MedPAC Dumps on the Medicare Advantage Program

The Medicare Payment Advisory Commission is made up of prominent individuals who track the performance of Medicare and give Congress and the executive branch advice on issues that should be addressed.  The meeting materials and various reports are available to the public and a great source of in-depth information on Medicare.  MedPAC recently issued a report on the Medicare Advantage program, under which private health plans have come to cover more than half of all Medicare beneficiaries.  The authors were not nice to the program.   (MedPAC Report)

Almost every beneficiary has access to an MA plan, and most have access to a large variety of plans.  Satisfaction is very high, largely because people’s out-of-pocket costs are greatly reduced and they get supplemental benefits.  The issue for MedPAC is around the cost.  The average rebate, or additional payment to the plan, has grown significantly.  The rebates are based on quality measures, which may or not reflect actual quality.  MedPAC was also concerned about the level of concentration in local markets, which may limit price competition, but the reality is that almost every market has a large number of zero premium plans with supplemental benefits.

In regard to the overall payment methodology, I think MedPac is on more solid footing.  It appears likely that it results in overpayments and higher than necessary profits to the plans.  The plans are increasingly vertically integrated in the sense that they own the providers.  This has allowed for margin shifting, which makes the plans look less profitable than they actually are.  Coding adjustments are also an issue, but plans are incented to look for every health issue.  This is beneficial to some extent and reflects a real problem in fee-for-service Medicare–no one is managing the overall health of the beneficiary.

MedPAC also raised the time-worn nonsense that the plans get favorable selection–healthier beneficiaries are in the program.  The opposite is true; the plans look for sicker populations because they get paid more and there is more opportunity for improving care.  One reason the MA population may look better is that the plans do a good job of limiting unnecessary care, especially hospitalizations and of improving the health of enrollees.  So MedPAC is giving no credit to the MA population looking healthier because it gets better care.

I do agree that there would be better payment methods that using the current risk adjustment approach, and that reform would save substantial amounts of money.