Medicare Advantage and the Long Term and Post-Acute Care Industry
Medicare Advantage (MA) is the managed care program within Medicare. Medicare Advantage provides beneficiaries with the option to receive their Medicare benefits through private health plans. Authorized by the Medicare Modernization Act of 2003 (MMA), the MA program is federally regulated by the Centers for Medicare and Medicaid Services (CMS) and plans are paid by the federal government.
AHCA’s Position on Medicare Advantage
In general, AHCA supports any effort to improve the quality of care for patients while at the same time controlling costs. However, the post-acute care and long term care (PAC/LTC) industry faces a number of challenges with regards to Medicare Advantage, especially in states with high penetration rates.
AHCA’s key concerns include:
SNF providers typically experience pressure to reduce the average lengths of stay (ALOS) of MA patients Shorter ALOS may impact hospital readmission rates.
With the increased pressure on MA plans to reduce operating costs (i.e., to comply with the medical loss ratio requirement), plans may impose stricter requirements on ALOS of MA patients, or take other cost-cutting steps.
MA plans are not required to pay a percentage of unpaid co-payments if the patient cannot pay as traditional Medicare does.
Only 11 states provide Medicaid Financing to pay some of the MA cost sharing.
Rate negotiations with MA plans can be very difficult for some SNF providers, especially in markets where the SNF provider has very little leverage.
Administrative and business processes among providers and MA plans are complex and pose numerous problems for many providers, especially those in states with highest MA penetration.
Despite CMS revisions to MA marketing guidelines, marketing techniques by some MA plans remain problematic.
MA Overview
MA is an alternative to the traditional, government-administered fee-for-service program. By statute, Medicare beneficiaries must be offered the choice of remaining in Medicare fee-for-service (FFS) or enrolling in an MA-PD. Medicare pays Medicare Advantage plans a per member per month (PMPM) payment, or capitation payment, to provide all Part A and Part B benefits, as well as an additional payment to plans who provide drug benefits under Part D. The figure below provides a comparison of Medicare FFS and MA-PD. Today, approximately one in four enrollees in Medicare, the federal health insurance plan for the elderly and disabled, receive their benefits through private health plans called "Medicare Advantage" plans.
Table 1. Comparison of Traditional Medicare and Medicare Advantage Plans
|
Traditional Medicare |
Medicare Advantage Plans |
Costs |
You pay Medicare premiums, deductibles and coinsurances (usually 20% of Medicare-approved cost for outpatient care). |
You pay Medicare Premiums and plan premium, if it charges one. Your plan sets its own deductibles and copays (usually a fixed cost for each office visit). You may pay the full cost if you don’t follow your plan’s rules. |
Supplemental Insurance |
You can buy a Medigap policy. (But only a certain times, depending on where you live.) |
You can’t buy a Medigap policy to help pay your out-of-pocket costs in an MA plan. |
Covers extra services like vision and dental? |
No. Covers medically-necessary inpatient and outpatient health care. Doesn’t cover routine vision, hearing, or dental. |
Maybe. May cover some services traditional Medicare doesn’t cover such as routine vision, hearing and dental. All plans must cover the same inpatient and outpatient services as original Medicare. |
Lets me see providers nationwide? |
Yes. You can go to any doctor or hospital in the US that accepts Medicare. |
Usually not. Most people have HMOs which typically have local networks of providers you must use. PPOs and PFFS plans should cover care you get outside the network, but you will pay more. |
Need referral to see specialist? |
No. You don’t need a referral. |
Maybe. You often need a referral from your primary care provider if you want to see a specialist. |
Covers drugs? |
No, but if you want Medicare prescription drug coverage, you can buy a separate Part D plan. |
Usually. Most plans include Part D drug coverage (MA-PD plans). You usually can’t get a separate Part D plan if you have an MA plan (some exceptions). |
Out-of-pocket limit? |
No. There’s no cap on what you spend on health care. |
Yes. Plans must have an annual out-of-pocket limit, which can be high but protect you if you need expensive care. The plan pays the full cost of your care after you reach the limit. |
Plans also may offer additional benefits and services outside of the usual portfolio of Parts A, B, and D to attract enrollees. Related to plan outreach and enrollment, the CMS has regulations on how plans can market themselves. For more information on MA operational guidelines, click here.
