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Medicare Advantage Under-Performance

A commentary on Medicare Advantage in a high-profile medical journal delicately discusses issues with MA performance. We believe the evidence warrants a much more critical stance. We need not accept the inevitability of Medicare capture by under-performing private insurance.

December 20, 2023

The Predominance of Medicare Advantage
New England Journal of Medicine
December 14, 2023
By Gretchen Jacobson and David Blumenthal

If current trends persist, more than half the 66 million beneficiaries of Medicare will be enrolled in Medicare Advantage plans in 2023. This constitutes a historic milestone in the evolution of a unique federal program that has profoundly benefited older and disabled Americans and deeply influenced the evolution of our health care system. When President Lyndon Johnson and his congressional allies secured the enactment of Medicare in 1965, it is safe to say they never imagined that most eligible Americans would be enrolled in the types of payment and service arrangements that Medicare Advantage offers, rather than the traditional fee-for-service system. The anticipated predominance of Medicare Advantage raises obvious questions about why it has developed, what it means for the quality and cost of care available to Medicare beneficiaries, and what it means for our health care system as a whole.

Comment by: Ana Malinow & David Leibowitz

This article on Medicare Advantage (MA) will be read by thousands of physicians, many of whom have not yet grasped how MA exerts a major influence over the practice of medicine and patient care. For this reason, a health policy report published in the NEJM is important. Sadly, the Journal has opted to platform an article that glosses over the profound problems with the entire concept of MA. We list a few here.

Unlike MA, traditional Medicare does not employ prior authorization except under very limited circumstances. The article mentions that “most [MA plans] require beneficiaries to receive a referral or other authorization as a condition for covering the costs of specialized or complex care.” It would be more accurate to state that “nearly all” MA plans require beneficiaries to receive prior authorization, given that 99% of beneficiaries in MA are in plans that require prior authorization for some services. Prior authorization determines access to care, which the article declares “seems to be similar in MA and traditional Medicare… Patient and physician complaints about denials of care as a result of the prior-authorization requirements of MA plans seem to have increased in recent years, but there are only limited data on rates of denials.”

Data on denials and access to care are not limited. A 2022 study from the Office of Inspector General shows 13% of denied prior authorization claims are inappropriately denied by MA plans, services that would have been covered had the beneficiary been on traditional Medicare. Further, 18% of denied payment requests were inappropriately denied by MA plans. Three large MA companies are being sued for inappropriately using AI to systematically deny care. Hospitals across the country are dropping MA, because, as one hospital executive confirmed, these plans “pay less, don’t follow medical policy, coverage, billing, and payment rules and procedures, and they are always trying to figure out how to deny payment for services.”

How MA is paid is important, and the article discussed this at length. In addition to benchmarks and bids, the authors write “Payments to plans are further adjusted for two factors: quality of care and the health status (risk) of enrollees… Plans with higher star ratings are provided higher benchmarks against which to bid and receive a larger share of the difference between their bid and benchmark, which results in larger rebates. In 2023, 51% of plans were rated 4 stars or better.”

What the article does not discuss is how meaningless star quality ratings are. When over half of the plans score 4 stars of more, you wonder about the Lake Wobegon effect, where “all the women are strong, all the men are good-looking, and all the children are above average.” The Medicare Payment Advisory Commission (MedPAC), the federal agency that advises Congress on Medicare, is clear in its condemnation of the stars. In its 2023 Status Report to Congress, MedPAC stated that “quality in Medicare Advantage cannot be meaningfully evaluated” using the current star program. Despite its limitations, the quality bonus program accounts for more than $15 billion in annual payments to MA plans. In 2022, the NEJM published a series of articles by Lisa Rosenbaum explaining why the concept of quality measurement is questionable at best, if not totally useless.

Because star quality ratings fail to measure quality of care, especially for beneficiaries with serious and complex illness, the statement “[t]he quality of care in Medicare Advantage as compared with traditional Medicare seems to be equivalent or better, on the whole, and some evidence shows that Medicare Advantage has reduced disparities in quality in some parts of the country” does not withstand scrutiny. MA plans cover fewer cancer centers of excellence, MA beneficiaries are preferentially admitted to lower quality skilled nursing facilities, and MA beneficiaries in the last year of life, in poorer health or who belong to a racial or ethnic minorities are substantially more likely to disenroll and join traditional Medicare. Finally, when properly adjusted for risk selection and upcoding, MA is equivalent or worse than traditional Medicare on key quality metrics.

