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For more than a year, the Center for Medicare Advocacy has been outspoken about the overpayments made to the private insurance plans in the subsection of the Medicare program called "Medicare Advantage." [1]During this same time period, the proponents of Medicare Advantage (MA) have operated what can best be described as a fierce campaign against reducing these subsidies.

Medicare Advantage Does Not Mean an Advantage in Quality of Care

One of the arguments espoused by MA plan proponents is that MA plans are able to coordinate the health care services of beneficiaries in their plans and therefore ensure that beneficiaries receive more appropriate care. However, comparisons of the health outcomes of beneficiaries enrolled in MA plans with those in traditional Medicare have not demonstrated that MA plans provide better health care than traditional Medicare. In fact, surveys of beneficiaries and analyses of data show that, in many cases, traditional Medicare outperforms MA on key health quality measures.

The Institute of Medicine (IOM), the Medicare Payment Advisory Commission (MedPAC), and the National Academy of Social Insurance – three well-respected organizations in Washington, DC – have all identified the potential for some MA plans to coordinate the health care of beneficiaries and thereby lead to better health outcomes in their beneficiaries. However, MedPAC's most recent report[2] summarizes the current state of available data and their analysis of MA plans highlights that this potential has not been realized:

Medicare beneficiaries give high ratings to the care they receive through MA plans and express satisfaction with their providers and health plans. However, quality measures for clinical processes and intermediate outcomes in MA show disappointing results. Commercial and Medicaid plans show more improvement than Medicare plans in clinical measures over the past year. New plans in Medicare perform worse than older plans on clinical indicators of quality.

Three important sources of data assess health plan quality: the Medicare Health Outcomes Survey (HOS), the health care Effectiveness Data and Information Set (HEDIS), and the Consumer Assessment of health care Providers and Systems (CAHPS).

The Medicare Health Outcomes Survey

For the HOS, a sample of beneficiaries in each MA plan with more than 500 enrollees is surveyed with questions about their physical and mental health and the care provided to them. Two years later, the same beneficiaries are contacted and asked the same questions in a follow-up survey. Beneficiaries who voluntarily leave the plan or die during the two-year period are not counted in the survey.

MA plan performance for both physical and mental health is separated into three categories: "As Expected," "Better than Expected," and "Worse than Expected." For the cohort that completed the follow-up survey in 2006, 151 MA plans reported on the HOS. On physical health, 136 plans performed "As Expected," 2 were "Better," and 13 were "Worse." On mental health, 139 plans performed "As Expected," 5 "Better," and 7 "Worse." As a comparison, for the cohort that completed the follow-up survey two years earlier, in 2004, 21 plans had beneficiaries in "Better" physical health and no plans had "Worse" physical health. For mental health, 27 plans performed "Better" and only 3 performed "Worse." It appears that MA plans are performing worse overall when compared to MA plan performance from just two years prior.

A 2006 report by Health Services Advisory Group (HSAG), a contractor of the Centers for Medicare & Medicaid Services (CMS), compared the 2002-2004 MA HOS cohort to similar groups of beneficiaries in the traditional Medicare program. The HSAG analysis found no statistically significant difference in the change in health status—both for physical and mental health—for beneficiaries in MA plans and in traditional Medicare. While the study has technical limitations, the basic point is important as very few studies compare the quality of care delivered by MA plans and traditional Medicare.

The health care Effectiveness Data and Information Set

MA plans as well as most Medicaid and commercial health insurance plans report on a collection of various quality measures known as HEDIS. These quality measures, developed by the National Committee for Quality Assurance (NCQA) with input from various stakeholders, assess to what extent a plan encourages its members to seek clinically appropriate care, like breast cancer screenings, and to what extent the plan encourages the network doctors and practitioners to provide clinically appropriate care, like beta-blocker treatment after a heart attack.

