A quick primer on Medicare. Medicare is a government-run insurance program for US citizens who turn 65 years of age, or have a certain disability like end-stage renal disease. Medicare is a fee-for-service (FFS) program that pays doctors and hospitals set fees for a wide range of medical services. The key issue with FFS is that it rewards service volume – healthcare providers get paid more if they do more for a patient. Pretty much everyone believes FFS models contribute to unnecessary medical testing and treatment, and drive up healthcare spending.
A newer insurance model being adopted by the Centers for Medicare and Medicaid Services (CMS), and many commercial insurers, are accountable care organizations (ACOs). I’ve written about ACOs in other posts, but long story short, ACOs pay doctors and hospitals based on the value of care provided. In other words, healthcare providers can lose money if their patients have unexpectedly poor health outcomes.
There are two paths to get Medicare benefits, and these are (1) traditional Medicare and (2) Medicare Advantage (MA). While both paths are regulated by CMS, MA plans are administered by the private sector. Here’s how an MA plan works: let’s say the government gives the MA plan roughly $10,000 per patient per year. The MA plan creates a network of healthcare providers who agree to take a bit less money for services provided to the plan’s members, in exchange for a higher volume of patients. Then after a year, the average healthcare spend for one patient may be $9,500. The MA plan effectively limits the patient’s choice to the plan’s network, in order to minimize healthcare expenditures, and pockets the difference.
Under traditional Medicare, a patient has more options for healthcare providers and sites of care. On the flipside, MA has a greater degree of flexibility to distribute medical care and can craft benefits that are attractive to some patients, like ride-sharing services and multiple wellness visits per year. Now whether these benefits lead to improved health outcomes is complicated and unclear.
Which path should you choose? Hands down, I’d say traditional Medicare is the way to go. Now, I’m sure you’ll find many advocates for MA plans, mostly touting the crafted benefits. And there’s also a growing set of technology startups jumping into the MA space, so the market interest is strong, and venture capital is flowing like water. But I think health systems are the entities that can truly make a difference in healthcare delivery, and not insurers. So why should patients limit their access to care under an MA plan’s provider network?
It really boils down to the quality of patient care, and whether that differs between certain MA plans and traditional Medicare. Again, I don’t think the answer to this question is clear, but I would address this question through the lens of accountable care, which is the future of healthcare in the US. Under accountable care, health systems (hospitals, clinics and physician group practices) are implementing care management programs that target all patients who touch their system – we call this ‘payer agnostic care’. It’s not really feasible to have different care management programs, dictated by different insurers, applied to different patient groups within a community. Health systems want to develop the best standard of care and provide that standard to all patients.
With that said, the influence of a single insurer is often limited. Case in point: when I worked for NYC Health and Hospitals, my team received weekly patient lists from a large insurer, requesting we pay extra attention to their patients, as they had a high risk of poor health outcomes. We simply ignored those lists, because we had our own internal risk stratification for patient follow-up and outreach. There was no need to prioritize one insurer’s patients over another.
I do want to note that NYC Health and Hospitals is a public safety net system, and not profit-driven. There are ways for profit-driven health systems to cater to a large medical insurer, and prioritize patients covered by that insurer – I will describe this in a future post.
To be fair to MA insurers, it’s certainly possible that some of them have strong relationships with local health systems and can directly influence the standard of care for their patients. Or maybe these insurers have powerful ways to influence patient behavior, to seek the right care at the right time. But anything short of this will mean that insurers keep doing what they’ve always done – pay hospitals and doctors – and not much else. And that’s why my vote is for traditional Medicare.
~ James
