Marsha Gold on Medicare Advantage and the market
Medicare Advantage In 2006-2007: What Congress Intended?
By Marsha Gold, senior fellow at Mathematica Policy Research
Health Affairs
May 15, 2007
This analysis shows that MMA (Medicare Modernization Act) has succeeded, at least in the short term, in expanding MA (Medicare Advantage) options nationwide and making MA more available in rural areas. The policy question is what value to place on this.
Much of the gain, especially for beneficiaries in areas with limited prior choice, has been achieved through expansion of the least-managed of MA options. Although the industry responded to congressional interest by offering R-PPOs (regional PPOs), firms offered PFFS (private fee-for-service) plans more extensively, and enrollment has gravitated toward this arrangement. We cannot tell from the information available how much this reflects beneficiaries’ preferences versus the ways in which firms have marketed these options.
Perspectives on current MA trends are largely in the eye—and orientation—of the beholder. If one believes that all choice is good and competition brings prices down, MMA has clearly been successful in expanding choice and competition. Because higher payments are driving the market, beneficiaries who enroll also benefit because benefits, even in the more limited plans, probably compare favorably against those of Medicare alone for not that much more premium. It could be that once attracted to MA, enrollees can be moved to more managed products, as some firms have indicated that they want to do.
If one tends to believe less in the market, some aspects of current trends are a concern. Most narrowly, the current expansion is fueled by MA payment rates that exceed what traditional Medicare now pays. At least in the short run, this means that Medicare pays more for each beneficiary that is attracted to MA. The added fiscal burden on Medicare is especially high for PFFS plans, because firms are benefiting from “floor” payments. Although individual enrollees may gain, beneficiaries as a whole may be harmed if higher payments add to the fiscal stress on Medicare, making the program less viable in the long run. Choice also makes demands on beneficiaries’ time, is challenging for many not familiar with the issues or those with cognitive limits, and adds the risk that coverage will be unstable if the forces that facilitate firms’ development of PFFS plans also make it easy for them to exit MA.
Do the benefits exceed the risk? Although people will differ in their calculations, I suggest that the answer could well be negative. The additional PFFS plan choices essentially allow firms to “piggyback” on Medicare’s existing investment and policies and do relatively little to improve care management because they are precluded from doing so by both Medicare and their own reservations. To the extent that PFFS enrollment grows, Medicare’s risk pool is fragmented, and the program’s purchasing power with providers is diluted.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.4.w445v1
Comment:
By Don McCanne, MD
Paying these private, fee-for-service Medicare Advantage plans 119 percent of the costs of the traditional Medicare program, and then pretending that this represents market competition, is utter nonsense.
This account by a highly respected and very credible authority should lay to rest forever the debate over the wisdom of this program. These wasteful private plans need to be dumped, and our legislators need to move forward with genuine health financing reform.