Will MA Beneficiaries See Lower Healthcare Spending for COVID-19?

March 12, 2020 - Despite having generally the same level of disability as Medicare beneficiaries in a traditional fee-for-service model, Medicare Advantage beneficiaries have lower spending and lower cost burden, a recent Better Medicare Alliance (BMA) study found.

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“This report shines light on the ability of Medicare Advantage to provide critical cost protections to beneficiaries relative to Traditional FFS Medicare, particularly for those who are most financially vulnerable,” the report stated. “The analysis underscores the importance of ensuring access across the country to the cost protections and supplemental benefits available through Medicare Advantage.”

In 2017, beneficiaries in Medicare and Medicare Advantage exhibited approximately the same amount of reliance on others’ assistance to conduct instrumental activities of daily living and activities of daily living. Instrumental activities of daily living cover using the telephone, housework, and financial management, whereas activities of daily living include eating and dressing.

There was only a 0.6 percentage point difference between the number of fee-for-service Medicare and Medicare Advantage beneficiaries needing help with one or more instrumental activities of daily living, 28.7 percent and 28.1 percent, respectively. While 8.8 percent of Medicare Advantage beneficiaries needed assistance with three or more instrumental activities of daily living, only 0.4 percent more beneficiaries in fee-for-service Medicare similarly required assistance.

READ MORE: CMS Targets Medicare Advantage Beneficiaries In COVID-19 Efforts

With the exception of instrumental daily activities assistance, slightly more Medicare Advantage beneficiaries experienced conditions that typically lead to higher healthcare spending. More Medicare Advantage beneficiaries needed help for activities of daily living, suffered from a chronic condition, or were dual eligible beneficiaries than in fee-for-service Medicare, and more were considered low income.

Despite these conditions, however, Medicare Advantage beneficiaries saw less out-of-pocket healthcare spending overall than fee-for-service Medicare beneficiaries.

The average total out-of-pocket healthcare spending in 2017 for a fee-for-service Medicare beneficiary (including their premium) was $4,685. Medicare Advantage beneficiaries, in contrast, spent about $1,600 less.

Furthermore, Medicare Advantage beneficiaries experienced less of a cost burden. The study defined “cost burden” as putting more than 20 percent of one’s income toward healthcare spending. 

A 2018 Kaiser Family Foundation study found that the cost burden on Medicare families was significantly higher than the burden for non-Medicare families. Healthcare spending among Medicare beneficiaries was more than double the level of healthcare spending in non-Medicare families. On average, 14 percent of Medicare beneficiaries’ income went to healthcare spending, whereas healthcare spending consumed only 6 percent of non-Medicare families’ incomes.

READ MORE: ESRD Proposal May Inadequately Reimburse Medicare Advantage Plans

But for Medicare Advantage beneficiaries, the likelihood of experiencing a true cost burden taking a fifth of their income is much lower. About 12 percent of Medicare Advantage beneficiaries are cost-burdened, as compared to 19 percent of fee-for-service Medicare beneficiaries.

For low-income beneficiaries, the disparity was even greater. Slightly over 46 percent of fee-for-service Medicare beneficiaries living at 200 percent of the federal poverty level or lower and who do not qualify for Medicaid experienced a cost burden. Less than 27 percent of Medicare Advantage beneficiaries were cost-burdened by their out-of-pocket healthcare spending and premiums.

While the patient satisfaction rate and access to care are high for both fee-for-service Medicare and Medicare Advantage beneficiaries—in both cases over 90 percent across the board—,the latter experienced slightly greater satisfaction and ease of access.

“As policymakers consider the impact of out- of-pocket costs for consumers, particularly those in Medicare, they should consider the important role that Medicare Advantage plays in providing financial protections for Medicare beneficiaries,” the study concluded. “Medicare Advantage provides real value to millions of beneficiaries, particularly those who live on low-to modest-incomes; specifically, those who are low-income but do not yet qualify for Medicaid (which covers most out-of- pocket costs for dual-eligible beneficiaries) or who cannot afford additional coverage, such as Medigap or employer-sponsored coverage.”

Not so fast…

That being said, a separate report published in 2019 found that Medicare beneficiaries who utilize more services are more likely to stay in Medicare, instead of switching into Medicare Advantage. Thus, out-of-pocket healthcare spending may be lower for Medicare Advantage beneficiaries, but the actual utilization of services may also be lower despite having similar conditions.

READ MORE: Medicare Advantage Costs 40% Less than Fee-For-Service Medicare

“Among dually eligible beneficiaries – a group of beneficiaries with relatively high Medicare spending – those who used more services and incurred higher Medicare spending in 2015 were more likely to remain in traditional Medicare in 2016, while dual eligibles with lower service use and spending were more likely to enroll in a Medicare Advantage plan in 2016,” the report stated.

Ultimately, these results point to potential self-selection, the researchers indicated, wherein Medicare beneficiaries who utilize less services are more likely to choose to switch to Medicare Advantage.

The study’s results had significant implications for Medicare Advantage plans’ reimbursement.

Implications for COVID-19 efforts

This trend of lower Medicare Advantage healthcare spending will be put to the test by the spreading novel strain of coronavirus (COVID-19) as seniors are particularly vulnerable. 

Medicare Advantage and Medicare Part D beneficiaries are more likely to experience a lower cost burden if payers follow through with CMS guidances, such as waiving cost-sharing for COVID-19 tests and treatments and increasing patient access to telehealth solutions.

In its $8.3 billion coronavirus spending package, Congress has allotted $490 million to CMS in order to expand access to telehealth solutions for seniors. But while these funds may be used to decrease Medicare spending, certain restrictions may pose problems for employing those dollars to fee-for-service Medicare beneficiaries effectively.

While Medicare Advantage plans’ use of telehealth solutions to battle coronavirus are covered under anti-kickback rules, so far Medicare plans are not released from anti-kickback rules—impeding their ability to deliver telehealth services.

Thus, while Medicare beneficiaries at risk for COVID-19 do receive waived copay and other forms of financial relief, Medicare Advantage are further benefiting from their plans’ greater flexibilities, allowing for telehealth benefits such as Aetna’s virtual evaluations and remote monitoring visits.