By GEORGE HALVORSON

Medicare made $83.4 billion very real dollars in 2022. The 17% discounts below the average cost of fee-for-service Medicare, that happen in every county for Medicare Advantage, have been very real and extremely successful in paying for Medicare coverage — in a way that now makes the program a profit center for the US Government.

You can see the actual financial report page from the 2023 Medicare trustee report below. It shows that the Medicare trust fund grew in 2022 for the first time in decades. More than half of the Medicare members are now enrolled in Medicare Advantage plans. Those members cost significantly less than their equivalent fee-for-service Medicare patients.

These are the actual numbers from the trustee report.

The Medicare trustee report says that the total Medicare program grows per member by 6.7% every year. They project in that report that they expect that rate of increase to be consistent over the next decade. The enrollees in the Medicare Part A and Part B programs have expenses that increase slightly above that number every year. That’s been true for a couple of decades.

Medicare loses money on every Part A and Part B member when expenses for those programs are higher than the 6.7% average.

Medicare Advantage costs for Medicare Part C are increasing at a lower rate than that number. That means that Medicare makes money and creates a surplus with the Medicare Advantage patients.

The Medicare Advantage programs that function as Medicare Part C now have expenses that increase, on average, about 4% each year. A 4% cost increase is a profitable number for the Medicare program. That lower level of cost increase is highly beneficial to Medicare. It helped create an $83.4 billion profit and surplus for Medicare as a total program in 2022.

Because Medicare Advantage is a capitation program and not a fee-based payment model, the capitation determines what the payment levels will be. CMS has determined to set the capitation increases at levels below the 6.7% number. We don’t need to guess about their process or number. They announced it publicly to the world early in the year.

CMS set the limit for those increases per member in 2024 at 4.3% for the year.

Their number guarantees that Medicare will be profitable. It also means that the trust fund is now secure from the long-term deficits and financial deterioration levels that most Medicare policy people have been predicting for decades for the Medicare program.

Critics of the Medicare Advantage program create some fantastical, misleading, unfounded, and completely wrong numbers about the relative cost of Medicare Advantage in several reports that have been written about the program. Those numbers have been published in some reputable publications in ways that have confused some people who are trying to evaluate Medicare Advantage as a program.

The critics say that the 17% discounts from fee-for-service Medicare, that are clearly paid every month, are not real. The critics say the plans somehow do some kind of coding magic that they say adds 12% to the cost of Medicare Advantage members every year, rather than the lower costs that seem to exist in the bids.

Critics and enemies of the program — with no understanding of how care actually functions at cost levels for care — completely invent and then assert that 12% “real costs” number to be the number we should use to measure the program. And they do this with no back up measurements or calculations of any kind to support that purely opinion-based number.

The critics who attack the program believe that number to be somehow inherently true. They use it with no actual measurements or calculations every year, which causes people to think that what seems to be an extremely good price for Medicare Advantage plans, is actually a bad and excessively high price for Medicare members, when you adjust it by that purely invented factor.

The 17% average discounts from fee-for-service Medicare for the Medicare Advantage plans are very real. And because they are real, the trust fund made an $83.4 billion surplus in real and actual dollars for 2022.

The $83.4 billion surplus shows that the critics are using fake news. It shows that they’re writing about, and using, completely wrong numbers for their evaluation of the relative costs of the programs.

Unfortunately, those critics have managed to damage the credibility of the program with those attacks. They should be completely ignored and rejected by everyone who looks at the real numbers and understands how the programs actually work.

The 17% lower costs are very real.

How does Medicare Advantage bid 17% below the cost of fee-for-service Medicare in every county?

They deliver much better care.

Fee-for-service Medicare has some very poor and weak care for too many low-income members. Fortunately, two out of three very low-income members have now joined plans, but the ones who aren’t in plans receive very bad care.

Amputations are a good example.

Far too many low-income Medicare patients have their legs amputated. They actually lose their limbs and they have an extremely high mortality rate after that happens.

That creates billions in revenue for those fee-for-service care programs in those communities.

