The Impact of Medicare Advantage Plans, ACOs, Payment Reform

January 05, 2016 - Now that the New Year is upon us, the Medicare program may be undergoing some significant changes that could affect patients and healthcare services. One ongoing transformative characteristic is the rise in enrollment in Medicare Advantage plans.

The Henry J. Kaiser Family Foundation comments that, despite decreased payments in Medicare Advantage plans set up by the Affordable Care Act, the number of Medicare beneficiaries signing up for these particular plans is continually rising.

After the Affordable Care Act became law, the number of people signing up for Medicare Advantage plans rose by 50 percent or 5.6 million. The results show that 31 percent of Medicare beneficiaries had enrolled in the Advantage plans as of March 2015.

Large insurers like Humana and UnitedHealthcare account for the majority of the population enrolled in Medicare Advantage plans. These plans, however, are offering “less financial protection to Medicare enrollees than they have in the past.”

For instance, average out-of-pocket costs have continued to rise and the average limit for out-of-pocket spending has hit $5,041 per year. Nonetheless, currently 16.8 million beneficiaries are enrolled in Medicare Advantage plans.

“Total Medicare Advantage enrollment grew by more than 1 million beneficiaries, or 7 percent, between 2014 and 2015. This pattern continues the rapid growth in enrollment that occurred concurrently with the introduction of Part D (prescription drug coverage) in 2006 and other changes in the Medicare Advantage program authorized by the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003,” the report from the Kaiser Family Foundation stated.

“While some of the growth in Medicare advantage enrollment reflects the influence of the baby boomers newly eligible for Medicare, recent evidence has indicated that enrollment growth also reflects small shifts in the larger pool of current beneficiaries switching from traditional Medicare to Medicare Advantage plans. Medicare enrollment has continued to grow despite the fact that the average number of plans available to enrollees nationwide declined from a high of 48 plans in 2009 to 20 plans in 2012 and to 18 in 2014 and 2015, as firms made changes to plans offered under their Medicare Advantage contracts.”

The Health and Human Services Office of the Inspector General will be reviewing billing practices among Medicare Advantage programs to see where certain costs could be contained, according to The Center for Public Integrity.

There will be anywhere from five to 10 new audits among the Affordable Care Act, specifically the health insurance exchanges. The audits will look into federal subsidies offered to new enrollees as well as the controls set up to prevent fraud and abuse of the exchanges.

The Office of the Inspector General’s audits are one among many of the projects set up for the coming year and will mostly focus on managed care solutions. Additionally, the Office of the Inspector General will audit the EHR Incentive Programs, which pays out billions of dollars to hospitals and providers that implement electronic medical records.

“Prior OIG reviews have shown that medical record documentation does not always support the diagnoses [used to bill Medicare],” the Inspector General said in a public statement. “Efforts for FY 2015 and beyond may include additional work examining the soundness of rates and risk and payment adjustments.”

The Office of the Inspector General will also focus on pursuing billing fraud and abuse among hospitals, physicians, medical suppliers, and managed care providers in particular. The agency will also be pursuing a number of different programs set up by the Affordable Care Act such as the expansion of Medicaid.

“Protecting an expanding Medicaid program from fraud, waste, and abuse takes on a heightened urgency as the program continues to grow in spending and in the number of people it serves,” the Inspector General wrote.

Along with the high enrollment in Medicare Advantage plans, the Medicare program will also be changing by offering coverage for end-of-life counseling services and a new payment model for surgeries, the Associated Press reports.

The Medicare program has had much greater focus on improving the quality of care, access to medical services, and a reduction in cost. One of the biggest changes coming in 2016 is that Medicare will reimburse providers for counseling patients on healthcare services and options at the end of life.

Additionally, the Medicare program is now showing more emphasis on improving care coordination and teamwork among healthcare professionals as well as offering preventive services. Strengthening hospital setting transitions is also a major goal of the Medicare program.

It is also vital to note that approximately 20 percent of Medicare beneficiaries are now participating in Accountable Care Organizations, explained Patrick Conway, Medicare's Chief Medical Officer. ACOs are a relatively new model of care that joins several providers and payers in a risk-based payment system meant to improve the health of an agreed-upon population.

Provider networks that meet quality improvement benchmarks and minimize costs under the ACO model are able to earn shared savings within the payer-provider relationship. The major change for Medicare beneficiaries coming in 2016 is an opportunity to choose an ACO model in which to receive care. The ability to opt-out is also given.

“Five years ago there was minimal incentive to coordinate care,” Conway told the source. “Physicians wanted to do well for their patients, but the financial incentives were completely aligned with volume.”

Now new reimbursement platforms and payment reform bring real incentive for physicians to coordinate care as well as emphasize prevention and quality improvements. As the Medicare program continues to move toward new health plans and models of care, healthcare providers may actually meet the needs of the ever-growing elderly patient population.