Facts about Medicare Advantage I bet you don’t know

Friend of the blog Bradley Flansbaum drew my attention to this MedPAC status report on Medicare Advantage (MA), presented by Scott Harrison and Carlos Zarabozo on December 8, 2016. It includes some MA facts I didn’t know, and I’m guessing you (or the vast majority of you) don’t know them either.

  • In 2017, the average, PMPM rebate to MA plans will be $89, higher than it has been since 2011. I don’t know what the figures are prior to that year. (The rebate is a percentage of the difference between an MA plan’s bid and the benchmark. The percentage, as well as the benchmark, varies by plan quality. Think of it as a kind of shared savings. Plans are required to use rebates to increase benefits or reduce cost sharing.)
  • For the 2017 plan year, the average MA bid was 90% of traditional Medicare spending (TM) for a comparable beneficiary. I do not recall it ever being that low, but could be wrong. Plans are still paid above their cost (hence the rebates), but in 2017, for the first time this century,* payments to plans are at parity with TM spending. This is something that MedPAC has advocated and is an ambition of the Affordable Care Act. Mission accomplished, with the caveat that MA coding intensity may still not be completely adjusted for. If so, plans could still be paid above a (properly diagnostically adjusted) TM rate.
  • MA payment rates are based on TM Part A and Part B costs. But — and this is something I never knew — this includes TM enrollees that only have Part A, and they spend less on Part A than those who also have Part B.** MA covers A and B, and 87% of TM beneficiaries have both (this proportion is shrinking over time). The upshot of this is that payment rates based on all TM beneficiaries are lower than they would be if they were calculated on Part A and Part B enrollees. Whereas, coding pushes payments up, this mismatch pushes payments down, by how much the status report doesn’t say.
  • MA enrollment growth is more rapid than Medicare as a whole, as it has been for many years.

There’s more in the report, though not a lot more. It’s a PDF of a brief PowerPoint presentation. But I thought the above were among the most interesting, and less widely known, facts.

* I could be wrong on this, but it’s certainly the first time since at least 2003.

** Just keep reading that sentence slowly. You’ll get it.


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