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Relative Rates of MA and FFS Medicare Hospitalization

By March 22, 2016Commentary

Medicare Advantage has grown and is growing rapidly, providing expanded benefits, better care coordination and higher quality than traditional Medicare.  At some point in the not too distant future, Congress is going to have to ask itself why it keeps the fee-for-service program arm.  Although masked by Medicare’s reimbursement formula, the Medicare Advantage program also spends much less on actual health services for the same enrollee than the FFS branch does.  This is primarily due to lower hospitalization rates, as reflected in a recent research study.  (Hosp. Paper)  The authors used 2012 data from the 12 states participating in the Healthcare Cost and Utilization Project that have data distinguishing MA and FFS beneficiaries.  They studied related rates in the two Medicare program arms of what they considered to be avoidable hospitalizations, marker condition stays and referral-sensitive hospitalizations.  An avoidable hospitalization is one deemed not necessary if there had been better outpatient care.  The researchers used a list of conditions developed by AHRQ for identifying avoidable hospital stays.  Referral-sensitive hospitalizations are planned hospital stays set up by physicians and again, the authors used a common list of the conditions underlying these stays.  Marker condition stays are those for unavoidable conditions that could not be prevented by better outpatient care.

After summarizing previous work comparing MA and FFS hospitalization rates, the authors adjusted for a number of variables in doing their analysis and also tried to identify potential “spillover” effects; i.e., whether greater MA penetration in a county leads to lower hospitalization rates not just in MA but also in FFS Medicare.  On an unadjusted basis, overall there are 31% fewer hospitalizations among MA beneficiaries than FFS ones.  MA beneficiaries have 27% fewer hospitalizations for marker conditions, suggesting a slightly healthier MA population.  They have 40% fewer avoidable hospitalizations and 14% fewer stays for referral-sensitive hospitalizations.  There was significant variation among the states on an unadjusted basis, from 31% fewer total hospitalizations in the FFS population in Rhode Island to 84% more in Arizona.  Almost every state, however, had much higher rates of FFS stays.

After adjusting for a variety of demographic and health status factors, avoidable hospitalizations are about 10% lower for MA members than FFS beneficiaries.  There was again variation among states, but only one had a lower rate of avoidable hospitalizations among the FFS population.  In addition, MA beneficiaries have 6% higher rates of referral-sensitive hospital stays, which could reflect better outpatient care.  There is a more substantial level of variation in the states on this measure.  The spillover effect seems to be real.  As MA penetration increases at a county level, both Medicare Advantage and FFS avoidable hospitalization rates decline, and referral-sensitive ones increase.  Overall, the study appears to validate that MA plans do reduce unnecessary hospitalizations.


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