Medicare Advantage (MA) has become a key health care program for seniors across the country. Available to 99 percent of Medicare beneficiaries, many seniors find this program better meets their health and wellness needs than the traditional “fee for service” Medicare program. While the majority of Medicare eligible beneficiaries choose to enroll in traditional Medicare (69 percent), Medicare Advantage has become an increasingly popular choice for seniors as they seek health care options. MA has experienced significant growth over the last several years partly as a result of the high quality and affordable options the program offers.
What is Medicare Advantage?
For more than thirty years, seniors eligible for Medicare have had the option to receive their benefits through private health insurance plans instead of through traditional Medicare. This private option, now known as Medicare Advantage, covers more than 31 percent of seniors nationwide, including more than four in ten seniors in some states.
Beginning in the 1970s, private plans were incorporated into traditional Medicare so patients enrolled in HMOs like Kaiser Permanente could transition into Medicare and keep their doctors. As policy makers began favoring “managed care” as a way to control health care costs, private plans became an increasingly important option in Medicare. The program became known as Medicare + Choice under the Balanced Budget Act of 1997 and was renamed Medicare Advantage in 2003 when Congress created the Medicare prescription drug program (Part D). The 2003 law also included incentives to increase access to these private plans.
How does Medicare Advantage work?
Traditional Medicare is not designed to promote effective “evidence-based” care or care coordination for patients with chronic conditions, such as diabetes. But because Medicare Advantage plans are privately offered, they have had the flexibility to pioneer the implementation of innovative care coordination and preventive care programs tailored to patients’ needs.
MA plans provide all traditional Medicare-covered benefits to enrollees, but also provide extra benefits such as lower premiums or reduced cost sharing, enhanced prescription drug (Part D coverage), eyeglasses, and nutritional counseling. MA plans also design programs to improve care coordination and quality of care.
Beneficiaries can enroll in MA from the first year of Medicare eligibility and can switch to an MA plan during each year’s open-enrollment period. The one exception to this rule is if a MA plan has a 5-star rating (the “Star Rating” system is explained below) and then a Medicare beneficiary can switch to a MA plan once during the year when it is not open-enrollment season. MA plans require enrollees to use in-network providers, much like other private health care options many working-age Americans use. Plans create these networks to allow them to work closely with providers to incentivize quality and control costs. Enrollees do, however, have the flexibility to use out-of-network providers, usually at an additional cost. For this and other costs, out-of-pocket maximum payments are capped at $6,700.
The Centers for Medicare and Medicaid Services (CMS) pays Medicare Advantage directly at a set fee for each enrollee which differs by geographical regions and health status. Under the Affordable Care Act (ACA) of 2010, plans are also eligible for “quality rating bonus payments” if they receive a 4 out of 5 star rating.
What is the Star Rating System?
The star rating system is administered by CMS and measures a health plan’s performance by evaluating factors such as health outcomes and patient experiences and access, to name a few. CMS’ star ratings are on the CMS website and low-performing plans are noted with a special icon. Consumers can search the website and compare heath plan performance to help them pick a plan that meets their needs. The majority of enrollees (65 percent) are enrolled in plans that have a four or higher star rating.
Who offers Medicare Advantage plans?
MA plans are offered by private health care plans. Plans are both for-profit and non-profit entities, large and small, and include national, regional and provider sponsored plans. Plans contract with the government through CMS to provide services to enrollees. On average beneficiaries had 18 choices of MA plans in 2015, with beneficiaries in non-urban areas having a choice of 10 plans. Ninety-nine percent of all Medicare eligible have access to at least one MA plan. MA plans take various forms that many beneficiaries are familiar with before enrolling in Medicare, frequently operating as HMOs, PPOs, and Special Needs Plans (SNP).
Medicare Advantage Growth
When the ACA passed, it included roughly $200 billion in cuts to the MA program. Experts warned that the program would shrink as a result. However, according to recent analysis by the Kaiser Family Foundation, enrollment has increased from 24 percent of Medicare beneficiaries in 2010 to 31 percent in 2015. Also, according to a recent study by the health care consulting firm Avalere, Medicare beneficiaries see increased plan choice in 2016 with 19 new MA providers entering the market.
Before passage of the ACA, some in Congress were concerned about what they viewed as the overpayment differential between MA and traditional Medicare. As a result and noted above, cuts to the program were instated and according to recent Med PAC analysis, MA payments as a percentage of fee-for-service has decreased.
Another criticism some have claimed is that certain MA plans could possibly “upcode”, or code certain patients as more sick than Medicare does, thereby costing more money.
Results to Date
Various surveys and polls show that seniors rate MA plans high in satisfaction. According to recent poll conducted by the Mellman Group and the Winston Group for the Better Medicare Alliance, 91 percent of seniors in MA are satisfied with the program. Many seniors find Medicare Advantage plans appealing because the “network” model resembles employer-sponsored health coverage. As mentioned above, MA also offers “supplemental benefits” such as vision, dental and hearing coverage, as well as out-of-pocket maximums, that are otherwise unavailable under traditional Medicare. Some plans (called “special needs plans”) are tailored for patients with specific or chronic conditions, such as dementia and diabetes. Also, MA plans can focus on preventive care and wellness, which has resulted in avoiding hospital visits and other costly care. For example, according to peer reviewed articles in Health Affairs and the American Journal of Managed Care, MA beneficiaries receive more clinically appropriate care than those in Medicare fee-for-service, resulting in a lower incidence of preventable emergency services, fewer hip and knee replacements, and 13 percent to 20 percent lower preventable re-admission rates. .
According to CMS, some of the other outcomes of MA, especially since passage of the ACA, include:
- Premiums have fallen by nearly 10 percent.
- Around 65 percent of beneficiaries are in plans with four or more stars. In 2009, the number was 17 percent.
- Over 95 percent of Medicare beneficiaries have access to a MA plan with a $0 premium.
- CMS is implementing the ACA’s requirement that at least 85 percent of all premiums are spent on quality and care delivery and not on administrative fees or profits.
Medicare Advantage has wide bi-partisan appeal in both the House and Senate. It continues to grow in popularity for the high quality, coordinated care it offers seniors.
The program has had a high success rate in treating patients with high-risk diseases and in promoting a broad continuum of care, as well as its popularity among enrollees, and its expanding reach in more states and regions.