When Paul Ginsburg, Ph.D., Steve Lieberman and other experts co-authored a study about Medicare Advantage (MA) earlier this year, they pointed out that MA enrollment exploded by 337% between 2006 and 2022.
However, neither the Centers for Medicare & Medicaid Services (CMS) nor lawmakers adjusted MA payment policies as membership grew, and that’s one of the main reasons the Medicare system stays on a course toward insolvency, the experts said.
MA plans are paid based on the average cost per beneficiary in traditional Medicare in each county. When this system was developed in 2003, MA members accounted for about 15% of beneficiaries. Now, about 50% of Medicare beneficiaries belong to MA plans.
Strategies to address this challenge include delinking MA payments from fee-for-service spending in Medicare or forcing insurers to undergo a competitive bidding process. That's not likely to happen anytime soon, though, the experts said, as health plans have lobbied heavily against even a demonstration project to weigh how competitive bidding could work.
"The only change related to competitive bidding that I perceive is more agreement by economists in the merits of this approach," Ginsburg, a senior fellow at the USC Schaeffer Center, told Fierce Healthcare in an email.
However, less drastic policies to address the rising costs in MA could be enacted more readily, argued Ginsburg, Lieberman and Eugene Lin, M.D., of the University of Southern California, in a Health Affairs Forefront post.
They proposed ways to reform “the current administered payment approaches linking spending in FFS to MA rates,” changes that could be enacted as early as 2025.
A good place to start would be altering the risk adjustment method for those who switch from fee-for-service Medicare to MA, people they refer to as “switchers.” The payments for those individuals would be based on their recent risk-score-adjusted fee-for-service spending. Switchers in a given year could be grouped together by risk score, according to the analysis.
“CMS could use these ratios as multipliers that adjust downward or upward county-level rates paid to MA plans for each switcher based on whether she has below- or above-average FFS expenditures for her risk score,” they wrote.
CMS would then track the number of years after beneficiaries switch to MA and adjust risk-score percentile ratios. The authors assume that the cost of care for switchers would move closer to the average cost of care in the MA plan over time and suggest implementing a "regression to the means" factor that could adjust for these changes in care costs.
Ginsburg told Fierce Healthcare that he perceives “a lot of interest in reforms to the administered pricing system … where modest changes can lead to substantial federal savings."
"My sense is that these problems with risk adjustment and favorable selection need to be solved before proceeding with competitive bidding," he said.
Lieberman’s hopeful that the fiscal structure of Medicare can be changed. He compares it to trying to make cuts to Social Security, where 98 cents of every dollar goes to the beneficiary. “If you cut money out of Social Security, you’re cutting into beneficiaries’ money," he said.
However, the insurance industry isn't likely to simply accept major changes to the program.
“if the health insurance industry thinks that the status quo leaves them in a desirable position, they’re going to oppose any change," he said. "If the status quo changes and becomes less comfortable for them, then that might lead to more dramatic changes.”