traditional Medicare and MA rather than encourage it through legislation that only benefits MA. Furthermore, as discussions of expanding health insurance coverage through Medicare intensify, policymakers should explore what version of Medicare they wish to expand.”
We urge policymakers to follow the lead of Senators Brown, Blumenthal and Stabenow and start to correct the imbalance between MA and traditional Medicare.