What's Going on with Medicare Advantage? - Part 1

Contributors: Wren Keber and Lisa Soroka
To learn more about Wren and Lisa, click here.

Source: Bigstock

Medicare Advantage (MA) has been a dominating topic in the headlines lately – even outside of industry publications. During the most recent open enrollment period, more focus than usual seemed to be placed on multiple areas, including attracting and enrolling new members, issues with provider payments, and delayed and/or restricted patient access as well as an increased regulatory involvement from the Centers for Medicare and Medicaid Services (CMS) and many states. Overarching polarizing opinions enhanced these themes as it relates to whether or not managed care for Medicare is working for all stakeholders, ranging from members to plan sponsors and ultimately to the payer, the Medicare Trust Funds.¹ In this article, we explore several divergent viewpoints regarding MA, and offer some considerations and tactics for healthcare leaders navigating through this complicated landscape.

For Medicare-Eligible Patients

Patients eligible for Medicare are faced with many coverage options, ranging from Original Medicare and the associated myriad add-on/supplemental (Medigap) plans to Medicare Advantage offerings, with the average Medicare-eligible individual being faced with 44 individual MA products from which to choose. Arriving at the right plan for them can be overwhelmingly daunting. Even so, Modern Healthcare reported an increase of 2.9% to 32.9 million enrollees as of January 1, 2024.² Patients continue to flock to plans offering discounted or no-premium plans, with seemingly attractive benefits.

MA is not without drawbacks for its enrolled members, of course. NPR reported with Kaiser Family Foundation (KFF) Health News that issues with obtaining pre-authorization and limited networks of specialists forced some patients to delay care, resulting in exacerbated conditions.^3,4 Healthcare leaders across the continuum can support Medicare-eligible patients by bolstering programs that assist in connecting them to culturally competent, skilled, licensed brokers - hopefully resulting in more informed decision-making and helping to increase health literacy.

Informed members with the support of their MA plan can potentially be better and more adherent patients, especially when they can understand the strengths and limitations of their plan as it pertains to their healthcare needs. This can occur when the MA plan can ensure that members have access to PCPs that speak their language, understand their culture and lifestyle, and communicate medical guidance and care plans in terms the member can understand. Beyond primary care, best-in-class MA plans educate members on how to access care, such as how to choose appropriate sites of service and levels of care (e.g., specialists vs. primary care, hospital-based vs. community-based).

For Health Systems

Health systems have been increasingly vocal in recent years regarding the issues MA plan partners face, ranging from delays in renegotiating acceptable contracts to abrupt changes in payment policies that can materially impact revenue. While contracted reimbursement rates for MA plans usually hover near 100% of Medicare, actual payments may yield much less, due to the claims payment policies employed by the plan, such as medical management/utilization management techniques like pre-authorization, down-coding, denials, and retroactive actions. This erosion in revenue has proven to be untenable for many health systems, including those that have very publicly terminated their MA contracts with major carriers.⁵ Conversely, the ever-increasing member enrollment can sometimes force health system leaders to keep underperforming contracts due to the concentration of MA enrollment in their catchment area – to terminate would be too disruptive to members, too great a hit to the health system enterprise’s bottom line, and potentially harmful to the community. Due to these realities, leaders should consider some key questions in designing an effective payer strategy to possibly engage differently with MA. These include:

What is the calculated yield for each MA contract?
Can revenue cycle management (RCM) identify primary and secondary causes of low yield?
What are the MA trends in their regional market?
Is enrollment fluctuating, and, if yes, in what ways?
Have the Star ratings of plans changed over time, and in what direction?
Are there any new entrants into the MA marketplace and/or market disruptors?
Does the organization have the capacity to enter into risk arrangements to manage MA premium?
What would it take (financially and operationally) to understand organizational readiness?
How will a risk-sharing strategy impact yield on the MA line of business, and how is that impact calculated?
Are there operational improvements within the RCM function that can address challenges with MA?
Are the MA plan partners willing to work with RCM to iron out these issues (e.g., changes to billing and coding standards and workflows to improve claim processing, deploying and optimizing electronic pre-authorization, etc.)?
Are there sponsoring organizations (e.g., unions and/or public employee benefits groups) focused on different ways to engage with provider organizations to manage cost and quality for their population(s)?

For Medical Groups

Independent medical groups – both primary care and multi-specialty – are not exempt from many of the same issues outlined above for health systems, yet sometimes have even fewer resources at their disposal to address them. Leaders of these organizations may be considering ways to evaluate and protect against revenue erosion for Medicare Advantage business. Two primary questions for medical groups include:

Are payment policies under MA changing faster than billing and coding staff can keep up? Some mid-size groups are looking at replacing back-office vendors with technology-enabled alternatives. This is one of the areas where artificial intelligence (AI) can be impactful in healthcare. Advanced algorithms may be able to learn and apply myriad payment policies and processing nuances, and then apply them on a per-provider basis. Since these edits traditionally have to be understood and addressed manually via rules edits, adding this enabling technology may improve billing efficiency and save time for claims adjudication. This may have the potential to quickly offset the initial investment.
How is reimbursement changing for physician-administered drugs? The buy-and-bill model has been prevalent for so long that practices (particularly specialists) have come to rely on drugs providing a critical source of contribution margin. In other words, practice administrators can manage with a negative margin for professional services, because it can be partially offset by the predictable reimbursement of at least 6% over the drug’s Average Sales Price (ASP). This ability to counter negative margins is increasingly changing as MA plans offer “take it or leave it” drug fee schedules somewhere below the Medicare reimbursement rate, sometimes as low as 80% of Medicare. This low level of reimbursement often cannot cover drug acquisition costs, particularly for high-cost brand drugs mainly prescribed by specialists. This can force practices and/or groups to accept “white-bagging” (medication sent from a specialty pharmacy directly to a healthcare provider vs. “brown bagging” where the medication is picked up by the patient and brought to the healthcare provider to administer) arrangements that can compromise clinician control, and at the same time disrupt practice economics. Given this reality, practice administrators should be focused more than ever on the acquisition cost for drugs, particularly in tracking the specific per-order costs fluctuating over time (rather than roughly calculated averages.) Additionally, cost accounting for professional services should be an area of focus, specifically to ensure that Medicare Advantage claims payments do not generate a negative margin.

Conclusion

These considerations and tactics are just the beginning of the discussion of ways in which healthcare organizations can manage their relationships and reimbursement with Medicare Advantage health plans. We have presented common challenges with which healthcare leaders and decision-makers are currently grappling and have been in recent years. As provider organizations are increasingly engaged in the active negotiation of payment terms covering the rendering of medically necessary services for America’s seniors, we believe there is continued promise in the transition from Original Medicare to MA. In our next article, we will focus on how providers and MA plans are partnering for value-based payments.

Contact Wren at: [email protected]
Contact Lisa at: [email protected]

References

What's Going on with Medicare Advantage? - Part 1

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