Tuesday, October 6, 2015
High-Cost Patients Had Substantial Rates Of Leaving Medicare Advantage
And Joining Traditional Medicare
By Momotazur Rahman, Laura Keohane, Amal N. Trivedi and Vincent Mor
Medicare Advantage payment regulations include risk-adjusted capitated
reimbursement, which was implemented to discourage favorable risk
selection and encourage the retention of members who incur high costs.
However, the extent to which risk-adjusted capitation has succeeded is
not clear, especially for members using high-cost services not
previously considered in assessments of risk selection. We examined the
rates at which participants who used three high-cost services switched
between Medicare Advantage and traditional Medicare. We found that the
switching rate from 2010 to 2011 away from Medicare Advantage and to
traditional Medicare exceeded the switching rate in the opposite
direction for participants who used long-term nursing home care (17
percent versus 3 percent), short-term nursing home care (9 percent
versus 4 percent), and home health care (8 percent versus 3 percent).
These results were magnified among people who were enrolled in both
Medicare and Medicaid. Our findings raise questions about the role of
Medicare Advantage plans in serving high-cost patients with complex care
needs, who account for a disproportionately high amount of total health
From the Introduction
Each year Medicare beneficiaries can choose between two options for
health coverage: traditional Medicare and Medicare Advantage. Although
each option covers the same core set of benefits, the two may differ in
terms of beneficiaries' out-of-pocket expenses, choice of providers, and
access to additional services. Approximately 30 percent of Medicare
beneficiaries in 2014 were enrolled in Medicare Advantage plans.
Because Medicare Advantage plans receive prospective, capitated payments
to finance and deliver services for their enrollees, they operate under
strong incentives to manage their members' health care costs. Policy
makers have been concerned that capitated payments give Medicare
Advantage plans an incentive to enroll healthier beneficiaries and to
avoid enrolling those with chronic conditions. Indeed, a large body of
literature based on data from the 1990s and early 2000s found that
Medicare Advantage plans disproportionately enrolled healthier
beneficiaries. This phenomenon, known as favorable risk selection, has
historically yielded substantial overpayments to Medicare Advantage plans.
From the Discussion
We examined the relationship between use of hospital, nursing home, and
home health care in 2010 and beneficiaries' switching between Medicare
Advantage and traditional Medicare by January 2011. Among traditional
Medicare beneficiaries, we observed lower rates of switching into
Medicare Advantage among people who used nursing home, home health, or
acute inpatient care, compared with beneficiaries who did not use these
services. In contrast, among Medicare Advantage beneficiaries, we found
increased rates of switching into traditional Medicare among people who
used nursing home and home health care, compared with beneficiaries who
did not use these services.
Our results are consistent with other studies reporting that
beneficiaries who report poorer health, use more health services, and
have higher health care spending are more likely than their counterpart
Medicare Advantage beneficiaries to leave Medicare Advantage plans,
despite the recent reforms to the Medicare Advantage payment formula.
Our results raise questions about whether current Medicare Advantage
regulations and payment formulas are designed to meet the needs of
Medicare Advantage members who use postacute and long-term care. First,
the enhanced payments to Medicare Advantage plans for dual eligibles or
people who receive extended nursing home care do not appear to be
effective in retaining these beneficiaries in Medicare Advantage plans.
The unidirectional flow of these high-risk and often high-spending
patients from Medicare Advantage to traditional Medicare appears to
transfer responsibility to traditional Medicare just as patients enter a
period of intensive health care needs.
There could be several reasons for the switching of high-risk Medicare
Advantage enrollees. One possibility is that Medicare Advantage plans
may not have sufficient incentives to spend their enhanced payments on
better services for their beneficiaries.
Second, our findings suggest that Medicare Advantage members who use
home health or nursing home services might be dissatisfied with the
Medicare Advantage program. Medicare Advantage beneficiaries may find
that their plans' network restrictions make it harder to access these
services that would be the case in traditional Medicare, creating an
incentive to switch.
Additionally, some Medicare Advantage plans have been criticized for
imposing high cost sharing for services such as the skilled nursing
facility care that can be necessary for seriously ill beneficiaries.
We observed substantial switching from Medicare Advantage to traditional
Medicare by beneficiaries who used nursing home and home health care,
particularly those who were also eligible for Medicaid, and virtually no
entry into Medicare Advantage plans by traditional Medicare
beneficiaries who used these services or acquired dual eligibility. We
found that a high proportion of beneficiaries with nursing home or home
health care use choose to exit the Medicare Advantage program by the
start of the next plan year. Thus, our study raises questions about the
role of Medicare Advantage plans in serving high-cost patients with
complex health care needs that span acute, postacute, and long-term care
The New England Journal of Medicine
July 17, 1997
The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out
By Robert O. Morgan, Ph.D., Beth A. Virnig, Ph.D., M.P.H., Carolee A.
DeVito, Ph.D., M.P.H., and Nancy A. Persily, M.P.H.
Enrollment in Medicare health maintenance organizations (HMOs) is
encouraged because of the expectation that HMOs can help slow the growth
of Medicare costs.
The rate of use of inpatient services in the HMO-enrollment group during
the year before enrollment was 66 percent of the rate in the
fee-for-service group, whereas the rate in the HMO-disenrollment group
after disenrollment was 180 percent of that in the fee-for-service group.
Comment by Don McCanne
In 1997, The New England Journal of Medicine published a landmark
article that showed that Medicare patients who enrolled in private
Medicare HMOs exited them when they developed a need for a greater
amount of health care: "The Medicare-HMO Revolving Door — The Healthy Go
in and the Sick Go Out"
After nearly two decades of refinement of payment methods for the
private Medicare Advantage plans, this new study from Health Affairs
shows that "a high proportion of beneficiaries with nursing home or home
health care use choose to exit the Medicare Advantage program."
Specifically, "Our results are consistent with other studies reporting
that beneficiaries who report poorer health, use more health services,
and have higher health care spending are more likely than their
counterpart Medicare Advantage beneficiaries to leave Medicare Advantage
plans, despite the recent reforms to the Medicare Advantage payment
The healthy go in and the sick go out. With Medicare Advantage plans,
the patients and the taxpayers end up as losers.
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