Medicare Advantage (MA) is the unique program under which the elderly and the disabled can enroll in private health plans, like the plans many of them were in as employees.
MA plans have enrolled nearly half of all eligible people and have satisfaction rates of 90 percent or higher. MA is the only place in the entire health care system where health plans specialize in various chronic conditions and advertise to attract those patients.
In MA, a doctor who discovers a change in a patient’s medical condition can get a higher premium payment from the government for that patient. Thus, it is in the financial interest of MA plans to discover medical problems and solve them. And that is why MA is the only place in the system where health plans aggressively compete to solve the problems of people who are sick.
Higher Quality, Lower Cost
Studies show MA plans, overall, provide higher quality care at a lower cost than fee-for-service Medicare: one study found MA plans cost $1,704 less per enrollee per year, all else being equal.
Seniors usually enroll in an MA plan for no more than the cost of Part B (outpatient) and Part D (drugs) premiums. They avoid almost $2,000 a year other beneficiaries spend on Medigap policies to meet deductibles and copays in regular Medicare. They also receive extra benefits—such as hearing, vision, and dental care—not available in regular Medicare.
Interestingly, the highest-rated plans are doctor-run and they are not necessarily HMOs. IntegraNet Health in Houston is an example of a doctor-run plan that achieves very high scores on quality and pays its physicians on a fee-for-service basis.
Are Patients Denied Care?
MA plans are now under attack after the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) reported instances where doctors’ requests for prior authorization of a drug or procedure (consistent with Medicare’s general rules) were denied by MA plans.
The OIG’s March report did not find any patients were denied needed care but raised the specter of that possibility. However, the OIG only looked at a handful of prior authorization requests—247 out of a population of 28 million enrollees. Of these, 95 percent of the requests were approved, and of the ones not approved, only 13 percent (33 cases) were questionable.
Prior authorization is used to avoid procedures that are wasteful and even unsafe. A majority of doctors say 15 percent to 30 percent of health care is unnecessary, and almost everyone agrees our system provides too much low-valued care and too little high-valued care. MA was created in part to address that issue.
If MA plans do what they are supposed to, we would expect them to provide fewer of some types of services and more of others. An accurate evaluation would compare MA plans with traditional Medicare, but the OIG did not do so.
Do Plans Overcharge Taxpayers?
Critics of MA also point to a report by the Medicare Payment Advisory Commission (MedPAC), an independent body that advises Congress, which found patients’ “risk scores” for medical problems are higher in MA plans than in traditional Medicare—leading to higher premium payments.
But this is to be expected. MA plans get paid more if enrollees have more health problems, so they have a financial incentive to find and document medical conditions. By contrast, a typical fee-for-service doctor doesn’t have such incentives and therefore may be less careful in maintaining patient records.
To the extent high-risk scores are a problem, part of the answer is conducting audits and fining health plans with excessive patient coding errors.
More drastic action should be taken if actual fraud is involved. An estimated $60 billion a year in Medicare spending is lost to fraud—and almost all of it is in regular Medicare, not MA plans.
Are Plans Overpriced?
A MedPAC study concluded Medicare pays 4 percent more than it would if the MA enrollees were in regular Medicare, whereas an insurance industry study concluded just the opposite—that Medicare spends 9 percent less.
George Halvorson, former CEO of Kaiser Permanente, calls the MedPAC study “shoddy,” and notes MA plans have 35 percent fewer emergency room days, 40 percent fewer hospital days, and many more virtual visits than traditional Medicare.
Even MedPAC says MA plans are more cost-effective.
Do Critically Ill Patients Leave?
Critics also point to a report by the General Accounting Office (GAO) that found patients in MA plans are more likely to disenroll and return to regular Medicare in their last year of life. Presumably, this is the point at which patients are the sickest, requiring the costliest care.
However, only 4.6 percent the disenrollment rate among this group was compared to 1.7 percent for other enrollees. More than 95 percent of patients in the last year of life stayed in MA plans.
Moreover, there are good reasons why terminally ill patients might disenroll, having nothing to do with the quality of their care. They may choose to enter a hospice, for example, or move to be closer to family.
The MA program is not perfect. There are a number of needed reforms, including making enrollment continuous. Enrollees should be able to get into the right plan as soon as their health condition changes, rather than waiting 12 months for an open enrollment period. But this and other reforms would only make a good program better.
John C. Goodman (firstname.lastname@example.org) is president of the Goodman Institute for Public Policy Research and co-publisher of Health Care News. An earlier version of this article appeared in Forbes on July 13, 2022. Reprinted with permission.
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