High-Cost Patients Had Substantial Rates Of Leaving Medicare Advantage And Joining Traditional Medicare
By Momotazur Rahman, Laura Keohane, Amal N. Trivedi and Vincent Mor
Health Affairs, October 2015
Medicare Advantage payment regulations include risk-adjusted capitated reimbursement, which was implemented to discourage favorable risk selection and encourage the retention of members who incur high costs. However, the extent to which risk-adjusted capitation has succeeded is not clear, especially for members using high-cost services not previously considered in assessments of risk selection. We examined the rates at which participants who used three high-cost services switched between Medicare Advantage and traditional Medicare. We found that the switching rate from 2010 to 2011 away from Medicare Advantage and to traditional Medicare exceeded the switching rate in the opposite direction for participants who used long-term nursing home care (17 percent versus 3 percent), short-term nursing home care (9 percent versus 4 percent), and home health care (8 percent versus 3 percent). These results were magnified among people who were enrolled in both Medicare and Medicaid. Our findings raise questions about the role of Medicare Advantage plans in serving high-cost patients with complex care needs, who account for a disproportionately high amount of total health care spending.
From the Introduction
Each year Medicare beneficiaries can choose between two options for health coverage: traditional Medicare and Medicare Advantage. Although each option covers the same core set of benefits, the two may differ in terms of beneficiaries’ out-of-pocket expenses, choice of providers, and access to additional services. Approximately 30 percent of Medicare beneficiaries in 2014 were enrolled in Medicare Advantage plans.
Because Medicare Advantage plans receive prospective, capitated payments to finance and deliver services for their enrollees, they operate under strong incentives to manage their members’ health care costs. Policy makers have been concerned that capitated payments give Medicare Advantage plans an incentive to enroll healthier beneficiaries and to avoid enrolling those with chronic conditions. Indeed, a large body of literature based on data from the 1990s and early 2000s found that Medicare Advantage plans disproportionately enrolled healthier beneficiaries. This phenomenon, known as favorable risk selection, has historically yielded substantial overpayments to Medicare Advantage plans.
From the Discussion
We examined the relationship between use of hospital, nursing home, and home health care in 2010 and beneficiaries’ switching between Medicare Advantage and traditional Medicare by January 2011. Among traditional Medicare beneficiaries, we observed lower rates of switching into Medicare Advantage among people who used nursing home, home health, or acute inpatient care, compared with beneficiaries who did not use these services. In contrast, among Medicare Advantage beneficiaries, we found increased rates of switching into traditional Medicare among people who used nursing home and home health care, compared with beneficiaries who did not use these services.
Our results are consistent with other studies reporting that beneficiaries who report poorer health, use more health services, and have higher health care spending are more likely than their counterpart Medicare Advantage beneficiaries to leave Medicare Advantage plans, despite the recent reforms to the Medicare Advantage payment formula.
Our results raise questions about whether current Medicare Advantage regulations and payment formulas are designed to meet the needs of Medicare Advantage members who use postacute and long-term care. First, the enhanced payments to Medicare Advantage plans for dual eligibles or people who receive extended nursing home care do not appear to be effective in retaining these beneficiaries in Medicare Advantage plans. The unidirectional flow of these high-risk and often high-spending patients from Medicare Advantage to traditional Medicare appears to transfer responsibility to traditional Medicare just as patients enter a period of intensive health care needs.
There could be several reasons for the switching of high-risk Medicare Advantage enrollees. One possibility is that Medicare Advantage plans may not have sufficient incentives to spend their enhanced payments on better services for their beneficiaries.
Second, our findings suggest that Medicare Advantage members who use home health or nursing home services might be dissatisfied with the Medicare Advantage program. Medicare Advantage beneficiaries may find that their plans’ network restrictions make it harder to access these services that would be the case in traditional Medicare, creating an incentive to switch.
Additionally, some Medicare Advantage plans have been criticized for imposing high cost sharing for services such as the skilled nursing facility care that can be necessary for seriously ill beneficiaries.
We observed substantial switching from Medicare Advantage to traditional Medicare by beneficiaries who used nursing home and home health care, particularly those who were also eligible for Medicaid, and virtually no entry into Medicare Advantage plans by traditional Medicare beneficiaries who used these services or acquired dual eligibility. We found that a high proportion of beneficiaries with nursing home or home health care use choose to exit the Medicare Advantage program by the start of the next plan year. Thus, our study raises questions about the role of Medicare Advantage plans in serving high-cost patients with complex health care needs that span acute, postacute, and long-term care settings.
The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out
By Robert O. Morgan, Ph.D., Beth A. Virnig, Ph.D., M.P.H., Carolee A. DeVito, Ph.D., M.P.H., and Nancy A. Persily, M.P.H.
The New England Journal of Medicine, July 17, 1997
Enrollment in Medicare health maintenance organizations (HMOs) is encouraged because of the expectation that HMOs can help slow the growth of Medicare costs.
The rate of use of inpatient services in the HMO-enrollment group during the year before enrollment was 66 percent of the rate in the fee-for-service group, whereas the rate in the HMO-disenrollment group after disenrollment was 180 percent of that in the fee-for-service group.
By Don McCanne, MD
In 1997, The New England Journal of Medicine published a landmark article that showed that Medicare patients who enrolled in private Medicare HMOs exited them when they developed a need for a greater amount of health care: “The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out”
After nearly two decades of refinement of payment methods for the private Medicare Advantage plans, this new study from Health Affairs shows that “a high proportion of beneficiaries with nursing home or home health care use choose to exit the Medicare Advantage program.” Specifically, “Our results are consistent with other studies reporting that beneficiaries who report poorer health, use more health services, and have higher health care spending are more likely than their counterpart Medicare Advantage beneficiaries to leave Medicare Advantage plans, despite the recent reforms to the Medicare Advantage payment formula.”
The healthy go in and the sick go out. With Medicare Advantage plans, the patients and the taxpayers end up as losers.