Just a couple of years ago, many healthcare policy wonks were predicting the death of the Medicare Advantage program. They expected reimbursement cuts mandated by the Affordable Care Act would drive numerous plans out of the sector.
However, even with those cuts, membership in Medicare Advantage continues to grow. Enrollment in MA plans grew by 7 percent from 2010 to 2011; the Centers for Medicare & Medicaid Services estimates at least 10 percent growth for 2011 to 2012.
Part of the reason may be that baby boomers, who are beginning to age into the Medicare program, are already accustomed to managed care plans like PPOs, which they likely had through employer group coverage. According to Gorman Health Group, 41 percent of Medicare age-ins choose to enroll into Medicare Advantage plans. Older seniors are more likely to prefer plain old fee-for-service Original Medicare.
Another development that has helped Medicare Advantage plans is the Star Ratings, which grade MA plans on medical and drug quality measures that are tied to reimbursement bonuses. Plans that receive three or more stars on a scale of five are eligible for reimbursement rate bonuses that can help offset MA reimbursement rate cuts.
MA plans were a favorite political target during the past several years because plans were being reimbursed more than Original Medicare. However, Original Medicare is trying to emulate many of the healthcare quality improvement activities that MA plans already do, such as the use of nurse case managers to help improve the health of members with chronic conditions, which, in turn, helps reduce overall healthcare costs.
Providers who want to focus on high-quality care for their Medicare patients are at a decision crossroads participate in an accountable care organization with the daunting number of hoops imposed by the government, or contract with a Medicare Advantage plan and work toward performance incentives.
In Washington state, the Everett Clinic, a large provider group, has made its choice. It has decided to require that all Medicare patients at the clinic sign up for MA plans in 2012 if they wish to continue getting care at the clinic. Officials at the Everett Clinic participated in a fee-for-service, pay-for-performance Medicare demonstration project that ended last year; it resulted in quality improvements, but the clinic loses about $10 million annually on its Medicare patients. In 2011, 17,000 of the clinic's 37,000 Medicare patients belong to MA plans.
Officials at the Everett Clinic say it's a lot easier to contract with MA companies than come up with P4P arrangements for the clinic. The Everett Clinic, which has MA contracts with carriers such as Humana and Group Health Cooperative, can afford to hire its own nurse case managers though MA contract agreements. If the clinic meets or beats agreed-upon quality metrics, it will be paid more by MA companies. This type of agreement was not possible with Original Medicare.
So MA plans, contrary to the pundits, are alive and well. If they can make adjustments to further reimbursement rate cuts, achieve high MA star ratings and comply with CMS ever-mounting regulatory requirements--which include increased scrutiny and audits-- they have the opportunity to attract thousands of new members in the coming years.