Medicare Advantage Spillover Effects to Traditional Medicare

By September 16, 2019 September 19th, 2019 Commentary

Medicare Advantage has grown to over a third of all Medicare beneficiaries.  People have hypothesized  that some of the tighter controls typically placed on physicians and other providers by the Medicare Advantage plans might cause changes in practice patterns in traditional Medicare as well, leading to reduced spending.  The other spillover that could occur is that physicians might become more adept at intensive coding for traditional Medicare, as they have in Medicare Advantage.  The Medicare Payment Advisory Commission explored this topic at a recent public meeting.   (MedPAC Study).  According to the Commission’s researchers, there is little relationship at a state level between total Medicare spending growth in a state and Medicare Advantage penetration.  In other words, states with very high MA penetration don’t see slower total Medicare spending growth than do states with lower MA penetration.  This suggests that either FFS Medicare spending growth doesn’t decline with more MA penetration, or if it does, MA spending growth is high enough to compensate for any decrease.  The Commission also found only a very slight negative relationship between MA penetration and FFS service use.  In other words, more MA penetration had a very minor tendency to reduce utilization among the state’s traditional Medicare population.

The researchers then price-standardized the data to avoid the effect of fee schedule changes and they looked at a constant cohort of beneficiaries to see how their coding changed over time and how those changes might affect spending.  Comparing the lowest penetration markets, which had about 13% MA membership, with the highest, which had over 50% penetration, the Commission found that average spending on a fee-for-service beneficiary per month was about 2% lower in the high penetration markets, or $14.  FFS spending growth was basically equivalent in high and low penetration markets.  But higher penetration was associated with more coding intensity in the FFS Medicare arm, although not enough to offset the apparent negative effect on spending.  They also noted that ACO penetration has a slight decreasing effect on total traditional Medicare spending.  Overall, the research suggests a negligible, and disappointing spillover of Medicare Advantage practice patterns to FFS Medicare.  But doctors generally are pretty good at figuring out how to maximize their income.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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