The third and major factor to plan payment is risk adjustment, which the authors dismiss by stating, “In fact, controversy rages over whether plans engage systematically in “upcoding” — the recording of diagnoses that are not expected to require treatment or that may be exaggerated or even fabricated.”

There is no controversy about whether plans engage in upcoding. Multiple publications, from the New York Times, in a highly critical expose of the MA industry, which they dubbed the “insatiable cash monster,” to Physicians for National Health Program, to MedPAC, have reported on the prevalence of upcoding and associated costs. In the 2023 status report, MedPAC reported that in two years, 2022 and 2023, MA “coding intensity” generated $44 billion of tax-payer dollars for the plans.

The authors supply the reader with assumptions of “may” and “seems” that would not otherwise be tolerated by NEJM. For example, that “Innovative care-delivery systems, care coordination, and comfort with managed care may also be driving some MA enrollment” or that “These systems may also enable plans to coordinate care.” There is no evidence for these statements, so why include them?  “Current beneficiaries are also more familiar with managed care and may be more comfortable with such arrangements than previous generations.” Why conflate familiarity with desire?

Further assumptions are found in the statement that “Another factor in the growth of MA may be obstacles to disenrollment. Beneficiaries who switch from Medicare Advantage to traditional Medicare may find that insurers that offer Medigap plans charge higher premiums for preexisting conditions or refuse to cover them at all.”

The facts are clear. Under federal law, newly Medicare-eligible enrollees have a 6-month “Medigap Open Enrollment” period, when they can purchase any Medigap policy without medical underwriting, meaning the enrollee cannot be denied coverage due to a pre-existing condition. Unless the enrollee lives in Maine, Connecticut, New York, or Massachusetts, purchasing a Medigap plan outside the 6-month window will either be impossible or exorbitantly expensive. The inability to purchase a Medigap policy poses a huge obstacle to any Medicare beneficiary on MA for longer than 6 months thinking about switching to traditional Medicare. This is especially fraught given the 40% of sick enrollees with financial barriers to care.

Instead of declaring profits are excessive, they ponder, “Another question concerns whether the profits earned by MA plans have become excessive. These profits seem at least in part the result of federal policy decisions and may not in all cases represent true efficiencies or higher value.” There is no question profits have become excessive, and profits are in greater part the result of compromised federal policy decisions, and not true efficiencies. According to a report by Wendell Potter, not only are government programs (Medicare and Medicaid in particular) the source of 90% of new health plan revenues of major insurance companies, but profits from all sources by the top seven US health insurance companies have climbed by almost 300% in the past 10 years to $70 billion in 2022. Why seed doubt?

It is true that “the fundamental features that make MA attractive to beneficiaries and investors remain in place,” despite feeble attempts by the federal government to rein in some of the worst abuses by MA companies. However, we are skeptical that tweaking around the MA edges, suggested by the authors, will result in both programs having a “level playing field” to test the role of competitive markets in health care. Do we need to keep retesting this hypothesis when we know “competitive markets” in health care do not reduce costs or improve outcomes? The neoliberal concept popular since Reagan/Thatcher has been to imagine that a freely competitive market is self-regulating. The nature of health care is such that it cannot function as a free competitive market, as first demonstrated by Kenneth Arrow.

The authors conclude that “the power of the Medicare Advantage industry and the huge numbers of older voters enrolled in Medicare Advantage plans also make it politically difficult to dramatically alter the course of the program.” This encourages readers to accept the status quo, that the for-profit companies raiding our public coffers are here to stay, and the best we can hope for is more of the same.

Readers of the NEJM should know that we must heighten our demands. Just because an expensive, opaque, self-serving, cruel system is “popular” among the industry and among seniors who have no other choice, does not make the system inevitable. There are two bills, one in the Senate and a better one in the House, that call for comprehensive, equitable, affordable, accessible, universal and improved Medicare for All. This is where we should be focusing our attention, not on a system that just because it is predominant, must be endured.

Ana Malinow MD is past president of Physicians for a National Health Program, a long-time single payer activist and writer, and recently retired as Professor of Pediatrics from UCSF.

David Leibowitz MD spent the first half of his career heading a research lab, at Columbia and Indiana Universities, and the second half in the community practice of Heme/Onc in the SF Bay Area.

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