Part C of the Medicare program, also known as Medicare Advantage (MA), is an option available to Medicare beneficiaries who wish to receive their benefits through private insurance companies, primarily HMOs. In 2017, more than 19 million Medicare beneficiaries (33%) were enrolled in MA plans. MA enrollment is projected to continue to grow, rising to an estimated 41% of beneficiaries by 2027. There are both pros and cons for beneficiaries who choose to enroll in MA plans (see, e.g., the Center’s enrollment tips here and here). For example, “pros” include the ease of “one stop shopping” through MA plans, as opposed to those in traditional Medicare who often must purchase separate Part D prescription drug and Medigap supplemental plans. “Cons” often include limited networks of providers available through MA plans, and, in our experience, increased difficulty in accessing services when the need for such services intensifies.
Part of the promise of allowing private plans to participate in Medicare was that such plans could provide better quality care at a lower cost. Neither of these propositions appear to have borne out. Despite changes made by the Affordable Care Act that sought to rein in overpayments to MA plans (averaging up to a high of 114% of what traditional Medicare would spend on a given individual), MA plans are still paid at a higher rate than traditional Medicare. In part, this is due to inappropriate “upcoding” – or coding intensity related to risk adjusted payment (plans get higher payment rates based in part on the reported health of individual enrollees). As noted by the General Accounting Office (GAO) in 2016, CMS estimates that about 9.5% of its annual payments to MA organizations were improper – totaling $14.1 billion in 2013 alone – “primarily stemming from unsupported diagnoses submitted by MA organizations.” According to the Medicare Payment Advisory Commission (MedPAC), “after accounting for all coding adjustments, payments to MA plans were about 4 percent higher than Medicare payments would have been if MA enrollees had been treated in [traditional] Medicare.”
MA plans often use this extra money, based upon the bid they submit to the Medicare program, to offer benefits not covered by traditional Medicare, such as some vision, hearing and dental coverage, which makes such plans more attractive to Medicare beneficiaries. But this extra money has not necessarily led to better health outcomes among MA enrollees. As noted in a recent article in the Journal of the American Medical Association (JAMA) “some studies show that Medicare Advantage has higher quality in certain dimensions, such as higher rates of preventive care and screenings among recipients” but other studies “suggest that Medicare Advantage does not serve certain beneficiaries well, such as those with greater illness severity.” The article highlights that the public does not have enough data about the MA program, concluding that “[d]espite the important and increasing role of Medicare Advantage plans, there is fairly little insight into the relative value Medicare Advantage provides to beneficiaries or the funder, the US taxpayer.”
As discussed below, despite costing more than traditional Medicare, yielding mixed quality outcomes, and a lack of enough data about how the program works, a variety of factors ranging from policy changes to government outreach tip the scales in favor of enrollment in MA plans. This bias towards the MA program not only costs Medicare more, but disadvantages the majority of Medicare beneficiaries who choose to access their coverage through the traditional program.
Recent Legislative and Regulatory Changes Favoring MA
The MA program has several designed advantages for enrollees over individuals with traditional Medicare. These include an out-of-pocket cap, absent from traditional Medicare; a requirement to accept almost all Medicare beneficiaries on an annual basis (as compared to federally-mandated enrollment rights regarding Medigap supplemental insurance plans, which does not require sale to individuals under 65, and only requires sales to people over 65 following certain triggering events); and the ability to waive the 3-day prior hospital stay requirement for coverage in a skilled nursing facility. These MA advantages have been amplified by recent changes in both law and regulation, including the changes discussed below.
Legislation
CURES Act – 2016 – On December 13, 2016, President Obama signed into law the 21st Century Cures Act (Public Law No: 114-255, also known as “Cures”, H.R. 34). Among other things, the CURES act imposed the following changes:
- Effective 2019, for the first 3 months of the calendar year there will be a continuous open enrollment and disenrollment period relating to MA plans (previously called the Medicare Advantage Open Enrollment Period, or MA-OEP). During this 3-month period an MA eligible beneficiary can make a one-time change to another MA plan, they can elect traditional Medicare, or they can elect coverage under Part D. This policy change, which has been backed by insurance agents/brokers and the health insurance industry, among others, favors MA enrollment over traditional Medicare by giving those in MA plans more flexibility to make changes to their coverage.
