MedPAC Report on Medicare Advantage Growth, High Costs Generates Kerfuffle

Derick Alison
Derick Alison
11 Min Read

A Medicare Payment Advisory Commission (MedPAC) meeting turned unusually contentious Friday as one member, Brian Miller, MD, MPH, of Johns Hopkins University in Baltimore, accused panel leadership of issuing a negative status report on Medicare Advantage (MA) plans’ market dominance, saying it had been “hijacked for partisan political aims to justify a rate cut to Medicare Advantage plans.”

Miller said the analysis, among a series of reports that advise Congress on Medicare policy, “appears to be slanted to arrive at a foregone conclusion in order to set up and provide political cover” just before the Centers for Medicare & Medicaid Services prepares its annual rate notice for MA plans, expected in coming weeks.

The chapter “reads like attack journalism as opposed to balanced and thoughtful policy research,” Miller said during the commission’s public meeting. He asked MedPAC staff to name three good things about MA plans, since he said none were in the report. He also criticized the report for numerous “intellectual inconsistencies” and “intellectual somersaults” and said it failed to make legitimate comparisons with care delivered to beneficiaries in fee-for-service.

The subject of his ire was a slide presentation that is posted for the public — and a lengthy report that only commissioners can read — highlighting growing concerns with the rapidly increasing amounts of Medicare funds now flowing to MA plans. The slides showed that MA plan “coding intensity” and “favorable selection” increased spending to MA plans — $82 billion in 2023 alone — above what Medicare paid for care to fee-for-service beneficiaries.

The analysis detailed the numerous ways that MA plans generate higher revenue, including enrolling people who are relatively healthy, known as favorable selection. They then vigorously scan patients’ medical histories and charts to code for health factors that generate higher per-capita payments, known as coding intensity, often spending less on services. Coding intensity is also the difference between a risk score that a beneficiary would receive in an MA plan versus in fee-for-service.

The report said that coding intensity has increased over the years, with many of the biggest MA plans appearing to do the most. It also noted that a few plans now dominate the MA plan market, and that three companies — UnitedHealthcare, Humana, and CVS Health — enrolled 58% of all MA enrollees in 2023.

“Higher coding organizations have a competitive advantage because they receive larger payments for enrolling the same beneficiaries as other organizations, and they can offer more extra benefits and attract new enrollees simply because of their coding efforts,” Andrew Johnson, PhD, MedPAC’s principal policy analyst, told commissioners.

Pushback on the report also came from Better Medicare Alliance, which represents MA plans. In a press statement, President and CEO Mary Beth Donahue said the organization has “concerns about MedPAC’s methodology and how its staff reached the report’s conclusions.” She noted that compared with fee-for-service, MA enrollees experience more benefits and savings; for example, they have 43% fewer avoidable hospitalizations and a 21% higher rate of seeing a physician within 14 days of discharge. Moreover, 99.9% of MA plans offer supplemental benefits.

Several commissioners came to the report’s defense, noting that they appreciated the report’s necessity and applauded its difficulty and complexity.

Many also chimed in with a wide array of adjacent frustrations they’ve heard about MA from providers and patients dealing with narrow networks, prior authorization practices that delay or deny care, and extravagant broker commissions that result in steering confused seniors into plans without their understanding of what they might be giving up.

A ‘Sense of Urgency’

According to the report, 52% of beneficiaries — 31.6 million people — are now enrolled in MA plans, up from 26% in 2010, a fact that prompted many commissioners to note a “sense of urgency” that aspects of the MA program have gotten out of control.

“The reason I feel a sense of urgency is, we keep coming back to this issue that MA has never yielded aggregate savings to the Medicare program, despite that being one of the core goals,” said Commissioner Cheryl Damberg, PhD, director of the RAND Center of Excellence on Health System Performance.

Lynn Barr, MPH, founder of Caravan Health, which was acquired by CVS Health through its acquisition of Signify Health, noted that “this is not the big lovely, you know, glowing success that everybody says it is. And we continue to create policies that drive people into these plans.”

She referred to the fact that Medicare allows money paid to MA plans to be used for broker commissions as high as “$600 to recruit them, and they get $300 a year every year that they stay [in the MA plan].”

“We have allowed MA to buy the market,” she added. “And that is why MA is growing. It’s not because the quality’s so great. People don’t love the prior auth, people are leaving their plans a lot.”

Aside from Medicaid, Medicare is the least profitable payer for doctors, Barr pointed out. “And at the same time, we give all this money to the plans. It’s unconscionable.”

Commissioner Larry Casalino, MD, PhD, of Weill Cornell Medicine in New York City, said that while policy experts maintain that MA plan growth is propelled by patient preferences, the real reason may be because of how brokers are pitching the plans to their clients.

“Increasingly, I get the sense they [brokers] have a pretty large role and they’re paid quite a bit to enroll people in MA plans,” he noted.

Casalino said that he and others have concerns about another disturbing practice that generates MA plan revenue. He’s “heard in interviews frequently that physicians are paid directly as individuals to, in one way or another, cooperate with the health plans upping up the diagnostic codes. We’ve heard numbers like $100 per patient. I can’t say whether that’s true or not, but I don’t think this is a trivial issue.”

Wayne Riley, MD, MPH, president of State University of New York Downstate Health Sciences University in Brooklyn, New York, said that, in regards to MA plan quality, “we’re hearing a crescendo of commentary around the country about [prior] authorizations being a big issue now … from MA patients.” He asked commission staff to prepare more information about which plans are using the practice the most.

Several commissioners pointed to how enormously complicated the process of choosing a Medicare option has become.

Gina Upchurch, RPh, MPH, executive director of the nonprofit Senior PharmAssist in Durham, North Carolina, said that providing counseling on Medicare benefits has become difficult. It’s not just hospitals and doctors that someone has to be concerned about being in network with a plan, she said. Some MA plans may not include contracts for care at inpatient rehabilitation or skilled nursing facilities or home health agencies. Many aspects of plan differences have “gotten really complex,” she added.

Stacie Dusetzina, PhD, of Vanderbilt University Medical Center in Nashville, Tennessee, noted that some MA beneficiaries may have trouble getting cancer care in MA plans’ limited networks.

She referenced a recent news story about an MA enrollee who couldn’t get the cancer care he needed from his MA plan, and couldn’t get out of it without facing 20% in expensive copays. In all but four states, supplemental plans that could pick up the difference can reject patients with costly conditions.

“When you’re 65 and aging into the program, you’re healthy at that time, you may not be thinking about your long-term needs, which would push you to think harder about the specialty networks that you may have access to [in an MA plan] or not,” she said.

In summary of the 2-hour session, Commission Chair Michael Chernew, PhD, of Harvard Medical School in Boston, acknowledged the numerous research challenges ahead for the agency, but said he believes MA plan enrollees receive similar, or even better, quality than fee-for-service beneficiaries.

However, he added, there could be changes over time, “and there’s a ton of heterogeneity across plans,” meaning that some may be delivering high-quality care, while others not so much.

He emphasized that the commission has not drawn any conclusions about MA plans going forward, but that the report simply acknowledges issues, such as higher payments, that MA plans receive. “We’re just reporting the facts as we see them,” he said.

  • author['full_name']

    Cheryl Clark has been a medical & science journalist for more than three decades.

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