That’s very bad and very expensive care for too many people.

The plans get paid a capitation for each patient rather than a fee for each piece of care.

The plans all know that foot ulcers in patients cause 90% of the amputations. And they all know that you can reduce foot ulcers by over 60% with dry feet and clean socks for patients.

Billions of dollars are saved when the plans have a much lower level of amputations — as opposed to the more than 20% of patients with foot ulcers and amputations that the Shameful Metric piece describes.

The most recent data (from the best current electronic database in care) says that the plans now have about 1.3% of patients with amputations.

Plans save billions of dollars with those lower amputation rates. The plans can bid 17% lower costs than fee-for-service Medicare, because those amputations don’t happen for their members.

We need to understand what just happened for Medicare.

The plans have a five-star quality plan that focuses on issues like low blood sugar levels for their patients. The Medicare Advantage care sites have multiple public meetings where they celebrate both the better culture of care that results from those programs and the best practices on team care, data-supported care, and patient-focused care that allows the plans to bid 17% below the average cost of fee-for-service Medicare.

We need to plot a future for Medicare that has much lower costs for their members and that lets us focus on continuously improving care, within the new culture and infrastructure of care, that’s created by having Medicare become a profit center for the country.

That’s a slam-dunk win for the country.

It means that the much higher level of benefits that exist for Medicare Advantage members are now the new normal for the Medicare program. Dental, vision, and hearing benefits — along with a wide range of in-home support benefits — are now paid for by Medicare for the majority of the members.

Some Medicare Advantage programs take the surplus that they earn from the 17% discounts and actually buy Part D drug benefits for their members. The plans who choose that path provide the Part D coverage for less than the cost of standard benefits, which is easily the most intelligent and high-value use of the Medicare dollar.

The people who don’t understand that the bulk of the new benefits are basically free money to Medicare should learn and remember that the point of the Medicare Advantage inclusion and provision in the Affordable Care Act and Obamacare was actually to save the Medicare program financially and to create far better benefits for the members.

It’s a slam dunk win for both of those goals now. That $83.4 billion surplus for 2022 is very nice icing for that cake.

The critics who hate insurance companies at an ideological level are still trying hard to cut benefits. That makes absolutely no sense when you see what the benefits do, who they serve, and how important they are to people’s lives.

The pressure on those points should be diminished by the plans saving the trust fund.

George Halvorson is Chair and CEO of the Institute for InterGroup Understanding and was CEO of Kaiser Permanente from 2002-14.

There’s a lot of strum & dangst about the uptick in system utilization that has boosted hospital profits and hit Humana and United’s bottom line (But not so much Elevance’s). Kevin O’ Leary over at Health Tech Nerds brought this up today and I was reminded of this piece I wrote in 2006. And a big issue was, how much understanding and control do insurers have over the utilization in (and out of) their networks. So take a look at this piece and particularly, given the issues at the BUCAHs and at smaller players like Agilon, consider how much insurers actually know about spending? And remember that Wellpoint was the 1990s name for what is now Elevance, via being called Anthem!–Matthew Holt

No one is arguing that Len Schaeffer isn’t a very bright guy, nor that he hasn’t done very well in America’s health care system. He’s also done very well out of America’s health care system. So when McKinsey publishes a fawning interview with the man who saved Blue Cross of California, and turned it into one of the most profitable for-profit health insurance companies, and then merged it with the other for-profit Blues, it’s perhaps appropriate to ask a few more questions.

Full disclosure here; in the distant past I’ve worked for several companies that are now part of the Anthem/Wellpoint collosus; and I currently do work for the California Health Care Foundation, which wouldn’t exist were it not for the fact that, when Wellpoint converted to for-profit status, it (and the California Endowment) were endowed with a huge chunk of stock. So you can take my comments in what ever light you like. In addition I’ve only done limited research here and a couple of things are retelling of tales I’ve heard, so if anyone knows more gossip, please email me.