- Beginning in 2021, people with End-Stage Renal Disease (ESRD) will be able to enroll in MA plans. Current law prohibits people with ESRD from enrolling in MA plans except in limited situations. Instead of promoting free choice regarding how people wish to obtain their health coverage, and endorsing equal opportunity for all Medicare beneficiaries, regardless of age or health status, Congress failed to extend Medigap rights to people with ESRD at the same time it removed prohibitions on enrollment in MA. Conversely, Congress is working to erode Medigap coverage more broadly. In 2015, Congress passed the Medicare and CHIP Reauthorization Act (MACRA) bill that will prohibit people eligible for Medicare on or after January 1, 2020 from purchasing a Medigap policy that covers the Part B deductible (sometimes referred to as policies that offer “first dollar coverage”).
- For more information on these changes see the Center’s Weekly Alert “Cures” Act Tips the Scales Even Further in Favor of Medicare Advantage Over Traditional Medicare” (December 28, 2016)
Bipartisan Budget Act of 2018 – Signed into law by President Trump on February 9, 2018, this bill contains a number of provisions that improve or expand services and coverage in Medicare Advantage only. On the one hand, these provisions have the potential to improve services and care for people enrolled in MA plans. On the other hand, this approach is unfair for the majority of Medicare beneficiaries, who are in traditional Medicare, and once again favors MA over traditional Medicare. This bill included all provisions of the bipartisan Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act, which aims to improve MA coverage for individuals with chronic conditions. These provisions include:
- Expansion of supplemental benefits in MA – beginning in 2020, supplemental benefits offered by MA plans will no longer be limited to being “primarily health related” but instead must only have a reasonable expectation of improving or maintaining the health or overall function of chronically ill enrollees.
- Expansion of access to telehealth services available to enrollees of MA plans, including offering such services as a basic benefit.
Regulatory Changes
In the current climate of “deregulation” a number of policy proposals have been offered that favor MA plan sponsor “flexibility” in a way that will make things more complex, not less, for Medicare beneficiaries. While the provisions of both the proposed Part C and D rule and the draft Call Letter are currently in draft form and not yet finalized, they are expected to appear in final versions of these documents in early April 2018.
Proposed C & D Rule – On November 28, 2017, CMS issued draft regulations entitled Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefits Programs for Contract Year 2019 (CMS-4182-P), available here. The Center submitted extensive comments to this proposed rule, which are available here. The proposed rule included the following provisions:
- Flexibility in Medicare Advantage Uniformity Requirements – CMS proposes to allow plan sponsors to offer differences in benefits tied to specific health conditions through a “new interpretation of the uniformity requirement.” This requirement will “permit MA organizations the ability to reduce cost sharing for certain covered benefits, offer specific tailored supplemental benefits, and offer lower deductibles for enrollees that meet specific medical criteria.”
- Meaningful Differences in Medicare Advantage Bid Submissions and Bid Review – CMS proposes to eliminate the meaningful difference requirement for MA plan sponsors wishing to offer more than one plan in a given service area. CMS notes that “[t]his proposal aims to improve competition, innovation, available benefit offerings, and provide beneficiaries with affordable plans that are tailored to their unique health care needs and financial situation.” CMS notes that it “expects” plan sponsors to continue to offer plans that are “different from one another with respect to key benefit design characteristics, so that any potential beneficiary confusion is minimized…”
- Additional proposals to segment benefit flexibility, add greater flexibility to plan maximum out of-pocket limits (MOOP) and allow higher cost-sharing limits for services combine to exacerbate barriers Medicare beneficiaries face in making informed decisions about their health insurance coverage.
