Medicare Advantage advocacy

Why did the Biden administration heavily promote signing up with private insurers?

One of the more surprising aspects of the just-ended Medicare sign-up season was the ubiquitous government ads encouraging seniors to sign up for Medicare Advantage plans. The ads made no mention of traditional fee-for-service Medicare.

For some unexplained reason, someone in the Centers for Medicare and Medicaid Services thought Joe Namath’s late night ads on behalf of the private insurance industry weren’t sufficient.

While the results won’t be known for a few months, it’s likely senior participation in MA will approach 50% in 2022, up from 32% in 2016. Seniors joining MA plans must accept narrower networks and greater insurance industry meddling in their care in exchange for lower upfront costs for drug and supplemental coverage. Some MA plans also offer minor benefit enhancements (limited dental and hearing benefits, for instance) as an inducement to sign up.

The ongoing shift toward privatized Medicare has proven highly lucrative for the insurance industry, which now relies on the program for a growing share of its profits. But not so for the government. Numerous studies (see this 2021 HHS Inspector General report and recent studies by University of California, San Diego researcher Richard Kronick) have documented how private insurers systematically game the government reimbursement system to inflate their charges and profits.

Different strokes for different folks: CMS and industry ads promoting Medicare Advantage plans

The program is supposed to pay insurers about the average cost of care for fee-for-service Medicare beneficiaries for everyone who signs up for one of their plans. However, that payment is adjusted based on the patient’s prior use of health care services and their underlying conditions. Plans can inflate their charges by documenting those ailments, even when they aren’t being treated.

The plans also get bonuses if they receive top quality ratings and high marks from patients. But, as the OIG report documented, insurers on the verge of downgrades in some of their plans avoid the financial penalties by merging those plans into larger plans with better ratings, which masks the poor performance; and that’s not just from CMS, but from potential customers.

No games here?

The insurance industry denies the gaming, of course, and points to its superior performance on care coordination, which reduces hospital utilization. That’s why profitability has soared, they say. A number of studies over the years has noted that MA plan members use less hospital care than seniors in the traditional FFS program.

And a new study out today in JAMA Health Forum would seem to reinforce that claim. Researchers led by Dr. Aaron Schwartz of the University of Pennsylvania, relying on data provided by Aetna, found seniors opting into the company’s MA plans in their first year after becoming Medicare eligible cost 36% less than a comparable set of beneficiaries who stayed with traditional Medicare with an Aetna supplemental plan. Virtually all the savings came from reduced hospitalizations.

My immediate reaction was that this made perfect sense because MA is financially most attractive to relatively healthy seniors just entering Medicare who don’t use much health care. Full disclosure: I’m a 71-year-old MA beneficiary with no serious conditions (knock on wood) who saves nearly $200 a month by not having to purchase a separate supplemental and drug plan.

The researchers sought to adjust for this problem by carefully matching the conditions of the two cohorts used in the study. But many people postpone badly needed care and procedures before choosing traditional Medicare, either because they can’t afford to take time off work or the FFS program, unlike their employer-based coverage or the MA plan option, doesn’t restrict which doctors they can see.

As the authors admitted near the end of their study, “If beneficiaries who were anticipating an inpatient procedure differentially opted for traditional Medicare out of concern that the physician or hospital they desired might be out of network in MA, this phenomenon would have introduced bias.” But then they dismissed the concern by stating “We doubt many beneficiaries with generous commercial insurance, which this sample had, would put off treatment until they became eligible for Medicare instead of pursing treatment while commercially insured.”

Yet they also stated both Aetna’s MA plans and the Medicare/Aetna supplemental combo had actuarial values of 83% (the patient ultimately pays 17% of the cost of care either way). If that’s the case, it would make far more sense for a person contemplating an operation in their first year on Medicare to opt for a traditional plan to avoid the narrow networks. The researchers can’t have it both ways.

I’m a great believer in care coordination. But the provider versions of that reform — the accountable care organizations created by the Affordable Care Act — have generated only modest benefits for the Medicare program.

Have private insurers miraculously come up with some secret sauce? Based on my own experience, there is zero evidence that Humana, which is my MA insurer, coordinates my care or provides any other service that would change the long-term trajectory of my health. There’s nothing in this latest study to indicate Aetna does any better.