The dramatic 12-year surge in enrollments that has put 50% of the Medicare population under Medicare Advantage (MA) coverage is raising concerns about both the cost and quality of that coverage as well as its ultimate impact on health equity and the solvency of the traditional Medicare program.

In 2003, the Medicare Modernization Act launched MA as a commercialized managed care alternative to traditional Medicare. During its first seven years, MA enrolled 25% of the Medicare population. Over the next 12 years, it doubled that and continues to expand its enrollments even as many of its costs, restrictive practices, and inaccurate advertising recruitment campaigns are embroiled in controversy.

In a November 3 virtual seminar entitled “Reforming Medicare Advantage to Deliver on Its Promise,” the University of Pennsylvania’s Leonard Davis Institute of Health Economics (LDI) brought together four top experts in the Medicare field to discuss the topic. These included the Executive Director of the KFF Program on Medicare; a former Executive Director of the Medicare Payment Advisory Commission (MedPAC); a former Assistant Secretary for Planning and Evaluation in the US Department of Health and Human Services (HHS); and Director of Research at Harvard Medical School’s Center for Primary Care.

Health Equity Implications

Event moderator and LDI Director of Policy David Grande, MD, MPA, opened the discussion pointing out that “Black, Asian and Hispanic enrollees sign up in MA at higher rates than white enrollees, but members of racial and ethnic minority groups also tend to be in plans with lower quality ratings. So as the MA program takes on this very large role in the delivery of health care to millions of Americans, there are a lot of questions about whether it’s fulfilling its original goal of delivering quality care at lower costs compared to traditional fee-for-service Medicare.”

The rise in MA enrollments is being further accelerated as increasing numbers of large employers that offer health benefits to retired employees shift that coverage to MA plans. Becker’s Healthcare reports that in 2022, 52% of employers offering benefits do so through MA plans.

Panelist Tricia Neuman, ScD, KFF Senior Vice President, said the overall MA growth trend “poses a big question that we all need to start thinking about as we cross the 50% threshold and continue to see lots of competition and lots of MA marketing. The question for policymakers is, ‘Do they want to sustain the traditional Medicare program?’ Because it looks like it’s on the way out, particularly in some [regional] markets where there’s 60-80% MA enrollment.”

Providing a succinct historical perspective, panelist Mark Miller, PhD, Executive Vice President for Health Care at Arnold Ventures and former MedPAC chief recalled that “Managed care plans came to Medicare and said fee for service is a screwed up, redundant, dysfunctional system. And we can do a better job on coordination, quality, and payment. And at this point, they have never delivered on probably a lot of that.”

Vertical Consolidation

Panelist Richard Frank, PhD, Director of the University of Southern California (USC)-Brookings Schaeffer Initiative on Health Policy, and former HHS official agreed. “You would think that owning health plans, physician practices, hospitals, and other kinds of services could potentially lead to better coordination of care because of more continuity and things like that. That would be the plus side. But the minus side is that they’re creating market power that drives people toward them, and the market toward higher prices and higher profits. The evidence that exists certainly doesn’t make it clear that there’s a huge efficiency gain from this.”

Today, MA payment is a central contentious issue. There is a big difference in how the two Medicare systems bill the federal government. Traditional Medicare’s fee-for-service system bills for services delivered. MA’s capitated health insurance plans receive a global amount of payment to cover a defined enrolled population’s health care. That amount is rooted in an assessment of that enrolled population’s risk as reflected in patient diagnoses rather than in actual services delivered. That risk-based system can be gamed by an MA company finding ways to upcode individual patients’ risk based on coded diagnoses and then billing for the projected costs of treating those exaggerated diagnoses. Writing in Health Affairs, a former Director of the Agency for Healthcare Research and Quality (AHRQ) estimated that upcoding results in overbillings that account for $20 billion of the MA industry’s annual revenue. That’s more than $54 million every day in federal billings for non-existent risk.

The upcoding practice is made possible by the fact that only 5% of bills to the federal government from MA plans are audited annually. Earlier this year, in an effort to claw back overpayments, the Biden administration changed the rules and can now audit a much larger number of billing records. In September, Humana sued to have that rule overturned as the MA lobby continues to work Congress for support of diminished MA corporation auditing.

Aside from upcoding, Miller pointed out that the complex, multi-layered conglomerate structures enable MA companies to juggle revenue in ways that escape the medical loss requirements defining how much of profits must be invested back into beneficiary care or services.

