Does Medicare Advantage have the advantage when it comes to low-value care?

The “fee-for-service” method of reimbursement is often given as a reason behind systemic overuse in healthcare. It makes sense that clinicians would be more likely to give patients unnecessary tests or procedures “just to be safe” if they get paid every time they do it. But do alternative payment plans like Medicare Advantage actually lead to less low-value care? A new study in JAMA Health Forum has some encouraging results.

Which hospitals in your city are best at avoiding overuse for Medicare beneficiaries? View the Lown Index rankings to find out!

An alternative to fee-for-service

Medicare Advantage (MA) is an increasingly popular alternative to fee-for-service Medicare; nearly half of all Medicare beneficiaries are enrolled in MA. 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. However, previous research on low-value care among Medicare Advantage beneficiaries found that rates of low-value imaging and cancer screening were similar in both Medicare plans, and that rates of overuse of antibiotic prescriptions and other medications were actually higher among patients enrolled in MA than those in traditional Medicare.

Potential for less overuse in Advantage

Now, a recent study in JAMA Health Forum adds some support to the theory of less overuse in Medicare Advantage. Researchers from Humana, the second-largest Medicare Advantage company in the country by enrollment, used claims data from about 2.5 million patients to compare rates of overuse for about two dozen low-value services in 2019. They found that after adjusting for patient characteristics, geographic region, and patient risk, those enrolled in MA received fewer low-value services overall than those in traditional Medicare. In MA, the rate of low-value services was 23.07 for every 100 beneficiaries, compared to 25.39 for every 100 beneficiaries in traditional Medicare.

In particular, MA beneficiaries were less likely to receive arthroscopic knee surgery, vertebroplasty, low-value cervical cancer screening, unnecessary hormone measurement for chronic kidney disease, and low-value carotid artery screening.

However, MA plans did not avoid all types of overuse. MA enrollees were more likely to have stents for stable coronary disease, head imaging for uncomplicated headache, and back imaging for nonspecific low-back pain. For about one-third of the services measured, rates of overuse for MA beneficiaries were not significantly different from traditional Medicare.

How value-based care can reduce overuse

The study results indicate that Medicare Advantage plans can lead to reductions in certain low-value services. The study also provides clues as to the mechanisms behind this relationship.

The authors compared not only MA vs regular Medicare, but also different types of MA plans like Health Maintenance Organizations (HMOs), which have lower premiums but restrict patients to a particular network of clinicians, and Preferred Provider Organizations (PPOs) which are generally more expensive but allow for out-of-network visits. The results showed that HMO participants received less low-value care than those in PPOs. The authors suggest that there is less overuse in HMOs because these plans require a refer from primary care before seeing a specialist, which could cut down on unnecessary specialty care like cardiac or orthopedic tests and procedures.

The study also found that plans that included value-based primary care models had the largest reductions overuse, particularly plans with “2-sided risk,” meaning that primary care clinicians are both financially rewarded for reducing waste and dinged for overuse.

The disadvantages to MA

These study findings are encouraging, especially as Medicare Advantage continues to grow in popularity. However, MA is far from a panacea on reducing overuse. For one, the differences between MA and traditional Medicare, while statistically significant, were still pretty small — and some expensive low-value procedures like cardiac stents were more prevalent among MA participants.

Recent investigations of Medicare Advantage plans show other downsides to this payment model. When you pay plans a set amount for each patient based on their risk, it incentivizes “upcoding” — ascribing as many diagnoses as possible to patients to make them seem sicker than they really are, thereby increasing the payment the plan receives. Plans are also more likely to cherry-pick patients who are healthier and need less care, or even to deny needed care in order to save money.

“We’ve literally created a nonproductive industry where there are businesses that collect diagnoses on Medicare Advantage solely for the purpose of getting paid — not to improve the care that these folks receive, but to improve the payment that the plans receive,” said Sean Cavanaugh, former Medicare official.

There is still a lot we don’t know about the relationship between Medicare Advantage and overuse, especially when it comes to hospital care. Are hospitals with more MA patients less likely to deliver low-value care? Do hospitals change their behavior when taking care of patients in MA? We’ll be looking at this question more closely in next year’s Lown Hospitals Index — stay tuned!