How Can We Overcome the Unintended Consequences of Medicare Advantage Expansion?

By | August 3, 2022

Since the formation of the Medicare Advantage (MA) program, there has been continuous growth in the number of Medicare beneficiaries that have chosen this model of care. The reasons are numerous. For instance, the pace of growth in the number of company offerings and members has picked up over recent years, and the current projection is that MA will be the dominant source of Medicare coverage by 2025. Though many commend this progress, we now must manage the countless fundamental challenges as this crossover of beneficiaries occurs.

Currently, the major hurdle to overcome is setting MA prices. Presently, CMS arrives on pricing based on the average traditional Medicare spend in local markets. Unfortunately, this methodology becomes problematic when the comparison group continues to decrease and, in some markets, may barely exist. As mature MA products migrate to a global cap model, the need for billing diminishes; thus, tracking costs becomes increasingly challenging.

Furthermore, quality standards are also problematic because fewer traditional Medicare beneficiaries exist. STARS metrics are based on the traditional Medicare population and have been transparently shared with the public. This data provides unique insight into the performance of US healthcare and can aid consumers and purchasers in choosing sources of care. Though MA is publicly funded, services and care are delivered through 186 private, for-profit, MA organizations that keep much of their internal data confidential as proprietary information. And yes, they are required to report their quality data to CMS, but how these benchmarks occur will require change over time.

Additionally, traditional Medicare helps fund rural healthcare centers and graduate medical education. Furthermore, it has also been the source of innovation in payment models such as Diagnostic Related Groups and relative value units, which have guided private pay commercial payers. Presently, many MA programs pay based on standard Medicare rates and methodologies, even though they receive their payment differently from CMS.

There is social a dynamic to consider as well. Medicare’s purpose is funding the healthcare of the senior population. Effectively, this is accomplished via a model that serves to guarantee that our elderly population receives covered healthcare. Though the underlying premise is viable within the private sector, managing the dynamics is crucial. The administrative cost to the tax payer will be significantly higher as companies compete for the business creating redundant costs versus just a single provider. Traditional Medicare administrative costs do not include marketing or member acquisition costs as they are not needed; these must be accounted for within MA products, once again, increasing the cost of the product. Consequently, these additional costs must be passed on to someone somehow; this issue also pertains to profitability.

None of these dynamics should limit what is in the best interest and direction of the program. However, as we continue to evolve, we must remember all these components, while simultaneously, solving for the complexity. As traditional Medicare has undergone numerous changes during its tenure, so must we adapt presently. Let us work through these issues before it becomes a crisis. Let these dynamics not take policymakers by surprise. Let us resolve these polarities now, in a manner that enhances our evolution on our journey to provide greater value to those we serve.