What Makes Medicare Advantage So Popular?

Since inception, Medicare Advantage has been the center of debate, questions, and questionable motivations.  The tremendous growth in enrollees indicates the product has identified a value for its consumer; but at what price?  In some respects, Medicare Advantage products has brought out the worse in the industry concurrent with highlighting the best in the system.

 

Within the countless hours and well funded lobbying movements in decades, the healthcare debate has quietly discussed currently funded services.  Medicare Advantage has the eye of President Obama.  The Office of the President has proposed stripping $100 billion plus in subsidies over a decade.  This debate is unique because a cadre of bipartisan supporters has already been able to restore $10 billion of the proposed reductions. 

 

If the macro-level debate could spark similar bipartisan support, the debate could move gear up and shift into implementation.

 

Medicare Advantage products have achieved a 14.3% market penetration in Indiana – lower than the national average, and its average monthly payment is approximately $782/month versus a national average of $849.50.  In a state with over 980,000 Medicare enrollees or 15% of the State’s population, the most recent data (through 2004) indicate total Indiana Medicare spending is a little higher than the national average.  Illinois lags behind Indiana in total spending while Ohio is somewhat higher.  This data reinforces Indiana’s positioning as average in its commitment to Medicare funding and utilization.  What is more surprising, when compared to Ohio, total discharges for short-stay hospitals in Indiana is less on average than Ohio, total days of care is near 50% of Ohio, and when analyzed by site of care, residents of Ohio have significantly higher utilization of hospital stays, home health, pharmaceuticals, and skilled nursing.  With these major differences in care management and treatment, when looking only at Medicare Advantage products, Ohio has a 26% market penetration versus Indiana’s 14.3%

 

The care delivery system in Ohio is one in which there are 15 special needs plans[1] for Medicare Advantage customers in Ohio where Indiana has 7.  Both states as of the most recent data have a similar percentage of its physicians accepted Medicare assignment.  In total, Ohio as 42 Medicare Advantage contracts and Indiana has 30.

 

Medicare Advantage has enjoyed a rapid, rocky, and at times torrid role within the healthcare business model since its inception in 2003 as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.  Replacing an earlier incarnation, Medicare +Choice, the concept of Medicare Advantage was to open the Medicare population up to insurers thereby offering consumers (in this case enrollees) the option of purchasing a Medicare product outside the governmental structure.  Since 2004 the enrollment in this plans have skyrocketed as has the added stress on a historically burdened system.  In 2009, Medicare Advantage enrollees cost were 14% higher than those of traditional Medicare recipients. According to MedPAC, 2009 payments to Medicare Advantage enrollees will average 114% of fee for service costs for the counties the enrollees have residence.  MedPAC also found that “…reduced cost sharing is the most common benefit enhancement but that for

2009 Medicare pays $1.30 in subsidies to the plans for each $1 provided in extra benefits (to enrollees). 

 

Several companies over the also few years have been identified by the government as employing unfair marketing practices; some have been suspended for a brief time from marketing their plans.  The notion of health care reform expounded by liberals and conservatives is an attempt to rein in costs and improve quality.  Very much an oxymoron, the solution is difficult to amass because the root cause and strategic issues are mired within the regulatory, billing, and practice standards of all stakeholders – physicians, hospitals, payers, government.  The drain on Medicare is significant; the opportunity for abuse is built into the program.  Aside from payment, within the industry payers and health systems have leapt to their feet to secure access to or a branded Medicare Advantage product.  A unique requirement within the regulatory guideline for Medicare Advantage is that a hospital, for example, can market to its constituents, friends, etc. in lieu of mass marketing. 

 

·         The doors is open for payers to link with hospitals in an effort to capture seniors and/or hospitals to develop business units to sell private label Medicare Advantage to its current and future consumer base.

 

·         Pushes providers to create senior clubs, programs, whatever it can to attract the broadest spectrum of 65+ consumers to it door.

 

·         Builds one additional level of questioning by potential consumers – a population already facing serious financial issues, high levels of dementia, and regulatory nightmares.

 

·         Creating new value in building long standing relationships with this market segment in order to steer its high volume and utilization, particularly due to chronic disease.

 

Last week Mayo Clinic announced that it would begin limiting the number of Medicare and Medicaid enrollees coming through its doors seeking healthcare.  Medicare Advantage enrollees seeking improved and potentially lower cost care often find themselves being denied by the payer marketing access to care through Medicare Advantage. 

 

The scientific method of discovery and business method of innovation are very similar.  Experimentation, build a hypothesis and testing it, is an advantageous road for creating change.  The Medicare Advantage hypothesis has demonstrated consumer value through it record setting enrollments.  It has also demonstrated an industry keen on locating and targeting loopholes to secure profitable return on investment.  The root cause of the healthcare debate is deep.  A solution needs to be more than cosmetic and implementation must be within the guardrails of pilot or hypothesis testing for a real solution to be identified, designed, and implemented.  Rather than strip dollars from Medicare Advantage and accept the less than stellar implementation, identify where the value for consumers is and build from that.