Differences in FFS Medicare and MA Enrollees

Medicare risk contracting has a long history and the health plans that participate have often been accused of designing benefits and taking other actions to attract healthier patients.  The research on whether this actually occurs has been mixed and the current CMS risk adjustment methodology is designed to minimize this behavior (although it clearly has encouraged upcoding, which muddies the water about beneficiaries’ actual health needs).  A new paper at the National Bureau of Economic Research looks at whether there still appears a differential sorting of healthy, or unhealthy, beneficiaries into the Medicare Advantage program.   (NBER Paper)   Prior work by the authors had found little such sorting, but had found that there was a wide variation in profit margins across various conditions or diseases used in the CMS risk-scoring methodology.   Chronic conditions like diabetes, COPD, and heart failure were relatively profitable, suggesting that the MA plans were able to successfully manage those conditions well.  Other conditions, often managed by specialists, were less profitable, like cancer and rheumatoid arthritis.  In this paper the researchers used data from 2012 and 2013 from two large MA plans on the 100 most frequent HCCs or combination of them.

One preliminary finding is a much lower number of beneficiaries in MA who have no coded HCC; this is consistent with the incentive of MA plans to do thorough review and coding of beneficiary conditions and health needs.  The finding that the most profitable HCCs are for common chronic conditions often managed by a primary care physician was confirmed by this latest work.  Interestingly, mental health conditions were also very profitable.  Having more comorbidities is also associated with more profitability.  There was little evidence to support the idea that plans might attempt to attract beneficiaries with profitable HCCs.  This is consistent with common sense and general experience.  At this point, MA plans are generally happy to take all beneficiaries.  If they do a good job at coding and medical management, they can make money on all of them.  If anything, they would want sicker beneficiaries because there is greater revenue attached to them and more opportunity to improve results by better care management and avoidance of acute episodes.