Forms of Medicare managed care approaches have been tested since the 1970s and, over the years, Congress has made significant changes to the policies that regulate Medicare managed care plans. Examples include establishing the range of plans available to beneficiaries, restricting the allowable marketing activities of the plans, and the adjusting payment to the plans to encourage participation. The core argument behind Medicare managed care is that private health plans are financially incentivized to reduce costs by using innovative strategies to improve the efficiency of health care delivery and quality.
The concept of privatization through managed care is the primary driver behind the wide range of payment reform initiatives, demonstrations, and pilots around the country. For a detailed list of CMS’ reform efforts, visit the website of CMS’ Center for Medicare and Medicaid Innovation (CMMI).
Medicare Advantage – An Expanding Market
The MA marketplace has significantly expanded in recent years. Currently, more than 12 million people in the United States are enrolled in a Medicare Advantage plan, representing slightly more than 25 percent of all 49 million Medicare beneficiaries. That number has more than doubled since 2003, and according to the CMS. Furthermore, enrollment is projected to increase by another 11 percent in 2013. The following graph shows MA enrollment over time.
Figure 1. Medicare Advantage Enrollment Trends
State-by-state variation in MA enrollment is significant, and enrollment can even vary considerably within a state. Generally, enrollment is higher in urban areas than in rural areas, and is shaped largely by the number of available plans in a given state:
Figure 2. Share of Medicare Beneficiaries Enrolled in Medicare Advantage Plans, by State, in 2011
Source: MPR/Kaiser Family Foundation analysis of CMS State/County Market Penetration Files, 2011.
For an analysis of the MA market since inception, click here.
Medicare Advantage Enrollment in Your State or County
Of importance to skilled nursing and nursing facility providers is understanding the proportion of Medicare FFS beneficiaries to MA enrollees and trends in MA enrollment.
- Statewide Data – For an overview of your state’s Medicare FFS enrollment, MA-PD enrollment and the proportion of beneficiaries enrolled in MA-PD (or the MA-PD penetration rate), click here.
- State and County-Level MA-PD Data –For detailed information on enrollment by plan, contract, state and county, click here.
Medicare Advantage and Health Care Reform
In its early days, the focus of Medicare managed care policy was to produce savings, primarily by keeping rates at or very near 95% of fee-for-service rates. However, in recent years, there has been an increasing focus on expanding access and providing more plan choice to consumers. Payments to private plans have steadily been increasing in order to attract them to participate in the program. This action, paired with the way plan payment rates are established and adjusted, has resulted in MA payment rates exceeding FFS spending. In 2012, payments to MA plans totaled approximately $124 billion (MedPAC 2011).
Additionally, questions have been raised about payments made to plans that exceed Medicare FFS payment made directly to Medicare providers. Researchers have found that plans cost the federal government about 10 percent more than the traditional Medicare fee-for-service program. This is a primary reason why the Medicare Advantage program was targeted for cost reductions in the Affordable Care Act of 2010.
Specifically, the Affordable Care Act (ACA), which was passed in 2010, introduces two defining policy changes to the MA program to address this payment inequity:
- Under ACA, the way county benchmarks are calculated will be adjusted to gradually bring rates more in line with average FFS costs in that county. MedPAC estimates that this will bring rates down, on average, by 3 percent. (For a detailed explanation of how MA rates are determined, click here.)
- Finally, the ACA also requires CMS to implement an MA medical loss ratio of 85 percent in 2014.
In the coming months, AHCA will add additional information on ACA changes to the MA program. For a more detailed explanation of health reform impacts on MA, click here.