Trends in the health status of medicare risk contract enrollees

Previous research has found Medicare risk contract enrollees to be healthier than beneficiaries in fee-for-service (FFS). Medicare Current Beneficiary Survey (MCBS) data were used to examine trends in health and functional status measures among risk contract and FFS enrollees from 1991 to 2004. Risk contract enrollees reported better health and functioning, but the differences tended to narrow over time. Most of the differences in trends were observed for functional status measures and institutionalization; differences in trends for perceived health status and prevalence rates of chronic conditions tended to be small or non-existent. The narrowing of functional and health status differences between the risk contract and FFS populations may have implications for payment policy, as well as implications for the role of private health plans in Medicare.     

Having it all: national benefit equity and local payment parity in Medicare

The Medicare Payment Advisory Commission (MedPAC) has identified two important problems with the Medicare+Choice (M+C) program: nationwide geographic inequity in government-financed benefits, and unequal government payments for M+C plans versus fee-for-service (FFS) Medicare in the same market area. MedPAC concludes that both problems cannot be solved simultaneously. We argue that both problems could be solved if Congress discontinued its policy of underwriting the cost of FFS Medicare. Instead, Congress should define a national entitlement benefit package and have all health plans submit bids on the package in each market area. The government's premium contribution should be equal to the lowest bid submitted by a qualified health plan in each market area. The contribution could be adjusted for health risk, the special obligations of FFS Medicare, and welfare enhancements associated with FFS Medicare that are valued by both beneficiaries and taxpayers but unrelated to beneficiaries' health status.     

Beneficiary decisionmaking: the impact of labeling health plan choices

One critical health plan decision concerns choosing an original Medicare plan or a Medicare managed care plan. Evidence suggests that people are confused by the phrase "Original Medicare plan." Using focus group and Q-sort methodology, the authors sought to identify a name for the Medicare fee-for-service (FFS) product. Two key insights were gained. First, participants used the word "Medicare" to name the FFS product. Second, participants did not choose between two plans. Rather, they decided between supplemental insurance and a managed care product. These factors should influence how CMS "brands" not only the FFS product but also the overall Medicare program.     

Variations in hospital resource use for Medicare and privately insured populations in California

The amount of resources used in the care of chronically ill Medicare fee-for-service (FFS) patients varies widely across hospitals. We studied variations across California hospitals in hospital resource use for chronically ill patients covered by Medicare health maintenance organizations (HMOs) and private insurers and found substantial variation in all of the coverage groups studied. Resource-use measures based on Medicare FFS data often reflect patterns evident for other payers. Previous estimates of savings if the most resource-intensive hospitals more closely resembled less resource-intensive hospitals, based on just Medicare FFS spending, could underestimate possible savings when other payers are taken into account.     

Hospital volume responses to Medicare's Outpatient Prospective Payment System: Evidence from Florida

Effective in 2000, Medicare's Outpatient Prospective Payment System (OPPS) sets pre-determined reimbursement rates for hospital outpatient services, replacing the prior cost-based methods of reimbursement. Using Florida outpatient discharge data, we study the effect of OPPS on hospital outpatient volume. We find that on average Medicare rate cuts either decreased or had no significant effect on Medicare volume, but increased private fee-for-service (FFS) volume. We also find that responses vary with the hospital's "exposure" to Medicare payment changes, where exposure is measured as the baseline Medicare patient share. Compared to less exposed hospitals, highly exposed hospitals responded with larger increases in private FFS volume and with smaller decreases (in some cases, even increases) in Medicare volume when payment rates fell. Our results are consistent with provider demand inducement.     

An economic history of Medicare part C

Context: Twenty‐five years ago, private insurance plans were introduced into the Medicare program with the stated dual aims of (1) giving beneficiaries a choice of health insurance plans beyond the fee‐for‐service Medicare program and (2) transferring to the Medicare program the efficiencies and cost savings achieved by managed care in the private sector. Methods: In this article we review the economic history of Medicare Part C, known today as Medicare Advantage, focusing on the impact of major changes in the program's structure and of plan payment methods on trends in the availability of private plans, plan enrollment, and Medicare spending. Additionally, we compare the experience of Medicare Advantage and of employer‐sponsored health insurance with managed care over the same time period. Findings: Beneficiaries’ access to private plans has been inconsistent over the program's history, with higher plan payments resulting in greater choice and enrollment and vice versa. But Medicare Advantage generally has cost more than the traditional Medicare program, an overpayment that has increased in recent years. Conclusions: Major changes in Medicare Advantage's payment rules are needed in order to simultaneously encourage the participation of private plans, the provision of high‐quality care, and to save Medicare money.     

Service-level selection by HMOs in Medicare

In the federal Medicare program, contracting health maintenance organizations (HMOs) are paid on a capitated basis. There has long been concern that an "adverse selection" of risks remain in the traditional fee-for-service (FFS) sector, since beneficiaries with low costs may leave the FFS sector and join the HMOs. The distortion associated with this form of selection is that health plans may design their mix of health care services in order to effectuate favorable selection. This paper scrutinizes patterns of HMO membership and costs by service in the FFS sector for evidence consistent with the hypothesis that HMOs engage in service-level product distortion. We develop a multi-service model of choice between FFS and HMOs and show that if the HMO sector is underproviding (overproviding) a service relative to the FFS sector, we should observe a positive (negative) correlation between the HMO market share and average costs of those remaining in the FFS sector. We estimate the correlation between the HMO market share and the average FFS costs for different health care services using Medicare data for 1996. We find evidence indicating that there exists significant service-level selection by HMOs.     

