FutureFocus May 23, 2018: Medicare Advantage Plans and PAC Providers - New Insights

Lisa Remington

In this week’s FutureFocus, we continue our discussions on Medicare Advantage Plans and new insights for PAC providers and patients. Our first article explores the differences in Medicare Advantage plans and fee-for-service and why Medicare Advantage plans should coordinate with PAC providers. Attorney Elizabeth Hogue explores the new Medicare Advantage Plans allowable supplemental benefits for home-based palliative care, in-home support services and caregivers. In our Washington Report, we look at the next overhaul of the private sector care program for the VA.

Lisa Remington, President, Remington Health Strategy Group

By: Lisa Remington, President, Remington Health Strategy Group, and Publisher, The Remington Report

Medicare Advantage enrollment is projected to grow by 9% to 20.4 million in 2018. The CMS estimated that more than one-third of all Medicare enrollees, or 34%, will be in a Medicare Advantage plan in 2018.

Traditional fee-for-service (FFS) Medicare’s prospective payment systems for post-acute care provide little incentive to coordinate care or control costs. In contrast, Medicare Advantage plans pay for post-acute care out of monthly capitated payments and thus have stronger incentives to use it efficiently.

"Patients in MA plans have lower acute and post-acute care use; these differences in use of health care services translate to a 16 percent potential savings in costs"

A study in Health Affairs compared the use of post-acute care in skilled nursing and inpatient rehabilitation facilities by enrollees in Medicare Advantage and FFS Medicare after hospital discharge for three high-volume conditions: lower extremity joint replacement, stroke, and heart failure. After accounting for differences in patient characteristics at discharge, the research found lower intensity of post-acute care for Medicare Advantage patients compared to FFS Medicare patients discharged from the same hospital, across all three conditions. Medicare Advantage patients also exhibited better outcomes than their FFS Medicare counterparts, including lower rates of hospital readmission and higher rates of return to the community. These findings suggest that payment reforms such as bundling in FFS Medicare may reduce the intensity of post-acute care without adversely affecting patient health.

  • MA enrollees discharged after joint replacements are 2 percentage points more likely to be admitted to a skilled nursing facility, but stay 3.2 fewer days than FFS Medicare patients on average.
  • Differences in the use of post-acute care facilities between MA enrollees hospitalized for a stroke or heart failure are similar to that of joint replacement patients.
  • MA enrollees with heart failure are less likely to be admitted to a skilled nursing facility compared with FFS enrollees.

How Does Fee-For-Service and Medicare Advantage Impact Post-Acute

The differences between the two groups of enrollees in fee-for-service and Medicare Advantage in the use of post-acute care are important because of Medicare payment reforms. First, Medicare Advantage enrollment continues to grow, and some policy makers have proposed changing Medicare to a system of “premium support,” which would further shift beneficiaries from traditional FFS payment to capitated plans with payment incentives similar to those in Medicare Advantage. Second, with the adoption of new payment models such as bundled payment and ACOs, the Medicare program is increasingly shifting financial responsibility for post-acute care and accountability on quality performance to hospitals and other entities. An unanswered question is whether these changes in financial incentives will lead to more efficient use of post-acute care. Examining Medicare Advantage’s experience is informative, because both Medicare Advantage plans and recipients of bundled payments pay for post-discharge care out of a fixed payment from Medicare: a monthly capitated payment in the case of Medicare Advantage plans and a payment for an episode of care (for example, a hospitalization and post-discharge period) in the case of bundled payment.

"MA plans use data-driven insights combined with better patient and provider engagement to manage care transitions from acute to post-acute care and to coordinate care across settings."

Why Should Medicare Advantage Plans Coordinate With Post-Acute?

The authors find that patients in MA plans have lower acute and post-acute care use; these differences in use of health care services translate to a 16 percent potential savings in costs. The savings primarily accrued from the use of lower intensity post-acute care settings.

MA patients had reductions in readmissions and improved rates of return to the community compared to FFS ones. These findings are important because this is one of the first studies to go inside the “black box” of MA plans. It contradicts the popular notion that MA plans have lower costs largely because they enroll healthy seniors. It shows that savings arise from better management of post-acute care.

Why Did MA Plans Spend Less And Achieve Better Outcomes?

The simple answer is because they made more money doing so. MA plans receive a capitated payment per enrollee for total care in a year, and thus have the incentive to manage care, with most of the savings in health care costs enabling them to add benefits and/or lower premiums for enrollees. Therefore, it is in the MA plan’s interest to steer patients toward less intensive post-acute care settings when appropriate and coordinate a patient’s care. In contrast, in the current Medicare FFS system, hospitals and each type of post-acute care provider have different payment systems, and there is no incentive for care management and care coordination. The results, in this instance, are higher costs for taxpayers and poorer outcomes for patients.

How Do MA Plans Manage Post-Acute Care To Achieve Lower Costs And Better Outcomes

  1. MA plans contract with only a select number of post-acute care providers. In order to win these MA contracts, post-acute care providers need to stand out. They need to convince MA plans that they have lower costs and good patient outcomes.
  2. Second, MA plans have contracts with post-acute care providers that typically pay less then Medicare FFS rates, pay differently (e.g., per stay rather than per day), or require post-acute care providers to take on some financial risks. Such arrangements provide incentives to post-acute providers to discharge patients early to their homes or to a lower cost post-acute care setting.
  3. Third, MA plans use other managed care tools such as prior authorization to limit use of higher cost post-acute care providers. Plans also might impose higher cost-sharing for post-acute care services to incentivize patients to limit their use.
  4. Last but not the least, MA plans use data-driven insights combined with better patient and provider engagement to manage care transitions from acute to post-acute care and to coordinate care across settings. A variety of organizations and consultants help MA plans achieve these goals.

Policy Implications

The findings of the study have policy implications for reforming traditional Medicare. They suggest that new payment models that create financial incentives for care coordination and management of care transitions might be more effective than traditional approaches such as reimbursement rate cuts. Without financial incentives, providers are unlikely to change behavior. In addition, the change in financial incentives needs to be combined with expanded authority for providers to be able to use the same tools used by MA plans to manage post-acute care.

Bundled payments incentivize providers to steer patients to more appropriate and less intensive facilities for post-acute care by allowing providers to share in the savings if the costs of care are lowered without harming quality—which this study shows to be feasible. Some bundled payment proposals also bake in a small payment cut below the existing full cost of an episode of care in order to guarantee federal savings. In turn, using bundled payments can help lower federal costs (and to a degree, beneficiary premiums because they are set as a percentage of Medicare Part B costs), and bring traditional Medicare costs down closer to those of MA plans.

Other alternative payment models, such as Accountable Care Organizations, can also provide similar incentives within traditional Medicare to save money by using more efficient settings for post-acute care. Such models provide a group of providers a single payment per member per month for the total spectrum of covered care, allowing the group to share in savings if they can lower beneficiary costs without harming quality. ACOs, therefore, have similar incentives as MA plans to lower the costs of acute and post-acute care; opportunities for savings might be particularly large for post-acute care.

See related articles:

Medicare Advantage vs. Medicare-Fee-For Service Longitudinal Site Of Death Study