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GAO: Medicare Advantage Insurers Cherry-Picked

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WASHINGTON–Medicare Advantage plans with relatively low premiums and high levels of cost-sharing ended up with healthier enrollees in 2008 than did other Medicare Advantage plans, the U.S. Government Accountability Office says.

Officials at the GAO 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.

The private organizations that run Medicare Advantage plans are supposed to avoid using premium rates, plan features, or other 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 intended or not, plans with certain kinds of designs ended up attracting significant healthier enrollees than did other plans, Cosgrove writes.

GAO divided MA plans into three groups: Good-health plans, in which the members’ average projected health care costs were 10% lower than average; poor-health plans, in which projected health care costs were 10% higher than average; and average-health plans, 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 at 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 average-health group, and $31 for 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 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 good-health group of plans, the GAO found.

In the past, 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.”

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


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