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Do Medicare Advantage Plans Respond to Payment Changes? A Look at the Data from 2009 to 2014

March 14, 2018

Issue: Medicare Advantage (MA) enrollment has grown significantly since 2009, despite legislation that reduced what Medicare pays these plans to provide care to enrollees. MA payments, on average, now approach parity with costs in traditional Medicare.Goal: Examine changes in per enrollee costs between 2009 and 2014 to better understand how MA plans have continued to thrive even as payments decreased.Methods: Analysis of Medicare data on MA plan bids, net of rebates.Findings: While spending per beneficiary in traditional Medicare rose 5.0 percent between 2009 and 2014, MA payment benchmarks rose 1.5 percent and payment to plans decreased by 0.7 percent. Plans' expected per enrollee costs grew 2.6 percent. Plans where payment rates decreased generally had slower growth in their expected costs. HMOs, which saw their payments decline the most, had the slowest expected cost growth.Conclusions: In general, MA plans responded to lower payment by containing costs. By preserving most of the margin between Medicare payments and their bids in the form of rebates, they could continue to offer additional benefits to attract enrollees. The magnitude of this response varied by geographic area and plan type. Despite this slower growth in expected per enrollee costs, greater efficiencies by MA plans may still be achievable.

Are Medicare Advantage Plans Lower-Cost Than Traditional Medicare?

January 28, 2016

The costs of providing benefits to enrollees in private Medicare Advantage (MA) plans are slightly less, on average, than what traditional Medicare spends per beneficiary in the same county. However, MA plans that are able to keep their costs comparatively low are concentrated in a fairly small number of U.S. counties. In the 25 counties where the cost differences between MA plans and traditional Medicare are largest, MA plans spent a total of $5.2 billion less than what traditional Medicare would have been expected to spend on the same beneficiaries, with health maintenance organizations (HMOs) accounting for all of that difference. In the rest of the country, MA plans spent $4.8 billion above the expected costs under traditional Medicare. Broad determinations about the relative efficiency of MA plans and traditional Medicare can therefore be misleading, as they fail to take into account local conditions and individual plans' performance.

Competition Among Medicare's Private Health Plans: Does It Really Exist?

August 25, 2015

Competition among private Medicare Advantage (MA) plans is seen by some as leading to lower premiums and expanded benefits. But how much competition exists in MA markets? Using a standard measure of market competition, our analysis finds that 97 percent of markets in U.S. counties are highly concentrated and therefore lacking in significant MA plan competition. Competition is considerably lower in rural counties than in urban ones. Even among the 100 counties with the greatest numbers of Medicare beneficiaries, 81 percent do not have competitive MA markets. Market power is concentrated among three nationwide insurance organizations in nearly two-thirds of those 100 counties.

Medicare Payment Reform: Aligning Incentives for Better Care

June 29, 2015

The Affordable Care Act (ACA) has provided the Medicare program with an array of tools to improve the quality of care that beneficiaries receive and to increase the efficiency with which that care is provided. Notably, the ACA has created the Center for Medicare and Medicaid Innovation, which is developing and testing promising new models to improve the quality of care provided to Medicare beneficiaries while reducing spending. These new models are part of an effort by the U.S. Department of Health and Human Services to increase the proportion of traditional Medicare payments tied to quality or value to 85 percent by 2016 and 90 percent by 2018. This issue brief, one in a series on Medicare's past, present, and future, explores the evolution of Medicare payment policy, the potential of value-based payment to improve care for beneficiaries and achieve savings, and strategies for accelerating its adoption.

The Affordable Care Act and Medicare

June 9, 2015

This second report in the series Medicare at 50 Years describes how the Affordable Care Act is strengthening the program for current and future beneficiaries and outlines the major challenges that policymakers have yet to confront. By starting to move Medicare away from fee-for-service payment and holding health care providers more accountable for both the quality and total cost of care, certain ACA reforms—most notably the new Center for Medicare and Medicaid Innovation—have the potential to reshape not just the Medicare program but the entire U.S. health care system, the authors say. But the rapid influx of new beneficiaries as the postwar generation retires will necessitate further changes to Medicare, as total program outlays will likely outpace growth in the economy. Another challenge is Medicare's complex and fragmented benefit package, which as currently configured is inadequate for meeting the financial and health care needs of future beneficiaries.

The Affordable Care Act's Payment and Delivery System Reforms: A Progress Report at Five Years

May 7, 2015

In addition to its expansion and reform of health insurance coverage, the Affordable Care Act (ACA) contains numerous provisions intended to resolve underlying problems in how health care is delivered and paid for in the United States. These provisions focus on three broad areas: testing new delivery models and spreading successful ones, encouraging the shift toward payment based on the value of care provided, and developing resources for systemwide improvement. This brief describes these reforms and, where possible, documents their initial impact at the ACA's five-year mark. While it is still far too early to offer any kind of definitive assessment of the law's transformation-seeking reforms, it is clear that the ACA has spurred activity in both the public and private sectors, and is contributing to momentum in states and localities across the U.S. to improve the value obtained for our health care dollars.

Health Care Opinion Leaders' Views on Health Spending and Reform Implementation

November 14, 2011

Presents survey responses from healthcare experts about support for the reform law's coverage expansion provisions, payment and delivery system reforms, the budget reduction framework that relies in part on Medicare and Medicaid savings, and other issues.

Identifying, Monitoring, and Assessing Promising Innovations: Using Evaluation to Support Rapid-Cycle Change

June 16, 2011

Examines the new Center for Medicare and Medicaid Innovation's mission, critical issues, and challenges in finding effective ways to raise healthcare quality and lower costs, documenting innovation, and providing evidence to support broad policy change.

Achieving Accountable Care: Are We on the Right Path?

April 14, 2011

Based on the Commonwealth Fund Commission on a High Performance Health System's ten recommendations, highlights considerations for the Centers for Medicare and Medicaid Services in finalizing rules for the Shared Savings Program, slated to begin in 2012.

High Performance Accountable Care: Building on Success and Learning From Experience

April 14, 2011

Presents the rationale for creating accountable care organizations, promising models, and the Commonwealth Fund Commission on a High Performance Health System's recommendations for implementing ACOs widely to achieve improved quality and efficiency.

Health Care Opinion Leaders' Views on Congressional Priorities

February 22, 2011

Presents survey results on healthcare experts' support for implementing the 2010 health reform, including the individual mandate, health insurance exchanges, and Medicaid expansion; incentivizing care coordination; and expanding cost-containment pilots.

Health Care Opinion Leaders' Views on Transparency and Pricing

October 25, 2010

Presents survey results on healthcare experts' views on the importance of public access to clinical quality and price information, its role in improving health system performance, and various payment reforms and mechanisms to foster efficiency and value.