How Successful Is Medicare Advantage?

Abstract

Context: Medicare Part C, or Medicare Advantage (MA), now almost 30 years old, has generally been viewed as a policy disappointment. Enrollment has vacillated but has never come close to the penetration of managed care plans in the commercial insurance market or in Medicaid, and because of payment policy decisions and selection, the MA program is viewed as having added to cost rather than saving funds for the Medicare program. Recent changes in Medicare policy, including improved risk adjustment, however, may have changed this picture.Methods: This article summarizes findings from our group's work evaluating MA's recent performance and investigating payment options for improving its performance even more. We studied the behavior of both beneficiaries and plans, as well as the effects of Medicare policy. Findings:Beneficiaries make "mistakes" in their choice of MA plan options that can be explained by behavioral economics. Few beneficiaries make an active choice after they enroll in Medicare. The high prevalence of "zero-premium" plans signals inefficiency in plan design and in the market's functioning. That is, Medicare premium policies interfere with economically efficient choices. The adverse selection problem, in which healthier, lower-cost beneficiaries tend to join MA, appears much diminished. The available measures, while limited, suggest that, on average, MA plans offer care of equal or higher quality and for less cost than traditional Medicare (TM). In counties, greater MA penetration appears to improve TM's performance. Conclusions:Medicare policies regarding lock-in provisions and risk adjustment that were adopted in the mid-2000s have mitigated the adverse selection problem previously plaguing MA. On average, MA plans appear to offer higher value than TM, and positive spillovers from MA into TM imply that reimbursement should not necessarily be neutral. Policy changes in Medicare that reform

Premium Levels and Demand Response in Health Insurance: Relative Thinking and Zero-Price Effects

“…A subsidy equal to costs in TM is sufficient to finance a negative premium for most plans, since MA plans are, on average able to provide the same benefits as TM at lower cost (Newhouse and McGuire, 2014). When the Medicare subsidy exceeds the MA plan's bid, which is supposed to be a declaration of its costs, the plan must either increase benefits to beneficiaries (by, for example, reducing the demand-side cost sharing from that in TM) or reduce the premium charged to beneficiaries.…”

Potential “Savings” of Medicare: The Analysis of Medicare Advantage and Accountable Care Organizations

“…McGuire et al (2011) review the economic history of Medicare Advantage and find that Medicare Advantage generally cost more than the traditional Medicare program. Newhouse and McGuire (2014) suggest that, on average, Medicare Advantage plans appear to offer higher value than the Original Medicare, and greater Medicare Advantage penetration appears to improve the performance of the Original Medicare. Landon et al (2012) compare utilization patterns of enrollees in Medicare Advantage plans and the traditional Medicare.…”

Mistaken for Dead: The Affordable Care Act and the Continued Resilience of Medicare Advantage

“…With rising payments and expanded benefits, as well as more recent evidence showing that MA outperforms traditional Medicare on various quality measures, MA has become a welfare-expanding and welfare-improving program (Ayanian et al 2013a;Ayanian et al 2013b;Newhouse and McGuire 2014). The financial protections and improving quality has helped to broaden support and increase the political legitimacy of the program.…”

“…A 2006 report from the Commonwealth Fund showed that in a sample of 88 MA plans, the out-of-pocket (OOP) costs were lower in nearly every MA plan than they would have been had a beneficiary enrolled in traditional Medicare (Biles, Nicholas, and Guterman 2006a). 3 In addition to greater protections against financial risk, recent evidence shows that in areas where comparable data is available, MA has outperformed traditional Medicare on various measures of quality and appropriateness of care (Newhouse and McGuire 2014). Beneficiaries enrolled in MA HMOs, for example, were consistently more likely to receive appropriate breast cancer screenings, diabetes care, and cholesterol testing for cardiovascular disease, as well as have higher rates of influenza and pneumococcal vaccines (Ayanian et al 2013b;Newhouse and McGuire 2014).…”

“…3 In addition to greater protections against financial risk, recent evidence shows that in areas where comparable data is available, MA has outperformed traditional Medicare on various measures of quality and appropriateness of care (Newhouse and McGuire 2014). Beneficiaries enrolled in MA HMOs, for example, were consistently more likely to receive appropriate breast cancer screenings, diabetes care, and cholesterol testing for cardiovascular disease, as well as have higher rates of influenza and pneumococcal vaccines (Ayanian et al 2013b;Newhouse and McGuire 2014). In addition, data from emergency and ambulatory surgery utilization showed considerably lower usage among MA HMO enrollees compared to those in traditional Medicare.…”