ENHANCING VALUE IN MEDICARE

1
ENHANCING VALUE IN MEDICARE

• Brian Biles, MD, MPH
• The George Washington University
• January 14, 2007

2
Two Approaches to VALUE IN MEDICARE

• Traditional fee-for-service Medicare
• 83 percent of total Medicare beneficiaries
• Use of private plans in Medicare
• 17 percent of total Medicare beneficiaries

3
Focus for VALUE IN MEDICARE

• Value to Federal government
• Value to Medicare elderly and disabled
  beneficiaries

4
Value to Federal GovernmentPAYMENTS TO MA PLANS

• Private MA plans are now paid, in the aggregate,
  more than average costs in traditional
  fee-for-service Medicare
• Average of 12.4 percent
• 922 per enrollee
• 6 billion in total annual extra payments

5
Value to Federal GovernmentPAYMENTS TO MA PLANS

• Private MA plan payment benchmarks are higher
  than fee-for-service (FFS) Medicare in every
  county in the nation
• Payment in urban and rural floor counties are set
  by statute at a projected average of 20 percent
  and 17 percent more than FFS
• Double payment for hospital indirect medical
  education costs
• Extra payments for risk adjustment payments
  through 2010

6
Extra Payments to MA Plans Above Fee-for-Service
Costs
Source George Washington University analysis of
CMS Managed Care quarterly State County Plan data
file for the quarter ending December 2005,
Medicare Managed Care quarterly State County
Market Penetration data file for the quarter
ending December 2005 and Medicare Advantage 2007
Ratebook Transcript of Public Meeting, Medicare
Payment Advisory Commission (MedPAC), April 21,
2005. Note Projections for 2007. Figures above
include BNRA and FFS normalization. Assumes 4
percent reduction in extra payments to account
for MA benchmark-based bidding.
7
Share of Extra Payments to MA Plans
Source George Washington University analysis of
CMS Managed Care quarterly State County Plan data
file for the quarter ending December 2005,
Medicare Managed Care quarterly State County
Market Penetration data file for the quarter
ending December 2005 and Medicare Advantage 2007
Ratebook Transcript of Public Meeting, Medicare
Payment Advisory Commission (MedPAC), April 21,
2005. Note Projections for 2007. Figures above
include BNRA and FFS normalization. Assumes 4
percent reduction in extra payments to account
for MA benchmark-based bidding.
8
Value for Medicare BeneficiariesENROLLMENT IN MA
PLANS

• Private MA plan enrollment is heavily
  concentrated
• 55 percent of MA enrollment is in just 4 States
  California, Pennsylvania, Florida, and New York
• Even in those states with the highest share of MA
  enrollment, less than one third of total
  beneficiaries in the state are enrolled in MA
  plans
• California 31
• Pennsylvania 25
• Florida 20
• New York 19

9
MA Enrollment is Heavily Concentrated
Percentage of Medicare Beneficiaries Enrolled in
MA Plans, by State

Source CMS Dec 2005 Enrollment data
10
Value for Medicare BeneficiariesMA BENEFITS FOR
SENIORS

• Private MA plan benefits vary greatly
• Out-of-pocket costs for MA enrollees in poor
  health range from an average of about 600 per
  year in Miami to nearly 6,000 per year in
  Providence, St. Louis and San Francisco
• Private MA plans may design their own benefit
  package
• Not like Medigap plans that must provide one of a
  set of defined benefit packages

11
Estimated Out-of-Pocket Costs for MA Enrollees in
Poor Health by Plan
Note Figures for 2006. 186 Plans shown.
12
Value to Medicare BeneficiariesMA PLAN COSTS FOR
PROVIDING BENEFITS

• Private MA plans can have higher costs for
  providing benefits than FFS Medicare for good
  reasons
• Administrative costs of 11 percent
• Higher payments to providers of up to 20 percent
• Less utilization review for quality and intensity
  of care since managed care backlash at end of
  1990s.

13
ENHANCING VALUE IN MEDICARE

• Medicare payments to MA private plans average
  12.4 percent more than average FFS costs
• MA plan enrollment is heavily concentrated by
  state and city
• Out-of-pocket costs vary widely for MA enrollees

14
ENHANCING VALUE IN MEDICARE

• Brian Biles, MD, MPH
• The George Washington University
• January 14, 2007