Medicare Advantage: The Role of Private Health Plans in Medicare

1
Medicare Advantage The Role of Private Health
Plans in Medicare
Michelle Kitchman Strollo, Dr.P.H. Principal
Policy Analyst, Medicare Policy Project Kaiser
Family Foundation for KaiserEDU July 2007
2
Nearly one in five Medicare beneficiaries are in
a Medicare Advantage Plan, 2007
Figure 2
Medicare Advantage
8.7 million
(19.7)
Traditional Medicare
35.3 million
(80.2)
Total Medicare Beneficiaries 44 million
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Source Centers for Medicare and Medicaid
Services (CMS), Monthly Tracking Report, June
2007.
3
What are Medicare Advantage Plans?
Figure 3

• Health plans offered by private insurers that
  provide basic Medicare-covered benefits
• Includes HMOs, PPOs, Private Fee-for-Service and
  others
• Cost-sharing can differ as long as actuarially
  equivalent to Medicare
• Most also provide Part D drug coverage
• Plans are paid a per capita amount for each
  enrollee and are at risk for the cost of
  providing health care to enrollees
• Plans contract with Medicare on an annual basis
  and enrollment generally occurs during a
  designated period
• Beneficiaries enrolled in Medicare Advantage
  plans
• Generally pay the Part B premium
• May pay supplemental premium for additional
  benefits
• Out-of-pocket costs will depend on their
  particular medical needs and their plans
  requirements

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4
A Brief History of Private Plans in Medicare
Figure 4

• Health Maintenance Organization Act 76
  Authorized private plans in Medicare
• Tax Equity and Fiscal Responsibility Act 82
  Authorized risk-bearing Medicare HMOs
• Primary goal to save money for Medicare by
  managing care
• Plans were paid 95 of traditional Medicare costs
• Balanced Budget Act 97 Created MedicareChoice
• Primary goal to expand role of private plans,
  give beneficiaries more choice through new plan
  types (private fee-for-service, local PPOs)
• Modified payment system to level the playing
  field
• Medicare Modernization Act 03 Renamed
  MedicareChoice ? Medicare Advantage
• Authorized new plans (regional PPOs, SNPs,
  Medicare MSAs)
• Updated payment system to encourage plan
  participation currently higher than payments in
  traditional Medicare

