Medicare Advantage: the Who, What, Where, Why… and What’s Next?
MA is formally known as Medicare Part C; MA plans replace traditional Medicare and any Medicare supplemental policies. The MA plans are paid a monthly, predetermined amount to cover a beneficiary’s care, based on the Medicare spending for beneficiaries living in the same county who are enrolled in the Medicare fee-for-service (FFS) program. Additionally, a risk-adjustment model is applied via risk scores that are calculated based on demographics and comorbidities. These scores are then used to either increase or decrease the payment to Medicare for a specific beneficiary. The accuracy of the payment therefore heavily depends on the modeling that predicts expected healthcare costs for an enrollee.
The goal of the MA program for patients is to provide an overarching plan that covers Part A, B, and D benefits, without the need for supplemental prescription drug coverage; the goal for Medicare as it relates to MA is to have MA spending equal to FFS spending. Despite the assumption that Medicare modeling correctly estimates and pays these plans, research has shown that the risk scores overpredict MA plans’ actual spending. This is in part due to the selection bias that results in more favorable patients opting for MA plans over traditional FFS Medicare. It is important to remember that taxpayers fund Medicare, and Medicare funds MA – therefore, these patients, who often have significant financial burdens and limited access through MA plans, are technically still costing the government, and taxpayers.
The June 2023 Medicare Payment Advisory Commission (MedPAC) report to Congress outlines some potential ways forward to help alleviate major concerns with the MA program. MedPAC is an independent, non-partisan commission of experts in healthcare and health economics that advises Congress on issues relating to the Medicare program. They release two reports in March and June of each year that outline recommendations to the US legislature on issues requested by Congress. In the June 2023 report, MedPAC released “Favorable selection and future directions for Medicare Advantage Payment Policy.” In this report, the Commission outlines 3 potential approaches to reform MA payments to be less reliant on modeling approaches that are based on FFS spending. First, they suggest a competitive bidding model that would require reform of Medicare rebates, particularly so that patients are not charged higher premiums to compensate for lower payments. Next, they suggest reform to the payment model to rely on both FFS and MA beneficiary spending to capture a more accurate Medicare payment estimate. Lastly, they introduce the idea of a baseline payment with an administratively set growth rate, but they acknowledge the difficulty and complexity of this undertaking.
Based on recent hearings from the House of Representatives Energy and Commerce Health Subcommittee, it is clear that major reforms to MA payments out of Medicare are forthcoming to ensure sustainability of the current system. Since the pool of beneficiaries enrolling in MA plans is increasing while Medicare FFS enrollment is seeing sustained declines, some Congressional representatives have stated that Medicare FFS will need to become more attractive and competitive with MA plans. As Congress reconvenes after August recess, we are sure to see more debate on the way forward for the Medicare program as a whole.
Written by: Ruchika Talwar, MD, Urologic Oncology Fellow, Department of Urology, Vanderbilt University Medical Center, Nashville, TN