The original Medicare program allows people to go to any provider and pays those providers for the services rendered. A number of “value-based” reimbursement methods have been implemented to attempt to limit excessive utilization in this arm of Medicare. For over two decades, Medicare has also had an option, now called Medicare Advantage, under which private health plans contracted with Medicare to serve beneficiaries who signed up with the plan. The Medicare Advantage plans tend to have better benefits and lower cost-sharing but may limit provider choice. Almost 40% of beneficiaries are now in Medicare Advantage and it has been very profitable for the participating plans.
The impact on quality and costs between the two arms has been extensively studied and that research is reviewed in this Health Affairs article. (HA Article) Having read this research over the years, I know what the conclusions are. Medicare Advantage plans have better control over utilization, using more primary care to lead to fewer ER visits and less use of inpatient hospitalizations. While MA plans have been accused of cherry-picking healthier beneficiaries, that is not true now, if it ever was. The plans often seek disadvantaged, high cost beneficiaries, as they get paid more for serving them and they have more opportunity to profit by better managing the care and health of these members. The article points out the the patient satisfaction with MA plans is inconsistent and that is an area for improvement.