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Medicare’s New Alphabet Soup:A National and Historical
Perspective
Medicare’s New Alphabet Soup:A National and Historical
Perspective
by
Marsha Gold, Senior FellowMathematica Policy Research
Presentation to Families USA Health Action 2007 ConferenceFriday, January 26, 2007
Mayflower Hotel
by
Marsha Gold, Senior FellowMathematica Policy Research
Presentation to Families USA Health Action 2007 ConferenceFriday, January 26, 2007
Mayflower Hotel
2
Medicare Advantage—Revolution or Evolution?
Medicare Advantage—Revolution or Evolution?
A little bit of both
Time will determine the balance
Short term benefits but potentially long term risks for beneficiaries
Complexity assured
A little bit of both
Time will determine the balance
Short term benefits but potentially long term risks for beneficiaries
Complexity assured
3
The Historical PerspectiveThe Historical Perspective
From the beginning Medicare aimed to accommodate the marketplace
Prepaid group practices
Medicare HMOs—The Medicare Risk Contracting Program (1985-1997)
More choices (on paper)—Medicare+Choice and the BBA of 1997
Withdrawals and reduced benefits, higher premiums—1999-2003 collapse
Resurrection—the Medicare Modernization Act of 2003
From the beginning Medicare aimed to accommodate the marketplace
Prepaid group practices
Medicare HMOs—The Medicare Risk Contracting Program (1985-1997)
More choices (on paper)—Medicare+Choice and the BBA of 1997
Withdrawals and reduced benefits, higher premiums—1999-2003 collapse
Resurrection—the Medicare Modernization Act of 2003
4
A Graphical PerspectiveA Graphical PerspectiveEnrollment in Medicare Risk/Medicare+Choice Plans, 1985-2003
0.4
0.81 1.1 1.1
1.3 1.41.6
1.8
2.3
3.1
4.1
5.2
6.16.3 6.3
5.54.9
4.6
0
1
2
3
4
5
6
7
Prev
alen
ce (
Cru
de)
(Per
cent
)
Source: Gold, 2003 updated.
Note: Date for 1992-2002 are for enrollees in M=C coordinated care plans. Data for prior years are for enrollees in Medicare risk contracts. All data are for December of the given year. As of June 2004, 4.6 million were enrolled.
5
What Medicare Advantage DidWhat Medicare Advantage Did
Continued expanded choice options: PPO, PSO, PFFS
Dealt with restrictions on rate increases (starting 2004) to encourage plan entry
Created “regional PPO” option to expand choice to rural and less urbanized areas
Made MSA authority permanent and removed limit on enrollment
Continued expanded choice options: PPO, PSO, PFFS
Dealt with restrictions on rate increases (starting 2004) to encourage plan entry
Created “regional PPO” option to expand choice to rural and less urbanized areas
Made MSA authority permanent and removed limit on enrollment
6
What Medicare Advantage Did - IIWhat Medicare Advantage Did - II
Continued qualified phase out of “cost” contracts if other choices exist
To get Part D, required beneficiary to join a private plan (PDP or MA-PD)
Authorized Special Needs Plans
Continued qualified phase out of “cost” contracts if other choices exist
To get Part D, required beneficiary to join a private plan (PDP or MA-PD)
Authorized Special Needs Plans
7
What Proponents IntendedWhat Proponents Intended
Increase private plan contracts in Medicare and make them attractive
More choice of provider, options with low premiums
Financial “tilt” towards MA versus traditional program
MA available across the country
Increase private plan contracts in Medicare and make them attractive
More choice of provider, options with low premiums
Financial “tilt” towards MA versus traditional program
MA available across the country
8
MA Payment Rates—A Crib SheetMA Payment Rates—A Crib Sheet
Pre-MMA (through 2003)
County based payments Based on costs in traditional Medicare program Movement away from FFS link to promote more even availability nationwide
– Rural flood (BBA, 1998)– Urban floor (BIPA, 2001)– Blend and minimum 2 percent update (BBA, 1998)
Any savings in providing Medicare benefits returned to enrollee
MMA Changes – 2004
Annual minimum update 2 percent OR national growth rate Minimum county payment 100 percent of FFS
Pre-MMA (through 2003)
County based payments Based on costs in traditional Medicare program Movement away from FFS link to promote more even availability nationwide
– Rural flood (BBA, 1998)– Urban floor (BIPA, 2001)– Blend and minimum 2 percent update (BBA, 1998)
Any savings in providing Medicare benefits returned to enrollee
MMA Changes – 2004
Annual minimum update 2 percent OR national growth rate Minimum county payment 100 percent of FFS
9
MA Payment Rates—A Crib SheetMA Payment Rates—A Crib Sheet
MMA Changes - 2006
Shift from set county prices to “benchmarks” Plans submit bids. If below benchmark, 25% goes to government (new)
and rest is returned to enrollee in extra benefits, lower premiums (including Rx benefits)
If above benchmark, enrollee pays difference (little impact yet).