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5
Plan Participation and Enrollment
Figure 5
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6
Figure 6
Medicare private plan/Advantage contracts have
climbed rapidly since 2004 and are now at an all
time high
602
407
240
Note Includes local HMOs, PSOs, and PPOs,
regional PPOs, PFFS plans, Cost contracts,
Demonstrations, HCPP, and PACE contracts.
Source Mathematica Policy Research, Inc.
Tracking Medicare Health and Prescription Drug
Plans Monthly Report December 1999-2006. CMS
Medicare Advantage, Cost, PACE, Demo, and
Prescription Drug Plan Contract Report, Monthly
Summary Report, June 2007.
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7
Figure 7
Medicare Private Plan/Advantage enrollment is
rising steadily after a decline earlier in the
decade
8.7
In millions
Note Includes local HMOs, PSOs, and PPOs,
regional PPOs, PFFS plans, Cost contracts,
Demonstrations, HCPP, and PACE contracts.
Source Mathematica Policy Research, Inc.
Tracking Medicare Health and Prescription Drug
Plans Monthly Report December 1999-2006. CMS
Medicare Advantage, Cost, PACE, Demo, and
Prescription Drug Plan Contract Report, Monthly
Summary Report, June 2007.
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8
Medicare Advantage penetration varies by state
Figure 8
U.S. Penetration, June 2007 19.7
2
1
17
34
10
9
2
6
DC8
lt10 penetration (19 states)
10-20 penetration (17 states)
20-30 penetration (7 states)
gt30 penetration (8 states)
NOTE Plans with 10 or fewer enrollees were
omitted from state enrollment counts but included
in the total U.S. count. Source Centers for
Medicare and Medicaid Services (CMS), June 2007.
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9
Figure 9
Enrollment in Medicare Advantage plans is highly
concentrated
UnitedHealth Care
(1.4 million enrollees)
Blue Cross/Blue Shield affiliates
4.6 million beneficiaries account for more than
half of total Medicare Advantage enrollment
(1.2 million)
All Others
Humana Inc.
(1.1 million)
Kaiser Permanente
(0.9 million)
Total Medicare Advantage Enrollment 8.7 million
NOTE All Other Medicare Advantage Plans
includes plans with enrollment less than 230,000
beneficiaries. Total for Blue Cross/Blue Shield
affiliates provided by Blue Cross/Blue Shield.
Numbers rounded. Data as of May 15, 2007.
SOURCE Centers for Medicare and Medicaid
Services (CMS), June 2007 Monthly Summary.
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Characteristics of Medicare Advantage Enrollees
Figure 10
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11
Figure 11
Half of all beneficiaries in traditional Medicare
and in Medicare Advantage plans live on incomes
below 20,000
gt30,000
20,000 - 30,000
10,000 - 20,000
lt10,000
Traditional Medicare
Medicare Advantage
NOTES Numbers do not add to 100 due to
rounding. Data exclude 3.6 million beneficiaries
due to missing income data. SOURCE Kaiser Family
Foundation analysis of the 2005 Medicare Current
Beneficiary Survey (MCBS).
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12
Figure 12
Medicare Advantage enrollment rates are similar
for White and African American beneficiaries
somewhat higher among Hispanic beneficiaries
NOTES Numbers do not add to 100 due to
rounding. SOURCE Kaiser Family Foundation
analysis of the 2005 Medicare Current Beneficiary
Survey (MCBS).
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13
Figure 13
A small share of beneficiaries in rural areas are
enrolled in a Medicare Advantage plan
Note As of 2006, 7 of Medicare beneficiaries in
rural areas were enrolled in Medicare Advantage
plans, according to MedPAC.
18
2
2005
SOURCE Kaiser Family Foundation analysis of the
2005 Medicare Current Beneficiary Survey (MCBS).
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14
Figure 14
Medicare Advantage enrollees are generally in
better health than beneficiaries in traditional
Medicare
Medicare Advantage
Traditional Medicare
SOURCE Kaiser Family Foundation analysis of the
2005 Medicare Current Beneficiary Survey (MCBS).
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Types of Medicare Advantage Plans
Figure 15
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16
The majority of Medicare Advantage enrollees are
in Medicare HMOs
Figure 16
2007 Medicare Advantage Enrollment 8.7 million
Notes Local HMO/PPO also includes a small number
enrolled in provider sponsored organizations.
Numbers do not sum to 100 percent due to
rounding. SOURCE Centers for Medicare and
Medicaid Services, Medicare Advantage, Cost,
PACE, Demo and Prescription Drug Plan Contract
Report, Monthly Summary Report, June 2007.
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17
Enrollment in Medicare private fee-for-service
plans has increased rapidly
Figure 17
1,581,393
25,897
SOURCE Avalere Health analysis of Centers for
Medicare and Medicaid Services, Medicare Managed
Care Contract Report (2000-2005) Centers for
Medicare and Medicaid Services, Monthly Summary
Report (2006-2007). Figures are year-end for
2000-2006 and as of June for 2007.
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Payments to Medicare Advantage Plans
Figure 18
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19
Medicare Advantage plans that bid below their
area benchmark may use a portion of the
difference to finance extra benefits
Figure 19
Enrollee Premiums
25 Returned to Medicare
100
Benchmark 1,000
100
75 Rebated to plan to fund extra benefits
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20
Medicare pays more, on average, for enrollees in
MA plans than it would spend on those
beneficiaries if they were in traditional Medicare
Figure 20
Payments as share of traditional Medicare
119
112
Source Medicare Payment Advisory Committee,
March 2007.
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21
Implications for Medicare Advantage Enrollees
Figure 21

• Unprecedented number of plans available
• Additional benefits available to enrollees
• Plan benefits vary widely
• Quality also varies across plans and theres
  little information on performance of new plan
  types, like private fee-for-service
• Can be challenging for beneficiaries to choose
  the best plan

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22
Figure 22
Implications for Medicare Program

• Current Payment System
• Adds to the cost of Medicare, cuts short the life
  of the Medicare Part A trust fund, and increases
  Part B premiums paid by all beneficiaries
• Equitable Distribution of Benefits
• Current payment system facilitates extra benefits
  for a subset of Medicare beneficiaries, raising
  questions about extent to which benefits are
  distributed equitably across the Medicare
  population
• Future Role of Private Plans
• Surge in number of plans and enrollment has
  implications for future stability of traditional
  Medicare

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23
Related Resources
Figure 23

• Medicare Advantage Fact Sheet http//www.kff.org/
  medicare/2052.cfm
• Medicare Health Plan Tracker http//www.kff.org/m
  edicare/healthplantracker/
• MedPAC Recommendations to Congress on Medicare
  Advantage Program http//www.medpac.gov/documents
  /062807_Housebudget_MedPAC_testimony_MA.pdf
• CBO Testimony on Medicare Advantage
  http//www.cbo.gov/ftpdoc.cfm?index8265type0

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