Schaeffer is coming towards the end of his business career, but he started young and fast. He was head of HCFA (the artist now known as CMS) at age 33 in the Carter Administration. Now I call Mark McClellan the boy wonder, but he was 41 when he got the job! After leaving HCFA (before it got really exciting in the early years of the Reagan administration when DRGs were introduced, but being the first to introduce a type of DRG for kidney dialysis), and going via Group Health for a couple of years, he ended up at Blue Cross of California. He got there in the middle of an incredible screw-up.

Blue Cross had set up an HMO to compete with Kaiser called HealthNet. Incredibly enough somehow or other Blue Cross didn’t manage to enforce their formal corporate control over its board members on the board of HealthNet. So the board of HealthNet looked around the room one day, noticed that they might do alright if they were running a for-profit company, and declared independence. More on that story in this court documents. And apparently despite several years in court there was nothing Blue Cross could do. Retroactively Healthnet had to agree to endow a foundation with the state (the California Wellness Foundation) but the amount put into that foundation was a tiny, tiny proportion of HealthNet’s market value.

Schaeffer turned up to steady the ship at Blue Cross in the wake of the Healthnet screwup. In part he did this by turning Blue Cross from a warm and fuzzy non-profit into a pretty avaricious underwriter and a health plan that played very hardball with its providers (and members). More on that in the first section of this document, but it’s a reminder of a tack taken years later by Jack Rowe at Aetna.

But he clearly learned something from the experience.  The first thing he did was to set up a for-profit subsidiary called Wellpoint which started buying health plans and offering services (primarily outside California). Then he tried to put all of Blue Cross’ assets into Wellpoint. It looked like he’d away with this for a while, but then started  negotiations to take the whole thing for-profit. Apparently when the state first asked him the amount with which he would fund the foundation, his first offer was “nothing”.  This eventually got anted-up to $100m. Eventually the state (pressured by consumers’ groups) pointed out that it had quite a bit of control over the Blue Cross plans, and in the end the two Foundations were set up with lots of money and the majority of the stock, which gets spent doing good works in California (and funding some great research!) — not that everyone’s happy with it!

However, what amuses and dismays me is that Schaeffer is lauded for a couple of things, specifically the creation of new insurance plans and the shift to consumer care, and a commitment to IT. I really don’t understand what is so amazing about the new consumer plans, other than the Tonik brand has a lame web sites which look exactly like what a 50 year old thinks a 23yr old thinks is cool.  THCB readers already know that, while selling high deductible plans to youngsters may help a 23 yr old who needs catastrophic insurance, you’re not going to fix the problem of uninsurance by replacing it with under-insurance. But underwritten properly, these plans are very profitable for Wellpoint. And Wellpoint is damn good at underwriting.

So much so that you’d be surprised at what Schaeffer says is the main problem with American health care. Practice variation and lack of information:

The level of variation in our health care system is unbelievable. You could be hospitalized for nine days in New York and for three days in California with the same diagnosis—and those differences would have no impact on outcomes. There is no other industry in the world that uses so many different approaches to the same thing and in which these differences don’t relate to better results

So can’t health plans fix that? Apparently not:

As a health insurer, if you start by telling doctors, “We know what’s best; we’ll pay you for it,” you violate the fundamental principle that doctors want to exercise their own discretion. That’s what killed HMOs—telling the doctors what to do. Doctors don’t like to follow cookbooks, but, clearly, evidence-based medicine would work better for patients.

So because health plans failed at getting doctors to practice better medicine, instead they’re going to give them the information systems that show the doctors all about this variation, and it’ll magically self-correct. Except there’s the odd problem there too, including more cluelessness by health plans.

The Quarterly: WellPoint invested $40 million to encourage its in-network physicians to start using IT and to begin “e-prescribing.” What results have you seen?