Issues regarding health plan payments under Medicare and recommendations for reform.

The failures of the market for current Medicare health plans include poor information and price distortions and can be attributed to government policy. Reforms that could improve its structure are annual open enrollment periods, premium rebates from health management organizations (HMOs) to members, and termination of the federal government's subsidy of Medicare supplementary insurance. However, the price for a basic Medicare benefits package would still be distorted because Medicare bases its contribution on the cost of a comparable package in the fee-for-service (FFS) sector rather than on the cost of the most efficient plan available to beneficiaries in each market area. The present Medicare HMO program almost certainly increases total Medicare costs and actually discourages HMO growth by shielding beneficiaries from the true price difference between basic benefits in the HMO and FFS sectors. Lacking payment reforms, the Medicare HMO program should be terminated.     

Variations in patterns of care and outcomes after acute myocardial infarction for Medicare beneficiaries in fee-for-service and HMO settings

OBJECTIVE: To assess revascularization and mortality after acute myocardial infarction (AMI) for all Medicare patients in fee-for-service (FFS) and health maintenance organization (HMO) settings in California. DATA SOURCES/STUDY SETTING: Hospital discharge abstract and death certificate data linked with Medicare enrollment files for patients aged 65 and over with Medicare coverage (69,040) discharged from a California-licensed hospital in 1994-1996. STUDY DESIGN: Risk-adjusted results were assessed for HMOs and FFS, as well as for FFS beneficiaries from areas served by each plan. DATA COLLECTION/EXTRACTION METHODS: Risk models were based on all sampled patients. The HMO patients were aggregated into 17 pseudoplans: 5 individual plans, 4 large plans split geographically (10 observations), and 2 "pseudoplans" of small HMOs. Observed versus expected 30-day mortality rates, lengths-of-stay (LOS) during the index hospitalization and any transfers, revascularization (coronary artery bypass graft [CABG] surgery and/or percutaneous transluminal coronary angioplasty [PTCA]) during the index hospitalization or 30 days after admission, were calculated for each pseudoplan. PRINCIPAL FINDINGS: Risk-adjusted death rate was slightly higher in FFS than in HMO settings (p < .01 with one risk adjustment model, n.s. with another). Three pseudoplans had significantly (p < .01) better than expected mortality rates. One pseudoplan was significantly worse (p < .05) with one risk adjustment model but not the other. The LOS and revascularization rates varied widely, but were not associated with outcomes. Plans with among the best results had the lowest LOS and revascularization rates. These pseudoplans were less likely to have their patients initially admitted to a hospital with revascularization capability, but the hospitals they used had higher CABG volumes. Even if CABG facilities were available during the index admission, in these plans with better than expected mortality rates, revascularization was often postponed or carried out elsewhere. CONCLUSIONS: For Medicare patients having an AMI in the mid-1990s in California, risk-adjusted outcomes were no different, or slightly better on average, for those in HMOs than in FFS. Not all plans performed equally well, so understanding what leads to differences in quality is more important than simple comparisons of HMOs versus FFS.     

Consumer information and biased selection in the demand for coverage supplementing Medicare.

This study examines how the relationship between health insurance knowledge and the health status of health insurance consumers influences their decisions to purchase insurance coverage. Data from the federal Medicare health insurance program for the elderly in the United States are used. The basic Medicare program provides a limited amount of coverage for health care services obtained from any provider in the private fee-for-service (FFS) market. Beneficiaries of this program may choose to supplement the basic coverage which they receive by two mechanisms: either they may purchase private insurance designed to fill some of the gaps left by the federal program ('Medigap' policies), thereby remaining in the FFS market and preserving their choice of provider, or they may enroll in health maintenance organizations (HMOs), thereby leaving the FFS market and agreeing to use only those providers affiliated with the HMO, and in return receiving broader coverage at little additional out-of-pocket cost. The study was made possible by a unique data set which combines measures of beneficiary knowledge of Medicare coverage with measures of perceived health status, socio-economic characteristics, and insurance coverage choices for a sample of Medicare beneficiaries who participated in an educational workshop about their insurance coverage options. These data were used to estimate a multinomial logistic model of the determinants of insurance choices, where the options included the two listed above and a basic Medicare option. The study explicitly recognizes the interaction between insurance information and health status in health plan choice. These results show that knowledge of coverage does have a differential impact on the decision to purchase health insurance depending on health status. With a high level of knowledge, sicker beneficiaries are less likely to have basic Medicare alone, compared with HMOs or Medigap policies, while healthier beneficiaries are less likely to be enrolled in HMOs, compared with Medigap policies. This finding has important implications for the use of health status measures to adjust capitated payment formulas when knowledgable consumers have the option to enroll in HMOs or remain in the FFS environment. In the absence of health status adjusters for the HMO capitation payments, high levels of coverage knowledge may exacerbate inherent selection bias among these coverage options by healthier and sicker consumers of health insurance.     