Risk Adjustment
Fully phased in 2007 Aggregate share in MA maintained (phase out starting 2007) Average MA rates in 2006 115 percent higher, FFS (112 percent after
gave back) (MEDPAC). Higher in “floor counties.
MMA Changes - 2006
Shift from set county prices to “benchmarks” Plans submit bids. If below benchmark, 25% goes to government (new)
and rest is returned to enrollee in extra benefits, lower premiums (including Rx benefits)
If above benchmark, enrollee pays difference (little impact yet).
Risk Adjustment
Fully phased in 2007 Aggregate share in MA maintained (phase out starting 2007) Average MA rates in 2006 115 percent higher, FFS (112 percent after
gave back) (MEDPAC). Higher in “floor counties.
What Happened?What Happened?
11
MA Availability IncreasedMA Availability Increased
72
25
82
63
85
69
9793
9894
0
10
20
30
40
50
60
70
80
90
100
1999 2003 2005 2006 2007
All Beneficiaries
Rural Beneficiaries
a
Percent of Beneficiaries with Plan Available
Source: MPR Analysis of CMS Data for The Kaiser Family Foundation for March of each year.
aExceptions are in Alaska and parts of New England.
12
2006 Expansion Driven by Relatively Unmanaged Options
2006 Expansion Driven by Relatively Unmanaged Options
78
89
37
80 79
9888 88 89
0
10
20
30
40
50
60
70
80
90
100
Any LocalHMO or PPO
Any PFFS Any RegionalPPO
All
Urban
Rural
Percent of Beneficiaries with Plan Available, 2006
Source: MPR analysis of CMS Data for Kaiser Family Foundation.
13
MA-PDs Offered Competitive Alternative to PDPs in 2006
MA-PDs Offered Competitive Alternative to PDPs in 2006
Source: MPR analysis of CMS’ November Landscape File for the Kaiser Family Foundation.
*Includes supplemental benefits and Part D (in addition to Part B premium).
37
21
16
27
17
$0
$5
$10
$15
$20
$25
$30
$35
$40
PDPs Regioanl PPOs Local HMOs Local PPOs Local PrivateFee-for-Service
Average Monthly Drug Premium, All MA-PDs, 2006*
14
Beneficiaries Responded and MA Enrollment Grew
Beneficiaries Responded and MA Enrollment Grew
2005 2006
All Medicare Advantage 6,121,678 7,591,051
Local Coordinated Care Plan (HMO, PSO, PPO) 5,157,627a 6,007,625b
Regional PPO 0 98,385
PFFS 208,990 864,100
Cost 321,555 318,274
Other 269,719 302,667
Number of MA Enrollees by Plan Type, 2005-2006
Source: CMS Monthly Summary report, December of each year.
aIncludes PPO demonstration enrollment
b5.5 million were in HMOs
15
PFFS’s Share of the Market Increased Substantially
PFFS’s Share of the Market Increased Substantially
25,897
51,214
208,990
864,100
0 200,000 400,000 600,000 800,000 1,000,000
2003
2004
2005
2006
PFFS Enrollment
Source: CMS Monthly Summary reports, December
16
Choice Continues to Expand in 2007Choice Continues to Expand in 2007
All urban beneficiaries and 94 percent of rural beneficiaries have PFFS available
Regional PPOs in same locations (a few more choices)
Small growth in areas with available HMOs (not local PPOs)
MSAs available for the first time in most areas of the country from Wellpoint
All urban beneficiaries and 94 percent of rural beneficiaries have PFFS available
Regional PPOs in same locations (a few more choices)
Small growth in areas with available HMOs (not local PPOs)
MSAs available for the first time in most areas of the country from Wellpoint
What Does it Mean for Beneficiaries?What Does it Mean for Beneficiaries?
