Kaiser Family Foundation Brief: Perspectives on the Medicare Advantage Market

The Patient Protection and Affordable Care Act (ACA) of 2010 included payment cuts to Medicare Advantage (MA) plans to be phased-in beginning in 2012. In a brief titled Firm Perspectives on the Medicare Advantage Market prepared by the Kaiser Family Foundation Program on Medicare Policy, firms report they expect their program offerings to be relatively stable in 2012, with no major changes anticipated. There is optimism among companies offering MA plans that the new quality-based bonus payments will offset payment reductions in the near term. The ACA includes legislative restrictions on private fee-for-service plans; firms that had offered those plans have replaced them with other MA products and beneficiaries have been transitioning to preferred provider organizations (PPOs). The findings presented in the Kaiser brief are based on extensive interviews with senior executives responsible for MA programs in 14 firms: UnitedHealthcare, Humana, WellPoint Blue Cross/Blue Shield (BCBS), other BCBS affiliates, Kaiser Permanente, Coventry, Aetna, HealthNet, Universal American, Wellcare, Health Spring, WellPoint (non-BCBS), Sterling, and CIGNA. The majority of the interviews were conducted after the preliminary 2012 payment rates were announced by the Centers for Medicare & Medicaid Services (CMS). Although there are fewer companies participating in the MA market, the changes included in the ACA seem to have favored firms with a long-term commitment to seniors and the MA market. Those firms that remain in the MA market acknowledge that without Medicare they would not be in the market; those companies with a long-term commitment to MA plans tend to be diversified across payers. They offer a range of Medicare products that include many versions of MA plans, Medigap options, stand-alone Part D drug plans, and other services that complement those offerings. The bonus payments included in the ACA are seen as crucial to firms’ plans to stay in the MA market, according to the brief. Bonus payments based on quality are considered “good policy” where organizational and government interests align, the interviews found. Most of the firms interviewed said they expected to receive payments, although only a few thought they would achieve 5 stars, the highest quality rating. Concerns about the bonus payment system voiced by the executives included worries about how the benchmark for performance will be constructed and how different metrics will be weighted. There was also concern about uncertainty, noting that the star ratings used by CMS were like a “moving target,” and that many specifics affecting the bonuses were still unknown. Special Needs Plans The Kaiser interviews included firms with a strong presence in the special needs plan (SNP) market. Those companies expressed concerns that the metrics of the overall MA program would not work well for their populations. As a rule, SNPs have too few enrollees to support some of the metrics. In addition, patients in SNPs have less common care needs and are less likely to respond to telephone surveys of quality of care conducted by CMS. Also, some guidelines for general care may not apply to subsets of SNP patients due to conflicting medical considerations. Accountable Care Organizations When asked about accountable care organizations (ACOs), the firms said they were waiting to see what would drive ACOs (the interviews were conducted prior to the release of the CMS draft regulations for ACOs). Some of the MA firms expressed concerns about the focus on provider consolidation, while others see ACOs as a potential new fee-for-service market that might benefit from their expertise in areas such as insurance and sales, financial risk management, and care management. The majority of the MA firms were deferring making decisions regarding ACOs until the final regulations are issued. The Role of CMS MA firms see CMS as an increasingly important factor in the development of the MA market. The firms expressed 2 major concerns about CMS policy: the first concern related to the agency’s policy regarding approval of plans as part of bid negotiations and the second revolves around CMS’s risk adjustment data validation (RADV) audits. Concerns about the bid negotiations centered on the possibility that CMS may limit the number of plans of similar type that firms offer in a particular market, discouraging multiple plan submission in the same area unless the places were significantly different from one another, limiting significant increases in annual cost-sharing or decreases in benefits. Firms that have been selected for an RADV audit in the past expressed frustration with the burden of the audits and the potentially large financial obligations they may face in future audits; for example, firms indicated that the length of look-back period of the audits has complicated their ability to locate records from providers, creating a burden on personnel and financial resources. Preferred Provider Organizations In recent years, PPOs have become more common in MA and enrollment in them has grown. MA market firms see network-based MA products as the future, according to the brief. PPOs are seen as being flexible and attractive to newly eligible Medicare beneficiaries, particularly those who have worked for an employer who offered PPO plans. As baby boomers reach retirement age, attracting people who are eligible for Medicare to MA programs is becoming increasingly important. Several firms interviewed said they were developing plans for retirees <65 years of age, hoping to retain them when they become eligible for Medicare. Noting that employer-sponsored retiree coverage is decreasing, MA firms look for more retirees to be attracted to the individual market, creating a growing market for MA plans. The brief noted that MA firms expect enrollment to continue to grow in 2011 and relative stability in 2012. Most said the CMS decision to pursue the bonus demonstration was an important factor stabilizing the market and creating incentives for improved quality performance, although there is some concern about technical issues that are yet to be addressed. In conclusion, the authors of the brief said, “Finally, firm interviews point out the potential artificiality of looking at Medicare Advantage and traditional Medicare as 2 entirely distinct markets. Many of the firms we talked with offer products for all Medicare beneficiaries, not just those in Medicare Advantage. Further, their Medicare Advantage contracts involve many providers who also treat beneficiaries in the traditional Medicare program. As firm discussions of ACO evolution reveal, they have insights into the challenges providers are facing through their experience working with them both in Medicare and in the commercial market. The issue is how best to leverage the firms’ experience gained through Medicare Advantage to support and strengthen the broader initiatives of healthcare delivery and payment reform.”