In a comparison of NCQA's most recent HEDIS summary (for 2006 measures) [3] with the previous year's summary (for 2005 measures), there are 18 effectiveness-of-care measures for which MA plans reported on comparable measures in both years. Of these 18 measures, MA plans in 2006 performed better on 5 measures, worse on 12 measures, and the same on 1 measure, as compared to 2005. Overall, MA plans performed more poorly in 2006 than in 2005 based on the HEDIS quality measures. Further, a MedPAC analysis of the NCQA data shows that over the same time period, commercial health insurance plans improved on 30 of 44 measures while Medicaid plans improved on 34 of 43 measures. These findings demonstrate that MA plans are performing poorly not only when compared to themselves, but also when compared to the trends in other health insurance plans.

The Consumer Assessment of health care Providers and Systems

The CAHPS program provides an opportunity for the comparison of health plans based on beneficiary responses to a standard questionnaire. CAHPS includes surveys of Part D Prescription Drug Plans (PDPs), MA Prescription Drug Plans (MA-PDs), MA plans, and the traditional Medicare program. Researchers at the RAND Corporation, using data from the 2007 CAHPS surveys, compared beneficiary experiences in traditional Medicare with beneficiaries enrolled in MA plans (excluding prescription drug measures). Vulnerable beneficiaries had MA experiences "markedly less positive" than traditional Medicare experiences while non-vulnerable beneficiaries had MA experiences "similar to or somewhat less positive" than traditional Medicare experiences. [4]

Newer MA Plans Fare Worse

MedPAC's researchers were able to analyze the HEDIS data according to the length of time that a particular plan has been participating in MA. The researchers defined a 'new' MA plan as one that began operations on or after January 1, 2004, the first full month after the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) was enacted. MedPAC's analysis shows that the newer MA plans were more likely to have lower scores on HEDIS measures than older plans. Further, the analysis also showed that the poorer scores were not simply due to the plan's having fewer enrollees because small, established MA plans outperformed small, start-up MA plans.

Changes Are Coming

MedPAC has also noted that quality data on the Medicare program are somewhat limited both for MA and for traditional Medicare. The MMA exempted Private Fee-for-Service (PFFS) plans and Medical Savings Account (MSA) plans from having to maintain a quality improvement program and from reporting data on quality. PFFS and MSA plans do not have to participate in the HOS and they do not have to report on HEDIS measures. While Preferred Provider Organizations (PPOs) are included in the HOS and they report on some HEDIS quality measures, they are only required to report on the services furnished by contracted practitioners and suppliers and they are not required to report on HEDIS quality measures based on evidence from patient medical records. Therefore, the majority of the HEDIS data from MA plans comes from Health Maintenance Organizations (HMOs).

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), which was recently passed by both Houses of Congress over President Bush's veto, makes significant changes to the MA quality landscape. MIPPA eliminates the MMA exemption for PFFS and MSA plans, requiring them to establish quality improvement programs and report those data for the first time in 2010. [5]


Those who defend the overpayments to private plans in Medicare suggest that these plans are able to offer better quality care than the traditional Medicare program. However, recent evidence suggests that this claim is not true and that many of these plans are providing worse care than they were in the past. Going forward, CMS should not only continue to examine ways of measuring beneficiary health outcomes, and create additional opportunities for the comparison of traditional Medicare with Medicare Advantage, but end the wasteful, unfair, and ultimately, according to these studies, ineffectual subsidies to private plans.

[1]See the Center’s March 29, 2007 Weekly Alert, “Medicare Overpayments to Private Plans.”

[2]MedPAC, “Report to the Congress: Medicare Payment Policy” (March 2008), pp. 249-262.

[3]NCQA, “The State of Health Care Quality 2007,” (2007).

[4]Elliott, Marc N., et al. “Findings from the 2007 Medicare CAHPS Survey.” RAND Corporation. Presented at the CMS Medicare Advantage Conference: Baltimore, MD (Apr. 8, 2008).

[5]MIPPA, Pub. L. No. 110-275 (July 15, 2008), §163.


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