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TERMS TO KNOW

Fee-for-Service Medicare: Also known as traditional Medicare, it is a federally funded program that enables beneficiaries to receive Medicare coverage through the government. Providers are paid a separate amount for each service or related set of services covered by Part A (Hospital Insurance) or Part B (Medical Insurance) and there is no limit on what beneficiaries will pay out-of-pocket each year unless the beneficiary has other coverage that helps pay these costs.

Medicare Advantage: A federally-funded program that enables beneficiaries to receive Medicare coverage through a private managed care plan. It serves as an alternative to traditional Medicare and can be attractive to beneficiaries because out-of-pocket costs can be capped and additional benefits may be available.

Risk Adjustment: A statistical method that seeks to predict a person’s likely use and costs of health care services. In Medicare Advantage specifically, it’s used to adjust the capitated payments the federal government makes to cover expected medical costs of beneficiaries, which in turn helps to ensure a plan’s providers have the resources to care for beneficiaries and do not have incentives to avoid sicker, more costly patients.

Quality bonus payment system: A program that increases payments to Medicare Advantage plans based on a five-star rating system. It is intended to encourage plans to improve the quality of care that they provide to beneficiaries to garner higher payments.

Coding intensity adjustment: An adjustment CMS makes to account for greater diagnostic coding among beneficiaries in Medicare Advantage that influences how much Medicare Advantage plans are paid.

The recent rapid growth of Medicare Advantage means now nearly 50% of all Medicare beneficiaries are in the program. The sheer numbers served, paired with the speed of the increase, raise important questions about both quality of care and the price tag for beneficiaries and taxpayers.

“Medicare Advantage is a critical option for Medicare coverage,” said Mark E. Miller, executive vice president of Arnold Ventures’ health care team. “We have an obligation to provide transparency and accountability for patient benefits and care and to spend taxpayer dollars and beneficiary premiums responsibly.”

There are promising signs that patients will benefit. For example, a Medicare Advantage plan can coordinate Medicare and Medicaid coverage for people who are eligible for both programs. Medicare Advantage plans have also demonstrated that they can provide care less expensively than fee‐for‐service Medicare, but they get paid more. As a result, Medicare Advantage plans have never produced aggregate savings to the Medicare program.

Reducing overpayments to Medicare Advantage is critical for improving the fiscal sustainability of the Medicare program and shoring up the Hospital Insurance Trust Fund, which funds nearly half the Medicare Advantage program and is set to be depleted in 2028.

The Centers for Medicare and Medicaid Services (CMS) recently released a Request for Information (RFI) seeking ideas on ways to improve Medicare Advantage, including ways to ensure the program delivers equitable and high-quality care while supporting affordability and sustainability of the Medicare program. The RFI sought input from stakeholders on more than 40 questions, potentially telegraphing both the magnitude of changes needed to strengthen the program and the scope of reforms the Administration may be considering.

Arnold Ventures responded to the RFI, highlighting opportunities to improve the program and strengthen Medicare’s fiscal sustainability. A few key recommendations include:

Reduce overpayments to Medicare Advantage plans. Risk adjustment and the quality bonus payment system are two of the main drivers of overpayments to Medicare Advantage today, and we encourage CMS to take steps to address them. First, we urge CMS to increase the coding intensity adjustment to fully recapture upcoding. Such reforms could reduce Medicare spending by as much as $198 to $355 billion over the next decade (2021−2030). Second, reform the quality bonus program to reduce inefficient spending and make it more aligned with the budget-neutral quality programs in fee-for-service.
Increase transparency and accountability for Medicare Advantage plans. We know less about the care and experiences of beneficiaries in Medicare Advantage relative to those in fee-for-service. As the program grows, it becomes even more imperative that CMS prioritizes strengthening data collection requirements with respect to quality, access, supplemental benefits, and enrollment so that we can assess the quality and value of the program for beneficiaries and taxpayers.
Prioritize improvements to and investments in growing the availability of fully integrated dual-eligible special needs plans (FIDE-SNP) to improve the care in which one of the most complex, costly, and diverse populations receive their health care. The FIDE-SNP is an integrated model that offers an opportunity to align all Medicare and Medicaid benefits, financial incentives, and program administration through a single entity for the population that is eligible for both, the so-called “dual-eligible” population. Despite this, fewer than 50% of dual-eligible individuals even have access to an integrated model. CMS should prioritize assisting states with implementing these models and making it easier for people to understand and enroll in these models to help achieve better outcomes for this population with a complex array of needs.