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GAO: Medicare Advantage Carriers Picked Cherries

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WASHINGTON BUREAU — Medicare Advantage plans with relatively low premiums and high levels of cost-sharing ended up with healthier enrollees in 2008 than other Medicare Advantage plans did.

Officials at the U.S. Government Accountability Office have published figures supporting that finding in a summary of results from an analysis of data from 2,899 plans that enrolled 7.5 million Medicare beneficiaries in 2008.

GAO officials prepared the analysis for Democrats on the House Ways and Means Committee and the House Energy and Commerce Committee.

The private organizations that run Medicare Advantage plans are supposed to avoid using premium rates, plan features, or other plan features or underwriting techniques to “cherry pick,” or attract healthier enrollees and repel enrollees with health problems.

“We did not determine whether [Medicare Advantage organizations] structured their plan benefit packages in response to enrolled beneficiaries’ health status or whether beneficiaries of a given health status chose certain MA plans specifically because of their benefit package designs,” James Cosgrove, a GAO director, writes in a letter summarizing the GAO findings.

But, whether intentionally or unintentionally, plans with certain kinds of designs ended up attracting significant healthier enrollees than other plans did, Cosgrove writes.

GAO officials divided Medicare Advantage plans into 3 groups: Good-health plans, in which the members’ average projected health care costs were 10% lower than average; poor-health plans, in which members’ average projected health care costs were 10% higher than average; and average-health plans, with members with projected costs somewhere in the middle.

About 43% of the plans were in the good-health group, 37% in the average-health group and 20% in the poor-health group.

When GAO analysts looked the enrollees, they found that 29% were in plans in the good-health group, 55% in plans in the average-health group, and 16% in plans in the poor-health group.

The monthly Part C Medicare Advantage premium was $24 for the plans in the good-health group, $37 for the plans in the average-health group, and $31 for plans in the poor-health group.

The pattern was different for out-of-pocket costs.

For an inpatient hospital stay of 21 days, for example, the typical enrollee in the poor-health plan paid $746 in “cost sharing,” and the typical enrollee in the good-health plan paid $895. Similarly, the typical enrollee in the poor-health plan would pay $1,802 out of pocket for 156 sessions of kidney dialysis, while the enrollee in the good-health plan would pay $2,118.

Plans in the good health group were more likely to have an out-of-pocket maximum, but the average OOP maximum for plans in that group, weighted by enrollment, was 55% higher than that for plans in the poor-health group.

Comprehensive dental and hearing aid benefits were more likely to be included in the benefit packages for beneficiaries in the poor-health group of plans whereas fitness benefits were more likely to be included in the benefit packages for beneficiaries in the good-health group of plans, the GAO found.

In the past, GAO officials found, the Centers for Medicare and Medicaid Services – the agency that runs Medicare -did not do much to screen Medicare Advantage plan designs to see if the plans might discriminate against sicker enrollees, Cosgrove writes.

Recently, CMS officials revised the bid review process to ensure that plans are accountable for meeting minimum cost-sharing thresholds. For the 2010 contract year, CMS officials “contacted all MA plans identified as having benefit packages likely to be discriminatory,” Cosgrove writes. “In addition, all plans contacted subsequently reduced cost-sharing amounts to at or below agency thresholds.”

House Democrats have charged that the GAO study shows that many Medicare Advantage carriers have come up with ways to attract healthier enrollees and send sicker enrollees elsewhere.

“This report shows that left to their own devices, insurance companies will design plans that benefit their profit margins above all else,” says Rep. Pete Stark, D-Calif., chairman of the House Ways and Means Health Committee health subcommittee.

As CMS implements Medicare Advantage reforms to comply with the healthcare reform law, it needs to hold insurance companies accountable “so they can’t stick seniors with the bill for their profit maximizing schemes,” Stark says.

America’s Health Insurance Plans, Washington, emphasizes that most Medicare Advantage plan enrollees like their plans and believe their plans suit their specific health care and financial needs.

Recent reports have shown that seniors in Medicare Advantage spend fewer days in a hospital, are subject to fewer hospital re-admissions, and are less likely to have “potentially avoidable” admissions, for common conditions ranging from uncontrolled diabetes to dehydration, compared to fee-for-service Medicare, AHIP spokesman Robert Zirkelbach says.

“Medicare Advantage plans reduce out-of-pocket costs for their enrollees,” Zirkelbach says.

In 2009, more 70% of Medicare Advantage plans capped out-of-pock costs, while the traditional fee-for-service plans offered no OOP maximums, Zirkelbach says.

In addition, because CMS recently revised the cost-sharing requirement for MA plans in 2010, the GAO itself says that “all plans met the new cost-sharing thresholds,” Zirkelbach says.


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