Revenue Diversions

“The more physician practices and other providers they own, the more they can park revenue outside the plan because of the way the quality data is collected,” said Miller. “They can generate the revenue but not feed it back to the beneficiaries.”

Panelist Zirui Song, MD, PhD, of Harvard Medical School’s Center for Primary Care, pointed to a little-publicized parallel trend to MA vertical consolidation: The growing number of health systems that are dropping MA plans and encouraging their patients not to enroll in them.

“Some examples of these systems that are walking away from MA–largely due to prior authorizations and denials–are in California, Oregon, South Dakota, Oklahoma, Montana, Kentucky, Georgia, and Ohio,” said Song. “One factor may be that hospital systems that don’t have a primary care base and rely on referrals are impacted by MA’s denials and prior authorization to a degree that affects too many people’s access to those providers.”

MA plans depend on channeling patients into limited networks of physicians and hospitals as opposed to original Medicare that enables patients to visit any provider of their choice. MAs also are not bound by the same rules as original Medicare in terms of denying required medical care or requiring prior authorization for specialist visits. Researchers as well as the Centers for Medicare and Medicaid Services (CMS) and Congressional Committees have reported dramatic increases in the number of complaints from MA beneficiaries who, after enrolling, discovered they were barred from using physicians they had established relationships with, and that prior authorization restrictions delayed or denied their ability to access medically necessary services.

The frequent prior authorization restrictions and treatment denials are also major elements in the national controversy related to the MA industry’s massive marketing efforts that include huge buys of TV commercials that tout their plans’ extra benefits but don’t mention their disadvantages.

U.S. Senate: “Deceptive Marketing”

In November 2022 the U.S. Senate Committee on Finance issued a report on its investigation of the MA industry’s marketing. Entitled, “Deceptive Marketing Practices Flourish in Medicare Advantage,” the investigation focused on MA advertising in 14 states and found “fraudulent and misleading marketing practices painting a consistent national picture … beneficiaries are inundated with fraudulent and misleading communications across all modes of communication (in-person, television, telemarketer and robo-calls).”

The Senate investigation also uncovered “a range of predatory actions. Agents were found to sign up beneficiaries for plans under false pretenses, such as telling a beneficiary that coverage networks include preferred providers even when they do not. Of particular concern to the Committee were reports across states of agents changing vulnerable seniors’ and people with disabilities’ health plans without their consent.”

Frank pointed out that one of the most frequent inaccurate claims in MA commercials is that plans may have “zero premiums.” “Zero-premium plans are not zero premiums,” he said. “People have to pay the Part B premium and because for most people that’s pulled straight out of their Social Security tax, it’s not visible. So, people make errors in choice by believing that they’re getting a zero-premium plan, when in fact they’re continuing to pay Part B and there are actually lower premium or lower cost options available to them that they forgo because they think they’re all the same.”

Higher Commissions

Neuman noted that brokers made more money selling MA plans than traditional Medicare and that their commissions were also higher for MA than for Medicare Supplement Insurance (Medigap) policies. She said when the Commonwealth Fund asked brokers and agents what plan they would personally choose, they said they favored traditional Medicare with a Medigap supplemental policy because that combination offered better coverage and choices than MA.

As the session ended, moderator Grande asked the panel to name the most important thing the federal government can do over the next couple of years to lay the groundwork for future MA reform that sets the country on a better path than it is on today:

• Neuman: “Regulators could make the marketplace more transparent. We talked about the attraction of extra benefits but what benefits are people actually getting and using for all the advertising we’re seeing? We have no idea. It would also be helpful to know how many denials people are experiencing. There’s a lot of work that could be done to improve what policymakers know.”
• Frank: “Promote competition and get away from using the county as a market definition. There are lots of other ways to reorganize markets to get enough plans to complete. Secondly, make it harder for plans with a lot of market power to vertically integrate and game the system. And finally, make traditional Medicare a more viable alternative.”
• Song: “Now that more Black beneficiaries, disadvantaged, and special needs beneficiaries are increasingly enrolling, it’s important that traditional Medicare be a viable competitor to discipline the market and serve as a counterweight to MA plans. CMS should set benchmarks and payment rates to make both programs viable rather than losing one.”
• Miller: “I’m going to define this very narrowly and quickly. The one thing to do in the next year is to recapture all the upcoding instead of leaving that $20 billion overpayment out there–recapture it.”

---

---