Draft 2019 Call Letter – On February 1, 2018, CMS issued its draft 2019 Call Letter, an annual set of proposed rules, guidelines and clarifications for Part C Medicare Advantage (MA) and Part D plans that wish to participate in Medicare in the following calendar year. The Center’s comments to the draft Call Letter are available here. Provisions of the draft Call Letter include:
- Health Related Supplemental Benefits – CMS intends to expand the scope of the primarily health related supplemental benefit standard by reinterpreting the statute “to permit MA plans to offer additional benefits as ‘supplemental benefits’ so long as they are healthcare benefits. Under [CMS’] new interpretation, in order for a service or item to be ‘primarily health related,’ it must diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization.” While the Budget Act of 2018 contains a similar proposal, to be implemented in 2020, CMS’ proposal would be rushed to implementation in 2019, apparently without time for drafting of thoughtful guidance, beneficiary education, solicitation of stakeholder feedback, and development of plan oversight protocols.
- Medicare Advantage (MA) Uniformity Flexibility – This policy change, first proposed in the draft Part C & D rule (discussed above) is presented in the draft Call Letter as if it is final policy. If implemented, it could dramatically increase the range of benefits and cost-sharing between plans, and would risk allowing some MA plans to devise discriminatory plan designs, intentionally or otherwise. We note that CMS began to test some of the concepts of loosening MA benefits in a Value-Based Insurance Design (VBID) demonstration through the Centers for Medicare and Medicaid Innovation (CMMI) beginning in January 2017. The demo is limited by condition, geography and plan and incorporates significant consumer protections. By loosening uniformity standards for all plans, CMS is putting the proverbial cart before the horse by scaling up an experiment before we have meaningful results, including whether such flexibility – even for a much smaller cohort with specific conditions – improves health outcomes. CMS’ policy change is premature in that there is not yet actionable, long-term feedback or lessons from the VBID demo as to whether altering benefits and cost-sharing in this manner is effective among the MA population – a crucial first step before significantly altering plan requirements. Loosening uniformity requirements in the manner CMS proposes could – by itself – create a chaotic environment for Medicare beneficiaries trying to make informed decisions about what options might be best for themselves. To do so without issuing strong consumer protections and more firm restrictions on plans is a stark departure from the more thoughtful and cautious approach recently taken by CMS in rolling out the VBID demo.
CMS Steering During Annual Coordinated Election Period (ACEP)
The Medicare Annual Coordinated Election Period (ACEP), from October 15th through December 7th, allows Medicare beneficiaries to make certain changes to their Medicare coverage, effective the following January 1st. As the Center discussed in an October 25, 2017 Weekly Alert, official Center for Medicare & Medicaid Services (CMS) Medicare Open Enrollment materials for 2018 tipped the scales to encourage beneficiaries to choose a private Medicare plan over original Medicare. For example, the Key Messages of the CMS Communications Plan for 2018 Open Enrollment did not even address original Medicare, and the CMS Open Enrollment webpage made no mention of original Medicare as a choice during Open Enrollment. While a CMS document entitled “Medicare Open Enrollment: Review, Compare, Enroll” does list original Medicare as a coverage option, the section on Open Enrollment in the document does not include original Medicare as an option.
On November 9, 2017, the Leadership Council of Aging Organizations (LCAO), a member coalition of the nation’s non-profit organizations serving older Americans, sent a letter about this issue to CMS and committees of jurisdiction in Congress.
The organizations listed in the letter wrote to express concerns that during the last Medicare open election period, CMS encouraged entities that assist Medicare beneficiaries with enrollment choices to disseminate information that was incomplete, biased towards Medicare Advantage (MA) and often failed to even mention traditional Medicare. The organizations urged CMS to take immediate corrective action to include and accurately portray the benefits and drawbacks of all coverage options in CMS materials.
Conclusion
The Medicare Advantage (MA) program, which provides Medicare enrollees with the option of obtaining their Medicare coverage through private plans, is reimbursed at rates higher than what traditional Medicare would spend on a given individual, often leading to extra benefits, along with other factors that favor MA enrollment over traditional Medicare. The Center urges policymakers to expand services and coverage equally for all Medicare beneficiaries, not just subsets – including those in traditional Medicare. For example, an out-of-pocket cap, or stop-loss, should be added to the program as exists in MA. Rights to purchase Medigap supplemental insurance policies should be expanded to both people under 65 and to include more ongoing access for all in order to provide truly meaningful choices for Medicare beneficiaries. And both payment and coverage should be equalized between MA and traditional Medicare so that the scales are not irreversibly tipped in favor of privatization.