18
MA Provides Competitive Premium but Higher Out of Pocket Costs than
Most Medigaps
MA Provides Competitive Premium but Higher Out of Pocket Costs than
Most Medigaps
Source: MPR analysis of Medicare Compare data using HealthMetrix Research’s Medicare HMO Cost Share Report Methodology in Gold and Achman, August 2003.
Note: Results are weighted by M+C plan enrollment. Includes only coordinated care plans. Costs include the Medicare Part B premium, the M+C plan premium and estimated out-of-pocket spending for pharmaceuticals, and selected acute care services (hospitalization, physician visits).
$976
$1,185
$1,438
$1,786
$1,964
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
1999 2000 2001 2002 2003
Estimated Average Annual Out-of-Pocket Health Costs for Medicare+Choice Enrollees, 1999-2003
19
Part D Benefits are Highly Competitive in MA
Part D Benefits are Highly Competitive in MA
Lower premiums, less out-of-pocket cost, some coverage generics in gap
Advantage mainly seen in HMOs and enhanced plans (2006)
Can use savings from A/B and overpayments to offset Part D (Rx ) costs
HMOs possibly can negotiate better rates (more managed)
Lower premiums, less out-of-pocket cost, some coverage generics in gap
Advantage mainly seen in HMOs and enhanced plans (2006)
Can use savings from A/B and overpayments to offset Part D (Rx ) costs
HMOs possibly can negotiate better rates (more managed)
20
Newer MA Options Provide Beneficiaries Less Financial Protection
Newer MA Options Provide Beneficiaries Less Financial Protection
All MA-PD (Except SNPs) All HMO
Local PPO PFFS
Regional PPO
All $268 $239 $303 $337 $432
Healthy $831 $72 $104 $81 $180
Episodic Needs $686 $621 $749 $911 $983
Chronic Needs $1,656 $1,487 $1,819 $2,254 $2,382
Number of Contract Segments 1,349 909 269 126 47
Estimated Out-of-Pocket Costs Per Enrollee for Hospital and Physician Services in MA-PD Plans by Type, 2006
Source: MPR analysis for AARP’s Public Policy Institute of CMS’s November 2005 Personal Plan Finder using HealthMetrix cost sharing methodology.
21
Free-Standing PDPs Remain More Popular with Beneficiaries
Free-Standing PDPs Remain More Popular with Beneficiaries
PDPs Stand alone Dual eligible
10.4 million 6.1 million
MA-PDs 6.0 million
Enrollment, June 2006
Source: KFF PDP Fact Sheet (November 2006)
22
Long Range Stability of MA Remains an Issue
Long Range Stability of MA Remains an Issue
Expansion highly driven by MMA, increased rates.
Growth in penetration (and nontraditional options) highly driven by decisions of a few firms (Humana, UnitedHealthcare, Wellpoint).
Over 80 percent of PFFS enrollment is in “floor” counties, benefiting most by overpayments.
Budgetary pressures may make higher MA payments harder to maintain.
Expansion highly driven by MMA, increased rates.
Growth in penetration (and nontraditional options) highly driven by decisions of a few firms (Humana, UnitedHealthcare, Wellpoint).
Over 80 percent of PFFS enrollment is in “floor” counties, benefiting most by overpayments.
Budgetary pressures may make higher MA payments harder to maintain.
23
Issues for Beneficiary ConcernIssues for Beneficiary Concern
Are beneficiaries aware of MA’s cost sharing?
Will providers accept a PFFS alternative to Medicare?
If MA penetration grows, will traditional Medicare be viable?
If not, will MA serve to limit the federal contribution to Medicare?
What forms of beneficiary protection will help beneficiaries benefit by MA?
Are higher MA payments a plus or negative for beneficiaries?
Are beneficiaries aware of MA’s cost sharing?
Will providers accept a PFFS alternative to Medicare?
If MA penetration grows, will traditional Medicare be viable?
If not, will MA serve to limit the federal contribution to Medicare?
What forms of beneficiary protection will help beneficiaries benefit by MA?
Are higher MA payments a plus or negative for beneficiaries?