Medicare Advantage (MA) is an increasingly popular alternative to fee-for-service Medicare, with more than half of Medicare beneficiaries choosing MA plans. Rather than pay health providers by volume, CMS pays the private plans that participate in Medicare Advantage a fixed amount per month based on the number of patients covered (adjusted for patient risk).
In theory, this capitated payment plan should reduce incentives for clinicians to perform low-value services since the plans are on the hook for the cost. But does this actually happen in practice? A new study in JAMA Network Open sheds light on the differences in overuse between these types of insurance plans.
Lower overuse rates in Medicare Advantage
In this study, researchers from the Harvard T. H. Chan School of Public Health and Brigham and Women’s Hospital compared the prevalence of 35 low-value services between patients with traditional Medicare coverage and those in different MA plans. Unlike previous studies, the authors stratified their results based on plan membership, allowing them to compare indicators of how well each plan avoids overuse.
Overall, the authors found that rates of overuse were significantly lower for patients in Medicare Advantage plans for 18 out of the 35 services measured. In particular, overuse rates for “2 or more antipsychotic medications,” renal artery revascularization, and vertebroplasty were lower for Medicare Advantage patients.
However, patients in MA plans had significantly higher rates for six other low-value services, including imaging tests for eye disease, Vitamin D deficiency screening, and low-value colorectal cancer screening.
Not all MA plans are the same
While MA had lower overuse rates overall, not all plans achieved the same success in avoiding overuse. MA beneficiaries enrolled in UnitedHealth, Humana, Centene, and smaller MA plans (not in the top 7 most popular plans) had lower rates of overuse overall compared to traditional Medicare. Centene patients had the largest difference in overuse, followed by Humana.
However, beneficiaries enrolled in CVS, Cigna, and Anthem did not have significantly less overuse than those in traditional Medicare, and those in Blue Cross Blue Shield plans actually had greater rates of overuse.
HMO vs PPO
Additionally, the authors found that MA beneficiaries in health maintenance organizations (HMO) had lower rates of overuse for 11 out of the 35 low-value services compared to preferred provider organizations (PPOs), and higher rates for 7 services. Patients in HMO plans are generally required to have a primary care provider manage their care, to obtain a referral from the primary care provider before seeing a specialist. In this way, primary care providers in HMOs may act as “gatekeepers” that reduce rates of low-value procedures often done by specialists, like vertebroplasty or cardiac stress testing. The HMO vs PPO patient distribution could explain differences in rates of low-value care among plans, the study authors suggest.
Comparison to previous research
This study adds valuable information to the body of research on low-value care in Medicare Advantage, which previously has been mixed. One 2021 study of 13 low-value services only found a significant difference in one overuse measure between MA and TM. However, a 2022 study of low-value care among Humana beneficiaries compared to traditional Medicare found that Humana patients received significantly lower rates of overuse for 13 of 26 low-value care services measured. The 2022 study also found significantly less overuse among Humana patients in HMO plans compared to PPO, consistent with the newer study findings.
Words of caution on Medicare Advantage
These new study results help us understand how insurance plan design can impact different types of low-value care. But this doesn’t mean that we should embrace Medicare Advantage plans wholeheartedly. Recent investigations have found that the MA payment model, in which insurers are paid per risk-adjusted patient, has incentivized systematic upcoding of diagnoses (to make patients seem sicker and increase their reimbursement rate) and denials of prior authorization requests. Any cost savings the government could be seeing from lower rates of overuse in Medicare Advantage is surely wiped out by the billions in overpayments MA insurers receive from gaming the system.
As the upcoming Trump administration seeks to aggressively promote Medicare Advantage plans in the next few years, policymakers should look to increase regulation of these plans to prevent fraud and overbilling, while continuing to learn from the successes of some MA plans in reducing low-value care.