Medicare Advantage plans are beginning to contribute to the moderating trend of the growth in Medicare per capita spending, which is at overall historic lows as a result of fewer hospital readmissions and shift to generic prescription medications.
"We have a much different Medicare program than we did three or four years ago, before passage of the Affordable Care Act," said Jonathan Blum, acting principal deputy administrator of the Centers for Medicare & Medicaid Services, and director of its Center for Medicare, at a recent conference sponsored by America's Health Insurance Plans (AHIP).
"Benefits are better, quality is better and costs are coming down," he said, adding that Medicare Advantage is an example that it is possible to do all three. "We have the data."
Part of the shift is that more seniors are enrolling in private Medicare Advantage, or Part C, plans, and more of them are choosing the better-performing plans. "Five percent growth is projected in 2014 in Part C, which is faster than overall growth in the Medicare program," Blum said. "… we've seen a steady but dramatic increase in the number of plan beneficiaries who are in 4-star and 5-star plans. In 2014, it is 55 percent."
In its Five-Star Quality Rating System, CMS uses 36 quality measures in five topic areas to rate Medicare Advantage plans from one to five stars so beneficiaries can compare them.
Many plans have put in place programs and provider contracts to change from being a 2- or 3-star plan to 4- or 5-star plan. "My father is in a 4-star plan, and I feel comfortable that my father is receiving the best possible care from his plan," he noted.
Beneficiaries also have switched from 2- or 3-star plans to 4- or 5-star plans. Adding support for quality plans, CMS will help beneficiaries, particularly those in low-performing plans, change to higher-performing plans, Blum said.
CMS also pays Medicare Advantage plans less than before Affordable Care Act, "when average plan payments were 114 percent of Medicare fee-for-service overall and now is closer to 103 percent and getting down to goal of parity," he said. "So we are paying lower payments to our plans compared to the average FFS; quality is increasing; there is no change in benefits; and per capita costs in Part C is essentially flat."
Despite CMS' overall optimism, a recent analysis from Avalere Health found that Medicare Advantage plans will decrease somewhat in 2014, reflecting continued payment reductions under ACA. The total number of Medicare Advantage plans will slip 5.3 percent from 2,664 in 2013 to 2,522 in 2014, based on CMS Landscape Files for 2014.
The decrease in 2014 will occur in a majority of counties across the country, with 80 percent of counties in the South and Midwest and slightly more than half in the Northeast and West experiencing fewer Medicare Advantage options.
"The multitude of payment changes for Medicare Advantage plans under the ACA are taking root and starting to broadly impact the number and types of plans available in the market," said Matt Eyles, Avalere Health executive vice president, in a news release. Besides the phase-in of payment cuts under ACA, other changes include revisions to the CMS risk-adjustment model, new medical loss ratio requirements for Medicare Advantage plans and the application of the new health insurer fee, he said.
A recent analysis from HealthPocket found that many Medicare Advantage plans that also included a Part D prescription drug benefit in 2014 have much lower maximum out-of-pocket caps than the current $6,700 limit for such plans. Some even had a $3,400 or lower out-of-pocket cap and a zero premium.
With such favorable options, trends reflect that Medicare Advantage plans with Part D are attracting increasingly more seniors over traditional Medicare with a supplemental plan and a Part D plan, HealthPocket noted.
"Quality scores should inform a final decision," Steve Zalenick, executive director for consumer strategy and development at HealthPocket, cautioned in a news release. "Medicare enrollees need to factor in whether their doctors and hospitals are in a plan's network, whether their current medications are covered, and the amount charged for specific medical services they may need in the coming year."
Supporting that trend, Avalere's analysis found that to accommodate financial pressures, plans are relying more on highly-managed health maintenance organizations, which will increase by 2.6 percent, while preferred provider organization offerings will drop 16.6 percent in 2014.