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How Medicare Advantage Distorts Clinical Outcome Data

March 15, 2023

Summary: Two studies reveal how Medicare Advantage plans distort comparisons with Traditional Medicare on inpatient and emergency visit rates, which represent clinical deterioration. A study done by MA employees is biased by massive diagnostic upcoding of MA enrollees. A study by university researchers reveals how inpatient admissions fall while emergency visits rise even more. Properly examined, MA has worse outcomes.

Comparison of Care Quality Metrics in 2-Sided Risk Medicare Advantage vs Fee-for-Service Medicare Programs
JAMA Network Open
December 12, 2022
By Kenneth Cohen et al

Findings In this cohort study of 316 312 individuals, physicians in a 2-sided risk Medicare Advantage model provided care of higher quality and efficiency compared with those practicing in a fee-for-service Medicare program in all 8 metrics measured. [NB – HJM doesn’t believe these findings … see comment]

Evaluation of Potentially Avoidable Acute Care Utilization Among Patients Insured by Medicare Advantage vs Traditional Medicare
JAMA Health Forum
February 24, 2023
By Adam L. Beckman et al

Importance Medicare Advantage plans have strong incentives to reduce potentially wasteful health care, including costly acute care visits for ambulatory care−sensitive conditions (ACSCs). However, it remains unknown whether Medicare Advantage plans lower acute care use compared with traditional Medicare, or if it shifts patients from hospitalization to observation stays and emergency department (ED) direct discharges.

Objective To determine whether Medicare Advantage is associated with differential utilization of hospitalizations, observations, and ED direct discharges for ACSCs compared with traditional Medicare.

Results Medicare Advantage patients had lower risk of hospitalization for ACSCs compared with traditional Medicare patients (relative risk [RR], 0.94), primarily owing to fewer hospitalizations for acute conditions (eg, pneumonia). Medicare Advantage patients had a higher risk of ED direct discharges (RR, 1.44) and observation stays (RR, 2.38) for ACSCs vs traditional Medicare patients. Overall, Medicare Advantage patients were at higher risk of needing care for an ACSC (hospitalization, ED direct discharge, or observation stay) than traditional Medicare patients (RR, 1.30).

Comment by: Jim Kahn

I’m a huge believer in the value of “health services research”. We need formal quantitative analyses of the effects of insurance status and other factors on measures – like hospitalization – that reflect clinical and financial outcomes. And I’ve seen enough studies over the decades to know that extracting legitimate conclusions from these studies is challenging, due to the complexity of the medical world and due to the risk of shoddy (often biased) research.

Both complexity and bias are in evidence with these two studies that compare hospitalization rates in Medicare Advantage (MA) vs Traditional Medicare (TM). One, done by UnitedHealth Group employees, is profoundly biased. The other, by respected academic researchers, elucidates what’s really happening with hospital and emergency stays.

The industry study (Cohen et al) examines several inpatient and emergency outcomes. Its core problem is huge diagnostic upcoding of the MA beneficiaries. As shown in Table 1, the prevalence of recorded serious diagnoses is twice as high for MA plans as for TM – despite the fact that MA enrollees are known to be healthier than TM enrollees. Why does this matter? Because several of the key statistical analyses are adjusted for the misleading extra diagnoses. If the MA beneficiaries seem sicker than they really are, it makes MA plan outcomes look better. Thus, key results are fallacious, most strikingly for COPD and heart attack / stroke. If the MA population was properly represented as healthier than the TM population, TM would probably have looked better across the board. (The paper is also incompletely and confusingly reported, which challenges sorting out all the details.)

An important quick detour: Rick Gilfillan, Don Berwick, and others analyzed the financial implications of this huge diagnostic upcoding, finding that it would lead to a 34% overpayment to MA as compared with TM. This confirms their prior “money machine” analyses discussed here, buttressing the argument that MA is shifting public funds to private shareholders.

The academic study (Beckman et al) is a model of conceptual clarity, sophisticated statistics, and excellent reporting. It adjusts (in several ways) for diagnostic upcoding. And it finds that an apparent decrease in hospitalization rates in MA is more than offset by increases in emergency department discharges and “observation” visits. In other words, for medical conditions amenable to good ambulatory care, overall MA does worse than TM. Why would these clinical episodes shift from inpatient to emergency department only? An obvious concern is that MA plans are denying authorizations for inpatient admission. Is that inferior clinical care? Impossible to say, but that’s a real concern. In any case, this excellent research clarifies that MA claims of lower hospitalization rates are misleading at best.

When it comes to health services research (perhaps even more than medical research in general), coupled with financial interests, the adage must be, “Buyer beware”. We at HJM strive to be your docent in this world.


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