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Quality Could Save Medicare Advantage
Lost in the public insurance and health reform debate last week was a Medicare Payment Advisory Committee (MedPAC) report issued to Congress that criticized Medicare Advantage for paying private insurers billions more than what the government pays providers through traditional fee-for-service Medicare—despite the fact that many Medicare Advantage programs offer similar services.
The key takeaway as highlighted in multiple media reports is that the federal government will pay $12 billion more to health insurers in Medicare Advantage than it costs to care for beneficiaries in fee-for-service Medicare. As such, some industry observers are recommending that the feds implement competitive bidding for Medicare Advantage insurers.
But there was another idea buried inside the 300-page report that could help Medicare resolve the overpayment issue, weed out insurers that are not providing innovative care management and delivery systems, and gain Democratic leaders' support for the program. What is this magic potion? MedPAC suggested the federal government pay private insurers in Medicare Advantage through quality measures.
As stated in the report, private insurers involved in Medicare Advantage don't gain financially from creating innovative programs. Sure, their beneficiaries might benefit from better programs, but the federal government isn't paying those insurers any more than competitors that are not providing those services.
Instead, the federal government should pay innovative insurers more for improving quality, while reducing payments to those who are offering more expensive FFS-like programs. This is no different than paying doctors and hospitals for providing quality care.
The National Committee for Quality Assurance found in 2008 that only half of the 10 million Medicare Advantage beneficiaries are enrolled in plans with above-average quality rankings. In other words, paying private insurers 13% more than FFS beneficiaries is not improving quality to about half of Medicare Advantage beneficiaries.
The federal government could improve the Medicare Advantage payment system by reemphasizing the goals of the program: financial neutrality, efficiency, equity, and quality. This could happen through care coordination and cost savings, which were the original goals of Medicare Advantage, according to MedPAC.
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Ray Holm (6/26/2009 at 1:54 PM)
Our organization put together a managed care network back in 1996 to serve the Medicare + Choice (M+C)members in a globally capitated arrangement. At the time we had 5,400 members. Over time we developed payment structures that balanced costs of care with the capitated revenue received. Now that Medicare Advantage PFS (MA PFS)has taken over, our membership has decreased to 1,500 members largely due to all of the health plans that began selling PFS plans. These plans basically pay hospitals and providers ordinary fee for service Medicare rates, thus allowing the plans to skim off the difference as profits rather than going to reward providers for coordinated care management. This change from M+C to MA PFS has ruined a system that was having a significant impact in controlling the rate of medical cost increases.
Robert Trinka (6/25/2009 at 11:57 AM)
On rereading my comment, it is necessary to clarify my recommendation, as follows: "The Administration and Congress with the help of the states, need to study the history of government intervention and regulation and its correlation to rising healthcare costs and lower quality, and totally re-engineer the regulatory structure for healthcare delivery and financing." Emphasis should be on revamping the regulatory structure.
Robert Trinka (6/25/2009 at 11:46 AM)
Prior to the 2003 MMA, Private Medicare Plans (Medicare+Choice, et al) were paid at less than the Medicare fee-for-service cost (generally 95%). Most all the plans were HMOs that managed care aggressively through controlled provider networks, often with capitated reimbursement. Following MMA and dating back to the 1997 act, CMS started controlling private plan networks reimbursement. Particulary important is CMS's decision to eliminate narrow, well planned and controlled provider networks that in their estimation did not provide "their beneficiaries" with enough access and choice. This led directly to today's required "phonebook" networks that simply cannot be structured and managed to deliver high quality care and lower cost. The Federal Government through its own regulatory framework largely killed the opportunity for private plans to provide higher quality care at a lower cost. MMA's increased compensation to the "no network" Private FFS plans is the primary reason for the disconnect between private plans and cost savings, which is a relatively recent phenomenen. The 1997 Act provided for the formation of Provider Sponsored Organizations that could, if properly structured and managed, successfully balance the cost/quality equation. Of course, this model was never nurtured, particulary by the states, and was essentially killed with in the 2003 Act. Federal and State Governments, particularly CMS, need to allow for the return of the true HMO model with a tight, well managed provider network capable of delivering comprehensive, coordinated care with an emphasis on keeping members healthy and their disorders under control. The Administration and Congress with the help of the states, need to study the history of government intervention and regulation and its correlation to rising healthcare costs and lower quality, and totally re-engineer the healthcare delivery and healthcare financing structure. This will lead them in the proper direction to successful reform. If anyone doubts this, consider that government control and intervention has steadily increased from the adoption of Medicare and Medicaid in 1966 and since then costs have increased exponentially and the perception of quality continues to diminish. Why would anyone expect that more government intervention will produce any other result? I think someone once defined that as "insanity".