Multiple payers,commonality and free-riding in health care: Medicare and private payers

Managed health care plans and providers in the US and elsewhere sell their services to multiple payers. For example, the three largest groups of purchasers from health plans in the US are employers, Medicaid plans, and Medicare, with the first two accounting for over 90% of the total enrollees. In the case of hospitals, Medicare is the largest buyer, but it alone only accounts for 40% of the total payments. While payers have different objectives and use different contracting practices, the plans and providers set some elements of the quality in common for all payers. In this paper, we study the interactions between a public payer, modeled on Medicare, which sets a price and takes any willing provider, a private payer, which limits providers and pays a price on the basis of quality, and a provider/plan, in the presence of shared elements of quality. The provider compromises in response to divergent incentives from payers. The private sector dilutes Medicare payment initiatives, and may, under some circumstances, repair Medicare payment policy mistakes. If Medicare behaves strategically in the presence of private payers, it can free-ride on the private payer and set its prices too low. Our paper has many testable implications, including a new hypothesis for why Medicare has failed to gain acceptance of health plans in the US.     

Preferred provider organizations and physician fees

Preferred provider organizations (PPOs) represent a form of managed care in which providers agree to accept discounted fees in exchange for the expectation that their patient volume will increase or at least be maintained. Managed care plans that rely on discounted fee-for-service (FFS) payments have increased from about 10 plans in 1981 to over 700 plans in 1994. In this study, we document levels of discounts achieved by two large national insurers and discuss how the size of the discount varies by type of service and how the discounted rates relate to Medicare fees. Our results show that, despite achieving large discounts (approximately 10 20 percent) relative to their indemnity plans, the two nationwide PPOs studied here pay at rates substantially above Medicare levels.     

Toward a rational, value-based drug benefit for Medicare

A major challenge facing Congress is what changes, if any, to make to Medicare Part D. With the apparent failure of the Democrats' attempt to remove the prohibition on government intervention in drug price negotiations, the party's next steps are unclear. One suggested option is a plan administered by the Centers for Medicare and Medicaid Services (CMS), to compete with private plans and facilitate a transition to a more rational structure. We discuss issues surrounding the design of such a mechanism and how it might provide a transition toward a more rational and sustainable drug benefit in the longer term.     

Estimating Medicare advantage lock-in provisions impact on vulnerable Medicare beneficiaries

Beginning January 2006, Medicare beneficiaries will have limited ability to change health plans. We examine the Medicare managed care enrollment and disenrollment behavior of traditionally vulnerable beneficiaries from 1999-2001 to estimate the potential impact of the new enrollment restrictions. Findings that several such groups were more likely to make multiple health plan elections, leave their managed care plan midyear, and/or have higher voluntary disenrollment rates and transfers to original fee-for-service (FFS) Medicare suggest that the lock-in provisions may have greater negative impacts on vulnerable beneficiaries. This article identifies several recommendations that CMS might consider to lessen the detrimental effects on at-risk groups.     

Growth of Fee-for-Service Medicare Home-Based Medical Care Within Private Residences and Domiciliary Care Settings in the U.S., 2012–2019

ObjectivesHome-based medical care (HBMC) delivers physician or advanced practice provider–led medical services for patients in private residences and domiciliary settings (eg, assisted living facilities, group/boarding homes). We aimed to examine the time trends in HBMC utilization by care settings.DesignAnalyses of HBMC utilization at the national and state levels during the years 2012–2019.Setting and ParticipantsWith Medicare public use files, we calculated the state-level utilization rate of HBMC among fee-for-service (FFS) Medicare beneficiaries, measured by visits per 1000 FFS enrollees, in private residences and domiciliary settings, both separately and combined.MethodsWe assessed the trend of HBMC utilization over time via linear mixed models with random intercept for state, adjusting for the following state-level markers of HBMC supply and demand: number of HBMC providers, state ranking of total assisted living and residential care capacity, and the proportion of FFS beneficiaries with dementia, dual eligibility for Medicaid, receiving home health services, and Medicare Advantage.ResultsTotal HBMC visits in the United States increased from 3,911,778 in 2012 to 5,524,939 in 2019. The median (interquartile range) state-level HBMC utilization rate per 1000 FFS population was 67.6 (34.1–151.3) visits overall, 17.3 (7.9–41.9) visits in private residences, and 47.7 (23.1–86.6) visits in domiciliary settings. The annual percentage increase of utilization rates was significant for all care settings in crude models (3%–8%), and remained significant for overall visits and visits in domiciliary settings (2%–4%), but not in private residences.Conclusions and ImplicationsThe national-level growth in HBMC from 2012–2019 was largely driven by a growth of HBMC occurring in domiciliary settings. To meet the needs of a growing aging population, future studies should focus efforts on policy and payment issues to address inequities in access to HBMC services for homebound older adults, and examine drivers of HBMC growth at regional and local levels.