Leonard Schaeffer: If you believe in an IT-enabled, evidence-based health care system—which I do—you’ve got to get IT into doctors’ offices. So we offered our in-network doctors, for free, either a desktop or a state-of-the-art “e-prescribing” unit for connecting to the Internet. Our theory was that if we could get a certain number of docs online, we could revisit them later and get rid of paper, which would benefit the physicians and us. That was the theory. But to get doctors to trust us, we had to say “no strings attached.” We had to contact 26,000 doctors to get 19,500 to accept the free gift. Of these 19,500 doctors, 2,700 accepted the e-prescribing package. Unfortunately, only about 150 physicians are using this technology consistently. I was very disappointed that we only moved the needle that much.

Harvey Fineberg, the president of the Institute of Medicine, explained why the doctors were so recalcitrant: “When you’re in private practice, ‘free’ is not cheap enough.” In other words, the doctor thinks,”You’re giving me what looks like a free gift, but you’re really requiring a change in how I work, which costs more and gives me little benefit. So I’m not changing my work process.”

It was a real lesson in life. We were trying to change fundamental behavior, and the doctors don’t want to change unless they see a significant benefit for their patients or themselves.

While Schaeffer is dismayed that the $40m giveaway intended to promote ePrescribing was such a failure, you’d think that the program could have had a little but of brains put behind it first. Basically docs were given the choice of a) either take this subsidized ePrescribing system that we’re going to drop on your practice with little support, or b) have this free Dell computer which you can use to trade stocks and surf porn at home, and later sell on Craigslist. Doctors, not being dumb, took the choice with some value.  This was for Wellpoint the equivalent of throwing mud at a wall to see if it sticks, except the technique used involved blasting the wall with a water cannon at the same time. The dummy was whomever at Wellpoint gave the docs the choice. And these are the geniuses who failed at HMO network medical management, as earlier noted

So why were the dummies in charge of this one?  Well because the smart guys are stuck over in a different part of the company.

But today the most important thing for us is our actuarial data, which helps us price our premiums. As you might guess, pricing is critical. Our analysis showed that the so-called cycle in health insurance—three good years, three bad years—is simply a function of pricing discipline and pricing mistakes. There isn’t any doubt that the companies with the best pricing are less cyclical. In our case, we have no cycles at all.

We found that the most critical information for good pricing wasn’t how many contracts we had but how many people we had—who they were, their age, their gender, and where they lived. Together with regional and local differences in illness types and doctors’ behavior, these characteristics determined what the costs would be. So we gathered more information than anybody else about those things, and this was a huge competitive advantage. Now almost everybody does things that way.

We also make a point of processing claims quickly because we found that faster processing gives you a better idea of your costs and early knowledge about how trends are changing. By monitoring the landscape, we were able to raise or lower our prices before anyone else, which is really important in this business. You never want to sell an underpriced policy.

So there you have it. Being really smart about pricing and risk is how you run a successful insurance company. If you look at Wellpoint’s stock in the last 4 years, it’s evident that in the mission critical part of their business, they’re very very good about this. Stock is up four-fold and profits nearly double in the last 3 years.

Of course that’s not the only thing that’s gone up in the last five years. So have premiums and health care costs. And the two things may per chance be related!

But this just goes to show that what Schaeffer is good at — running a lean mean ultra-competitive pricing business — has little if anything to do with solving the wider problems of the health care system that he’s so eloquent about. He of course is walking off from the whole deal with some $300m smackers under his belt. All in stock from “converted” non-profit companies, and all such high stock because Wellpoint has (like the rest of the business) been able to stick price increases to its clients, year after year after year.

So why is McKinsey, which is after all supposed to be in the business of helping the Fortune 500 reduce their overall costs, so fawning to Schaeffer? Perhaps it’s just a mutual recognition that when it comes to corporate America, perhaps you can fool all the people all the time — so long as they hang out in the executive suite.

By JEFF GOLDSMITH

On Christmas Eve 2014, I received a present of some profoundly unwelcome news: a 64 slice CT scan confirming not only the presence of a malignant tumor in my neck, but also a fluid filled mass the size of a man’s finger in my chest cavity outside the lungs. Two days earlier, my ENT surgeon in Charlottesville, Paige Powers, had performed a fine needle aspiration of a suspicious almond-shaped enlarged lymph node, and the lab returned a verdict of “metastatic squamous cell carcinoma of the head and neck with an occult primary tumor”. 

