Public Payers News

Medicare Advantage Plans Decrease Avoidable Hospitalizations

Medicare Advantage plans are known for improved care coordination and greater efficiency much like the managed care field in the private insurance sector.

By Vera Gruessner

The Centers for Medicare & Medicaid Services (CMS) may be able to reduce healthcare spending by decreasing the number of hospitalizations, emergency room visits, and other expensive medical care services.  This could be done by bringing greater focus on preventing disease and improving medication adherence among patients. The Robert Graham Center published a report that discusses how Medicare Advantage plans are able to reduce hospitalizations when compared to typical fee-for-service Medicare plans.

Medicare Advantage Beneficiaries

Improved care management, stronger attention to primary care, and greater utilization of preventive services have all brought significant benefits to Medicare Advantage beneficiaries. The report found that there is a higher penetration of Medicare Advantage plans today and this is leading to fewer avoidable hospitalization across the country.

The study also discovered that counties and regions with more Medicare Advantage beneficiaries tend to have a decline in avoidable hospitalization rates.

The Medicare Advantage program was first designed in 1985 through the Tax Equity and Fiscal Responsibility Act. This would allow CMS to contract with private health plans to ensure coverage for its beneficiaries through a traditional fee-for-service payment system with the inclusion of monthly reimbursement.

Medicare Advantage plans are known for improved care coordination and greater efficiency much like the managed care field in the private insurance sector. The history of Medicare Advantage plans consisted of a growth in enrollment and CMS ending up paying the private sector more for coverage than it originally hoped.

As such, the Balanced Budget Act of 1997 was created to better manage the costs associated with the Medicare Advantage program. The managed care coverage now consisted of an expansion of options including health maintenance organizations (HMOs), preferred provider organizations (PPOs), point of service (POS) plans, and private fee-for-service (PFFS) plans.

Payment cuts due to the Balanced Budget Act of 1997 left a large number of payers from working with CMS through Medicare Advantage plans. The number of beneficiaries covered through these plans dropped 12 percent by 2003.

The Medicare Modernization Act was passed in 2003 to ensure beneficiaries receive drug prescription coverage and risk adjustment measures were incorporated into payment structures for health plans.

Regional PPOs were included under the new legislation as well as Medicare Special Needs Plans, all of which led to a surge in enrollment. By 2011, 25 percent of all Medicare beneficiaries were enrolled in Medicare Advantage plans. More recently, the Affordable Care Act brought a quality bonus program to Medicare Advantage plans.

When the Affordable Care Act was passed, an extra 5.6 million people signed up for the Medicare Advantage program. By March 2015, 31 percent of Medicare beneficiaries had enrolled in these plans.

CMS is also pushing forward finalized rulings that restructure some of the payment systems in the Medicare Advantage program. Essentially, it is meant to improve the accuracy of provider payments.

“We continue to strengthen Medicare Advantage and Medicare Part D, in particular for enrollees who need additional investments in their health, such as dually Medicare-Medicaid eligible individuals and those with complex socio-economic needs,” CMS Acting Administrator Andy Slavitt said in a public statement. “With these policies, we will continue to see improvements in growth, affordability, benefits, and quality for millions of seniors and people living with disabilities.”

Along with the Robert Graham Center study, prior research has also shown that Medicare Advantage beneficiaries are less likely to receive unnecessary medical services. Looking at a few states, researchers discovered that higher rates of Medicare Advantage penetration correlated with fewer avoidable hospitalizations.

Avoidable hospitalizations were defined as admissions to a hospital that could have been prevented with improved outpatient care. The researchers restricted their study to members who were 65 years and older since patients with disabilities may skew the results due to specific health needs.

The study also looked at 12 states including Massachusetts, Arizona, Florida, Oregon, Nevada, and New Jersey. The results speak for themselves - in every state, the number of hospitalizations were lower among Medicare Advantage members as compared to traditional Medicare beneficiaries.

“Looking at 12 states’ Medicare hospitalizations, we found that Medicare Advantage (MA) enrollees were less likely to have avoidable hospitalizations than traditional fee-for-service Medicare (TM) beneficiaries, even after indexing against marker condition (also labeled ‘expected’ or ‘unavoidable’) hospitalizations and controlling for differences in age, race/ethnicity, and gender,” the report concluded.

“Our findings are consistent with those reported by other researchers that show MA plans reduce avoidable hospitalizations by approximately 10% after adjusting for individual and contextual factors. We also found that referral-sensitive hospitalization rates, which are a marker for better outpatient care, seem to be higher among MA enrollees than among TM beneficiaries.”

As the federal government especially CMS continues to innovate methods for improving quality care and reducing healthcare spending, bringing greater focus to disease prevention and strong outpatient care could help federal agencies achieve these goals. Medicare Advantage plans are a true example of these achievements, as they reduce costly hospitalizations and improve patient outcomes.

Image Credits: Robert Graham Center

 

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