It’s no accident that MA plans are better at managing serious chronic illness—that’s what they are incentivized to do, said a study author.


July 10—Contrary to general belief, Medicare Advantage (MA) plan enrollees are initially sicker than those in fee-for-service (FFS) Medicare, according to new research. And once enrolled, MA beneficiaries get better care at a lower cost.

In a comparison of demographic and clinical characteristics, overall healthcare utilization, cost of care, and related clinical quality outcomes between two large national samples of MA and FFS Medicare beneficiaries who were enrolled throughout 2015, Avalere found 36 percent of MA beneficiaries with chronic conditions had enrolled in Medicare due to disability. That compared to only 22 percent in FFS Medicare.

Additionally, low-income/dual-eligible beneficiaries comprised 23 percent of MA enrollees and 20 percent of those in FFS Medicare. The research also found that MA beneficiaries had a 57 percent higher rate of serious mental illness (9 percent versus 5 percent) and a 16 percent higher rate of substance abuse (7 percent versus 6 percent).

“The finding that the [MA] population is actually sicker going in will be somewhat surprising to many analysts,” said Dan Mendelson, founder of Avalere. “What we’re finding is that is a relatively more severe population than the matched [FFS] population, and that’s different” from previous research.

Critics of MA plans have long maintained that the plans are targeted toward healthier enrollees to maximize revenue under fixed payments. To back up that argument, they have highlighted research that indirectly addresses the issue, such as a 2017 study by the nonpartisan Government Accounting Office (GAO), which found some plans had higher-than-average disenrollment rates—particularly for members in poor health.   

“There hasn’t been a lot of research on these issues because there hasn’t been good data to support an analysis of what the quality outcomes were in both settings and of the underlying severity of the population,” Mendelson said in an interview.

Utilization Findings

Despite poorer health, MA beneficiaries had 23 percent fewer inpatient stays (249 per 1,000 beneficiaries versus 324 in FFS Medicare) and 33 percent fewer emergency department (ED) visits (511 per 1,000 beneficiaries versus 759 in FFS Medicare).

Average annual costs for MA beneficiaries and FFS Medicare beneficiaries were similar, but annual spending per beneficiary on preventive services and tests was 21 percent higher in MA ($3,811 versus $3,139).

Meanwhile, FFS Medicare enrollees had 17 percent higher average spending on inpatient care ($3,477 versus $2,898) and 5 percent higher spending on outpatient or emergent care services ($2,474 versus $2,359).

The researchers also found that average costs for non-dual FFS Medicare enrollees were 10 percent less than for non-dual MA beneficiaries ($8,357 versus $9,177), but they concluded that difference primarily stemmed from higher MA spending on preventive services and tests.

Quality Findings

MA plans outperformed FFS Medicare on several key quality measures, including a nearly 29 percent lower rate of all potentially avoidable hospitalizations (17 percent versus 24 percent) and 41 percent fewer avoidable acute hospitalizations.

Additionally, MA plans were found to have 18 percent fewer avoidable chronic hospitalizations and higher rates of preventive screenings or tests, including LDL testing (5 percent more) and breast cancer screenings (13 percent more).

MA beneficiaries in the clinically complex diabetes cohort had half the rate of complications (8 percent versus 17 percent in FFS Medicare) and one-third the rate of serious complications (2 percent versus 6 percent).

What’s “remarkable is how much better the MA plans are at managing serious chronic illness,” Mendelson said. “It’s a sizable and measurable effect and one that hasn’t really been elucidated to this degree in other research.”

Examples of effective programs included a Humana MA plan that targeted enrollees at risk of developing diabetes. In a 2017 studyin the Journal of Aging and Health, researchers found that among 500 such enrollees who were tracked 12 months after starting in the program, participants lost an average of 13 to 14 pounds, improved glucose control, and decreased total cholesterol.

They credited the improvements to participation in the insurer’s Omada Health Diabetes Prevention Program, which combines digital health tools (such as wireless digital scales and online courses) with coaches to help older adults improve their health and reduce their diabetes risk.

“The MA plans are specifically incented to manage chronic illness through the star rating program, and I think that has a significant effect on the operations of the companies and how they orient their activities,” said Mendelson, who previously served on the board of an MA plan.

Spending Findings

The Avalere research also found that MA plans had 6 percent lower average costs per beneficiary than FFS Medicare for all patients in the clinically complex diabetes cohort ($11,635 versus $12,438).

Additionally, MA plans had 21 percent lower average costs per beneficiary for dual-eligible patients in the clinically complex diabetes cohort ($13,398 versus $16,897).

A common way for MA plans to achieve such savings is through narrow provider networks. Although the downside of the approach for patients is less choice, Mendelson said that tactic can help improve enrollee health outcomes.

“The interesting thing about narrower networks is it also gives the health plan more of an ability to direct the activities of the provider in the network,” Mendelson said. “And so, the health plan said to the providers, ‘Look, caring for patients with diabetes on a more routine basis or making sure that patients with heart failure are under better control is a real priority for us.’ And then the plans are sending the incentives downstream to the physicians.”

One challenge to implementing such tactics could be increased regulatory scrutiny. A 2018 preview of top issues in the healthcare industry by PwC warned MA plans that the federal government is ramping up reviews of them.

“To avoid penalties, health insurers should manage risk by focusing on members, paying particular attention to services such as timely member notifications, an adequate network, and up-to-date provider directories,” the report stated.

The research was funded by Better Medicare Alliance, a group that represents insurers with MA plans. However, Avalere retained full editorial control.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Wednesday, July 11, 2018