I had worked in healthcare for nearly forty years when cancer struck, and considered myself an “expert” in how the health system worked. My experience fundamentally changed my view of how health care is delivered, from the patient’s point of view. Many have compared their fight against cancer as a “battle”. Mine didn’t feel like a battle so much as a chess match where the deadly opponent had begun playing many months before I was aware that he was my adversary. The remarkable image from Ingmar Bergman’s Seventh Seal sums up how this felt to me.

The CT scan was the second step in determining how many moves he had made, and in narrowing the uncertainty about my possible counter moves. The scan’s results were the darkest moment: if the mysterious fluid filled mass was the primary tumor, my options had already dangerously narrowed. Owing to holiday imaging schedules, it was not until New Years’ Eve, seven interminable days later, that a PET/CT scan dismissed the chest mass as a benign fluid-filled cyst. I would require an endoscopy to locate the still hidden primary tumor somewhere in my throat.  

I decided to seek a second opinion at my alma mater, the University of Chicago, where I did my doctoral work and subsequently worked in medical center administration.

The University of Chicago had a superb head and neck cancer team headed by Dr. Everett Vokes, Chair of Medicine, whose aggressive chemotherapy saved the life and career of Chicago’s brilliant young chef, Grant Achatz of Alinea, in 2007.

If surgery was not possible, Chicago’s cancer team had a rich and powerful repertoire of non-surgical therapies. I was very impressed both with their young team, and how collaborative their approach was to my problem. Vokes’ initial instinct that mine was a surgical case proved accurate.

The young ENT surgeon I saw there in an initial consultation, Dr. Alex Langerman performed a quick endoscopy and thought he spotted a potential primary tumor nestled up against my larynx. Alex asked me to come back for a full-blown exploration under general anaesthesia, which I did a week later. The possible threat to my voice, which could have ended my career, convinced me to return to Chicago for therapy. Alex’s endoscopy found a tumor the size of a chickpea at the base of my tongue. Surgery was scheduled a week later in the U of Chicago’s beautiful new hospital, the Center for Care and Discovery.

This surgery was performed on Feb 2, 2015, by a team of clinicians none of whom was over the age of forty. It was not minor surgery, requiring nearly six hours:  resections of both sides of my neck, including the dark almond and a host of neighboring lymph nodes. And then, there was robotic surgery that removed a nearly golf ball-sized piece of the base of my tongue and throat. The closure of this wound remodeled my throat.

I arrived in my hospital room late that day with the remarkable ability to converse in my normal voice.

Thoughtfully, I was put in a quasi-isolation unit with two doors and negative air pressure. There was a consistent, very high level of focus on infection control throughout my stay. The next day, flushed with the news that no cancer had been found in any other lymph nodes, that there were clean, ample cuts around the tumors we knew about, and, best of all, that no follow-on chemo- or radiotherapy would be needed, I chatted away happily with two visitors for almost ninety minutes. I was repaid for this premature end-zone celebration with a siege of intense throat pain that lasted over a week. I was also repaid in a different way for the optimistic removal the next morning of the nasogastric tube installed during my surgery to feed and medicate me post-op. 

My surgeon, Alex Langerman, was generous with his time. We had four visits in the hospital that I could remember and one which I couldn’t. He responded thoughtfully and substantively to my questions and concerns but delegated the day-to-day management of my care to his senior and junior residents. The senior residents, who were present in the OR,  were as impressive as Alex was.

Some of the junior residents, however, literally phoned it in. On the second night, I woke up strangling on a large blood clot that had dislodged from the wound and blocked my airway. The anxious nurse in charge of my care paged the on-call resident who . . . didn’t answer the page in 90 minutes. Paged again, the resident scolded the nurse for bothering her and instructed the nurse to inform me that “breathing and swallowing problems were normal for this type of surgery” and refused to come in to the hospital to examine me.

