How to Fully Realize the Potential of Medicare Advantage

COMMENTARY Health Care Reform

How to Fully Realize the Potential of Medicare Advantage

Jun 5, 2017 5 min read

Commentary By

Robert E. Moffit, PhD

Senior Research Fellow, Center for Health and Welfare Policy

Jean Morrow

Former Research Assistant, Domestic Policy Studies

Enrollment in Medicare Advantage plans has more than doubled since 2007. iStock

Key Takeaways

Medicare Advantage has demonstrated the capacity of private plans to create innovative products for senior and disabled citizens.

A key benefit of many Medicare Advantage plans is the provision of care coordination.

The program’s success can be a strong foundation for further reform of the giant Medicare program, especially through the adoption of a premium support model.

The House Ways and Means subcommittee on health will host a hearing this week on promoting integrated and coordinated care for Medicare beneficiaries. The committee will review how Medicare Advantage, the program of competing private health plans, is providing services for senior and disabled citizens.

This wide-ranging program includes, among other things, Special Needs Plans (SNPs) and other models for improving care delivery for our most vulnerable seniors and people living with disabilities.

The Congress is right to focus on seniors with special needs. In Medicare Advantage, this population is helped by three different types of SNPs: dual-eligible, or D-SNPs (qualify for both Medicare and Medicaid), chronic condition, and institutional.

Access to these plans remains high. Enrollment in these plans grew by 7 percent in 2016 alone and has grown from 0.9 million in May 2007 to 2.2 million in April 2016. The current SNP authority is set to expire at the end of 2018.

A key benefit of many Medicare Advantage plans is the provision of care coordination.

The care coordination helps patients access what they need and, for those senior and disabled citizens who are financed by both Medicare and Medicaid (dual-eligibles), the coordination between Medicare and Medicaid can provide more efficient care delivery at lower costs.

One care model out of Arizona concluded that it kept enrollees out of the hospital and produced fewer readmissions than traditional Medicare coverage.

If more widely adopted, this sort of care coordination could be especially helpful for patients facing multiple chronic conditions. This is significant because chronic illness is the biggest single driver of medical costs.

The Centers for Disease Control and Prevention reported that about half of people in the United States had one or more chronic health conditions as of 2012, and that if these conditions were properly managed, the superior care delivery could reduce health care costs for Medicare and Medicaid by up to $125.5 billion.

Not surprisingly, the Senate Finance Committee recently reported out the CHRONIC Care Act, a bipartisan bill that will help Medicare beneficiaries facing chronic illness.

The intensifying congressional scrutiny on the potential of Medicare Advantage is especially well-timed. Medicare Advantage is the senior’s alternative to traditional Medicare, and it has been rapidly growing.

Today, Medicare Advantage accounts for almost one-third of the entire Medicare population. The reason: Medicare Advantage gives seniors better options than traditional Medicare.

Consider the most important. Unlike traditional Medicare, which is a defined-benefit program, Medicare Advantage is a far more flexible defined-contribution program, meaning that the government makes a per capita contribution to the plans that seniors choose.

These competing health plans offer a broader and richer range of medical services than traditional Medicare, including various preventive services, as well as care coordination and case management for persons with chronic illness.

Medicare Advantage, as documented by The Heritage Foundation, has other attractive features as well. It provides a broad range of personal choice. In 2015, for example, 99 percent of all Medicare beneficiaries had access to Medicare Advantage plans, and could typically choose from among 18 health plans.

Unlike traditional Medicare, all Medicare Advantage plans provide protection from the financial devastation of catastrophic illness. Not surprisingly, beneficiary satisfaction is higher than that of enrollees in traditional Medicare.

For beneficiaries and taxpayers alike, Medicare Advantage is economically efficient. According to Heritage analysis reports, Medicare Advantage plans deliver care at costs routinely lower than traditional Medicare costs.

In this context, it is also worth noting that Medicare beneficiaries often pay no more than the regular monthly Medicare Part B premium. In 2017, this will range from $109 to $134.

In fact, according to the Medicare Payment Advisory Commission, the panel that advises Congress on Medicare reimbursement, a stunning 81 percent of Medicare beneficiaries had access in 2016 to at least one Medicare Advantage plan that included catastrophic coverage, as well as prescription drug coverage, with no additional premium over and above the standard monthly Medicare Part B premium.

By contrast, enrollees in traditional Medicare may have to pay an additional monthly premium for a Medicare prescription drug plan. Nationwide in 2017, the average prescription drug plan monthly premium is $42.17.

Because traditional Medicare has no catastrophic protection, and other gaps in coverage, beneficiaries must buy supplemental private coverage, such as Medigap coverage, and pay another additional premium.

Nationwide in 2017, the average Medigap monthly premium is $183.

Medicare Advantage has demonstrated the capacity of private plans to create innovative products for senior and disabled citizens, including those with chronic and complex medical conditions.

Congress should build upon this progress, expand Medicare Advantage’s platform for new payment and delivery models, and encourage the participation of health plans that hold promise of improving medical outcomes while reducing costs.

The program’s success can be a strong foundation for further reform of the giant Medicare program, especially through the adoption of a premium support model—a model based on Medicare Advantage’s system of defined-contribution financing and market-based competition.

This piece originally appeared in The Daily Signal.

Donate to The Heritage Foundation

Our more than 100 policy experts and researchers are invited to testify before Congress nearly 40 times a year

DONATE TO HERITAGE