The Congressional Budget Office (CBO) recently released a report that reviewed 10 Medicare demonstrations designed with the intention of reducing spending and improving quality of care. Unfortunately, the demonstrations did not produce the desired results.
The CBO report concluded, “The results of the demonstrations illustrate the challenges of developing, implementing, and evaluating policies that reduce Medicare expenditures while improving or maintaining quality of care.” However, Heritage policy analyst Kathryn Nix has analyzed research that shows that the answer to the challenge is right under everyone’s nose: the private market.
Nix explains that private health plans participating in Medicare Advantage (MA) are making strides in what Congress has tried—and failed—to achieve in traditional Medicare fee-for-service (FFS) for decades. Competition among private plans has maintained patient satisfaction, lowered costs, and increased the quality of care. Success is obvious and abundant in the MA program.
MA is more advantageous to beneficiaries when compared to traditional FFS Medicare. It was created in 2003 to allow seniors to receive their Medicare benefits through a private health plan of their choice. The private plans are required to offer the same benefits as traditional FFS. MA has become increasingly popular, with almost 20 percent of the Medicare population enrolled as of 2010.
The program’s popularity is justified by the astounding improvements to the quality of care. MA has led to the opportunity to compare the performance of participating plans with that of traditional Medicare. In a Center for Policy Innovation Research Summary, Nix analyzes two separate research studies that show MA outperforming FFS on several measures of health care quality:
- MA performed better than Medicare fee-for-service on most measures reflecting patients’ receipt of appropriate care.
- MA also performed better than FFS when assessed using discharge data on hospital utilization.
- MA plans may be doing a better job of preventing unnecessary inpatient care by increasing use of outpatient services and office visits.
- MA plans may be avoiding unnecessary readmissions through superior discharge planning and coordination of care following an inpatient episode of care.
The findings summarized by Nix were reinforced by a paper published in January’s Health Affairs that showed a comparative analysis of utilization rates among patients with a chronic disease, in this case diabetes, enrolled in Medicare Advantage Chronic Condition Special Needs Plans (C-SNPs) as opposed to traditional Medicare FFS.
The analysis indicated that people with diabetes in the MA special-needs plan had lower rates of hospitalization and readmission than their peers in fee-for-service Medicare:
Risk-adjusted hospital days per enrollee among special-needs plan participants were 19 percent lower than for fee-for-service Medicare enrollees (27 percent lower for nonwhite enrollees). Risk-adjusted physician office visits were 7 percent higher among C-SNP enrollees than among comparable fee-for-service enrollees (26 percent higher for nonwhite enrollees).
The advantages of Medicare Advantage stem from the competition it allows among private health plans. Private plans are able to produce more efficient, better quality health care for beneficiaries. As Nix concludes, “Lawmakers should apply this information as they contemplate reform to improve quality and reduce spending within the traditional Medicare program.”