Medicare Beneficiaries More Likely to Switch Away from Managed Care

In 2003, Congress passed legislation constituting the largest overhaul of the Medicare program in its history. Among the law’s provisions was a significant adjustment to the way that Medicare reimburses Part C plans, commonly known as Medicare Advantage (MA) plans. MA plans, offered by private insurers, cover the same core benefits as traditional Medicare (TM), such as hospital care, physician office visits, skilled nursing care, and some home health care. However, these plans have the ability to offer different cost-sharing arrangements and additional services to attract potential enrollees.

The new reimbursement was a response to mounting evidence that MA insurers were experiencing favorable selection, meaning that they were able to disproportionally enroll healthy, low-cost Medicare beneficiaries. Since MA plans receive a fixed fee per month that a member is enrolled in the plan, if the insurers were able to attract low-cost patients, the government would effectively be overpaying for the actual costs those patients would incur. The legislation sought to address this by adjusting payment based on the risk of the patient population covered by the MA plans. Plans with lower-risk populations would receive less, while those with higher-risk populations would receive more.

Risk-adjusted payment would theoretically reduce the incentive for MA insurers to selectively enroll low-cost patients, since their profit margins wouldn’t increase by doing so. However, MA plans still have an incentive to tightly manage care and restrict provider networks in order to control costs. Policymakers continue to have concerns that patients who need several services will leave MA plans for TM, which doesn’t have similar restrictions on utilization or patient choice of providers. Because TM is paid on a fee-for-service basis, rather than a fixed payment per month, higher-cost patients using more services would lead to increased Medicare spending.

In a recent study in Health Affairs, Momotazur Rahman, Laura Keohane, Amal N. Trivedi, and Vincent Mor examine data from both TM and MA enrollees to determine if patients that use higher-cost services were more likely to switch between the two plan types. The researchers first gathered plan enrollment data from 2010 and 2011 and determined which patients switched from MA to TM, and vice-versa. The team then collected data on the patients’ utilization of a few high-cost services, including acute hospital care, nursing home care, and home health care. Finally, they created a model that predicted whether or not a patient would switch after accounting for the above variables, as well as demographic and geographic characteristics.

The authors found that MA patients who used nursing homes and home health services were significantly more likely to switch to TM than were MA patients that did not use those services. Further, MA patients using these services switched to TM at a higher rate than TM beneficiaries using the same services switched to MA. There were no significant effects of switching among users of acute care hospital services. Among all beneficiaries using home health care, beneficiaries enrolled in MA were 4.1 percentage points more likely to switch to TM than the reverse. Among those who used long-term nursing home care, MA beneficiaries were nearly six times as likely to switch to TM as were TM beneficiaries to switch to MA.

The authors dug even deeper into the data by performing separate analyses for individuals who were dually eligible for both Medicare and Medicaid. These individuals are particularly frail and tend to use more of all services than beneficiaries enrolled in TM or MA alone. Across the board, rates for dually-eligible individuals who switched from MA to TM were even higher than they were in the full population. Among individuals who became newly, dually eligible in 2010, those who used long-term nursing care switched from MA to TM at a rate of 29 percentage points higher than TM beneficiaries switched to MA.

This study suggests that risk adjustment in payment for MA plans has not fully addressed the issue of favorable selection. The authors question the ability of MA plans to address the needs of high-cost beneficiaries, pointing out that high switching rates from MA to TM suggest that many high-cost beneficiaries are dissatisfied with the MA program. They posit, for example, that MA plans’ restrictive networks may make it more difficult for patients to access high-cost services. Further, many MA plans impose a greater cost-sharing burden for long-term nursing home care, which might explain why the gap in switching rates between MA and TM was the highest for these services.

Overall, the researchers did not find solid evidence that risk adjustment of MA payments helped these plans better serve the needs of high-cost beneficiaries. Policymakers will continue to grapple with what role MA plans can play going forward in helping to control costs for high-risk patients. Otherwise, beneficiaries will likely continue to exit the MA program.

Article Source:  Rahman et. al., “High-Cost Patients Had Substantial Rates of Leaving Medicare Advantage and Joining Traditional Medicare,” Health Affairs, October 2015, 34(10): 1675-1681.

Featured Photo: cc/(Don Buciak II)

Matthew Green
Matthew Green is a staff writer for the Chicago Policy Review. He is interested in the private health insurance market and healthcare payment model reform.

Comments are closed.