At this point, I asked to speak to the resident on the phone, which prompted her to appear in my room thirty minutes later. She performed a perfunctory, fifteen-second examination, pressing down on my tongue with a depressor, but failing to examine my airway where a large piece of the clot was still lodged. Then she delivered a sour little lecture on how “breathing and swallowing problems were normal. etc.” and after documenting that she had showed up, ordered a swallowing study for the next day and vanished without taking any other action, not to be seen again. I eventually coughed up the rest of the clot myself and prayed it wouldn’t happen again. 

The failure of on-call residents to respond to pages from the nurses caring for me was repeated later in my stay. Despite this inconstant clinical back up, I received thoughtful and attentive nursing care throughout my stay. Sadly, the nurses seemed to spend twice as long typing into the numerous computers in the rooms and at the nursing station as they did actually caring for us.  

However, the inadequate pain control regimen vital to my regaining my ability to swallow exacted a huge price. Originally, my pain meds were to be delivered through the nasogastric tube that bypassed my new throat. When the tube was removed the day after surgery, no thought was given to rethinking my pain control. Though I had a mild patient-controlled anaesthesia through IV, I was expected to swallow my primary pain medication delivered in liquid form roughly every four hours. 

As you might expect given the large wound in my throat, swallowing was a nightmare, particularly since the liquid pain medications seemed to be suspended in alcohol. I could not swallow them sitting up in bed, so I made a medication station out of my window sill. Even if I diluted them with water or a suspension of edible fiber, it took almost twenty minutes to down each dose of pain meds. Every tiny swallow brought a sharp stab, a hop and a yelp, followed by a spasm of painful coughing. Several days of protest brought a new idea:  bitter ground up pain pills mixed with apple sauce! Chunks of pain medication and apple hung up in my throat, lodging on the wound. 

Then the hospital entered the fugue state otherwise known as the weekend. A hospital stay expected to be seventy-two hours had stretched to six days, during which I was unable to eat and barely able to swallow even water, let alone therapeutic food. I made an angry circuit of the massive, aircraft carrier sized hospital floor every few hours, pushing my IV stand alongside of me, weakening each day from the cumulative deficit of protein. 

 I lost more than seventeen pounds during my stay in the hospital, mostly muscle, from my inability to eat. This muscle loss contributed directly to the collapse of my left hip joint later in the spring by depriving a badly eroded arthritic joint of its supporting musculature. Escalating pain in both hips required two joint replacements in the ensuing eighteen months.   

Finally, on Sunday evening, Alex called for a pain consult, which came on Monday morning, from a brilliant young anesthesiologist named David Dickerson. The result was a nearly complete victory: a combination of an anesthetic patch, local anesthetic mouthwash for the throat, a medication intended to numb the small nerves, and a strong liquid systemic painkiller to be used as needed. I was discharged within 36 hrs. able to swallow protein drinks for sustenance. 

Unfortunately, within twenty-four hours, I was back in the University of Chicago ER for bleeding. I was readmitted for minor surgery to cauterize the wound in my throat, and also to remove fluid from one side of the neck. Finally, after recovering from the anesthesia, I was sent back to my physician’s house, which was my base camp during my Chicago stay. I flew home to Virginia two days later, on February 13. 

The saga wasn’t over. Karen, my wife, stayed with me the first four days. Despite her constant presence, neither my wife nor my guardian angel hosts in Hyde Park were given discharge instructions. Karen was barely acknowledged by any member of the care team during her four days in the hospital, despite her impending role as my caregiver. I received my discharge instructions in a haze of elation and pain meds,  and immediately tucked them away in my bag. When I arrived home in Charlottesville, exhausted from my eleven-day visit to Chicago, I showered and collapsed into my welcoming bed.

I awakened fifteen hours later with no feeling in the fingers of both hands. I also found nearly two-inch blisters on my heels from lying on my back for fifteen hours. Karen, a florist, was preoccupied by Valentine’s Day, her busiest day of the year, and my son, Trevor, who came to stay, was reluctant to disturb me. Six months later, I still had no feeling in the two outer fingers of my right hand, needless collateral damage from my treatment. I basically lost my ability to type. This avoidable complication was eventually addressed with a six-hour nerve grafting surgery at Washington University in St. Louis in October, 2015.

