Why Medicare Advantage Is the Basis for Medicare Reform

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There’s a lot of negative news surrounding the government’s handling of the COVID-19 crisis. Mistakes by the Centers for Disease Control and Prevention and National Institutes of Health top that list. But there is also some rare good news on the COVID-19 front. 

Preliminary research has found that the Medicare Advantage program outperformed traditional Medicare fee-for-services in delivering higher quality care to its enrollees during the pandemic. Seniors enrolled in Medicare Advantage have fewer hospitalizations, fewer deaths, and a greater ability to receive treatment for routine medical conditions.

Looking deeper into the research, this is not unique to COVID-19. As a matter of fact, the Medicare Advantage program has a long track record of outperforming traditional Medicare in improving quality and reducing health care disparities.

Medicare Advantage is a system of competing private health plans offered as an alternative to traditional Medicare. The health plans provide hospital and medical coverage like traditional Medicare but can also provide additional benefits such as prescription drug, dental, vision, hearing, and fitness coverage.

The Quality Factor. Writing in a 2020 edition of Health Affairs, a team of researchers concluded: “Evidence from forty-eight studies showed that in most or all comparisons, Medicare Advantage was associated with more preventive care visits, fewer hospital admissions and emergency department visits, shorter hospital and nursing facility lengths of stay, and lower health care spending. Medicare Advantage outperformed traditional Medicare in most studies comparing quality of care metrics.” 

Medicare Advantage’s emphasis on prevention, case management, and care coordination is having a positive impact on improving black and Hispanic patient outcomes, too. With the onset of the COVID-19 pandemic, MA’s care delivery proved to be a godsend. 

Writing in Health Affairs, Dr. Elena Rios, president of the National Hispanic Medical Association, and Martin Hamlette, executive director of the National Medical Association, an African American medical society, emphasized:

As the COVID-19 pandemic persists—acutely impacting communities of color—additional research shows that Medicare Advantage saw lower COVID-19 related hospitalization and mortality rates than FFS (fee-for-service) Medicare.

Reducing Disparities. Not only have Medicare’s private plans been delivering appropriate care, but they have also been reducing racial and ethnic health disparities in patient outcomes. For example, a 2020 Centers for Medicare & Medicaid Services study of seven patient experiences in Medicare Advantage found that Hispanic patients reported experiences that were like white patients’ experiences on five of these measures and worse than white patients’ experiences on just two. 

Disparities can be caused by many factors, including poverty, education, and other socioeconomic factors; reduced access to services; environmental factors; cultural differences in approaches to personal health; and more.

In 2021, the Centers for Medicare & Medicaid Services conducted a study of 23 clinical care measures and found that Hispanics and white patients had comparable results on 17 clinical care measures, Hispanics had worse results than whites on 16 measures, but Hispanics had better results than white patients on six measures.   

Of course, health plans and medical professionals can always do better, but there is no denying the substantive progress achieved in and through the Medicare Advantage program.

Breast cancer is, for example, a leading cause of death among Hispanic women, but historically, Medicare Advantage plans have demonstrated a better record in prevention than traditional Medicare. According to a Journal of the National Cancer Institute study, there were higher rates of mammography in MA plans (HMOs and PPOs) than in traditional Medicare. Thus, the authors concluded: “Given their higher rates of mammography, Medicare HMOs may be more effective than traditional Medicare in eliminating racial and ethnic disparities in this service.”

Rapid Growth. It’s therefore not surprising that more seniors are gravitating to Medicare Advantage plans. Of the 64 million senior and disabled Americans enrolled in the $940 billion Medicare program, over 30 million (46%) have joined Medicare Advantage. Just 10 years ago, Medicare Advantage had only 13.5 million enrollees, or a little more than 28%.

More than one-third of all Medicare Advantage enrollees identify as racial or ethnic minorities. For example, 53% of all Hispanic and 49% of all black Medicare beneficiaries are enrolled in Medicare Advantage. By 2060, the Hispanic share of America’s senior population will reach 19.9 million, or 21% of all Americans over age 65.

Something else to note: In contrast to traditional Medicare, Medicare Advantage disproportionately enrolls lower income beneficiaries with more complex medical problems.

A key factor in the success of Medicare Advantage is its design. Medicare Advantage is a defined contribution program, meaning that the federal government makes a direct financial contribution, adjusted for health status, to a beneficiary’s chosen health plan. The plans have the flexibility to offer a variety of benefits that traditional Medicare does not; and, most importantly, they provide crucial protection from the financial devastation of catastrophic illness.   

Beneficiaries choose the kind of health plan they want, the kind of coverage they need, the special benefits most advantageous for them, and the premium they pay, if any, over and above the government’s sizable contribution to their health plan. Today, the average Medicare beneficiary has a choice of 39 plans nationwide.

Broader Reform Potential. Medicare Advantage’s defined contribution success holds lessons for systemic reform of the entire Medicare program. Specifically, Congress could update and expand the defined contribution financing system and apply it to traditional fee-for-service Medicare, upgraded with a catastrophic benefit and greater managerial flexibility to enable the program to compete effectively. Likewise, Medicare Advantage needs some crucial reforms, especially in its plan payment and risk adjustment systems, and these changes would greatly strengthen the program. 

The giant Medicare program, the largest “payer” in American health care, has outsized impact on private sector health care financing and delivery. Compelling traditional Medicare to compete directly with Medicare Advantage’s private health plans on a level playing field—while expanding patient options such as direct primary care plans and incorporating health savings accounts—would have a positive spillover effect on the private sector and could set the stage for a renaissance in American health care.

Not only would such a comprehensive reform give millions of seniors a chance to compare and act on their coverage options, it would also stimulate an unprecedented level of intense health plan competition and control costs.  And, in a transparent environment of medical price and provider performance, it would incentivize doctors and other medical professionals to pursue serious innovation in care delivery and improve medical outcomes. It is hard to imagine anything that would better serve beneficiaries and taxpayers alike.

Washington policymakers can improve the lives and the health of millions of Americans, especially for those who face the biggest and most complex health care challenges. We have a working model to improve upon in reforming America’s biggest health care entitlement. All we need is the political will to tackle the job.

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