I’d been warned by several of my policy colleagues about selecting Medicare Advantage when I turned sixty-five. “Wait ‘till you get sick”, they sagely warned me.

In fact, my carrier, Humana, did not delay my course of therapy by five minutes, and rapidly approved my personal decision based on medical advice to seek cancer care from an NCI designated Comprehensive Cancer Center five hundred miles from home and “out of network” for my Virginia-based plan. 

Unfortunately, the MA approval process placed a huge clerical/administrative burden on my Charlottesville-based primary care physician Jeff Davis, whose long-suffering office staff was required to initiate requests for authorization for every single stage of the diagnosis and treatment, a process which consumed nearly two person days of administrative time. I did get regular check-ins from a Humana nurse for several weeks after the procedure and a big shipment of frozen meals.  

But otherwise, my Medicare Advantage plan added no value to my cancer care, and grossly underpaid the University of Chicago for my surgery. The hospital was paid $15 thousand under their Humana MA contract for my total care, not counting Alex’s surgical fee, for a complex surgery, an eight day hospital stay and an emergency readmission.

The surgical care I received at the U of C was a triumph, both thorough and definitive. It saved my life.  However, the follow up pain management and the discharge process and post-surgical recovery were disasters, both from a patient experience standpoint (fed back with verve on my HCAHPS survey!) and a cost standpoint.  

The diffusion of responsibility throughout the complex care episode, and consequent lack of ownership of my recovery, was the root cause of much of this gap. An additional learning for me:  much of the risk of any clinical intervention is borne by the family after the intervention is over. The failure to prepare my family for its role had direct consequences for me in future surgical episodes that would have been unnecessary a better scripted episode. 

A recent commenter on LinkedIn compared the “consumer” of healthcare to a person gorging on Baked Alaska in a restaurant where someone else picked up the bill. Given my own frightening experience with cancer, I found this characterization insulting and demeaning. I wasn’t “consuming” anything; I was drowning! My central challenge was finding someone I could trust to save my life. Would I have chosen someone I did not know or trust, but whose services were less costly, to rid me of my cancer? Not on your life. 

Economist Kenneth Arrow wrote sixty years ago that one thing that distinguishes medicine from other things our economy does is that illness is not only unpredictable, but also an “assault on one’s personal integrity”. Responding to that lethal uncertainty is the toughest job in our economy. I was and remain deeply grateful to my clinical team for saving my life.  

I am now nine years cancer free, and sobered by how fraught and complicated my care experience was. It is hard to describe how much fear and uncertainty I felt, even in my home institution, despite forty years of working experience in and around hospitals. When I hear marketing experts prattle on about the “consumer’s care journey”, it just makes me want to throw up.

Jeff Goldsmith is a veteran health care futurist, President of Health Futures Inc and regular THCB Contributor. This post comes from his personal substack

By MATTHEW HOLT

Humana is out with a report saying that its Medicare Advantage members who are covered by value-based care (VBC) arrangements do better and cost less than either their Medicare Advantage members who aren’t or people in regular Medicare FFS. To us wonks this is motherhood, apple pie, etc, particularly as proportionately Humana is the insurer that relies the most on Medicare Advantage for its business and has one of the larger publicity machines behind its innovation group. Not to mention Humana has decent slugs of ownership of at-home doctors group Heal and the now publicly-traded capitated medical group Oak Street Health.

Humana has 4m Medicare advantage members with ~2/3rds of those in value-based care arrangements. The report has lots of data about how Humana makes everything better for those Medicare Advantage members and how VBC shows slightly better outcomes at a lower cost. But that wasn’t really what caught my eye. What did was their chart about how they pay their physicians/medical group

What it says on the surface is that of their Medicare Advantage members, 67% are in VBC arrangements. But that covers a wide range of different payment schemes. The 67% VBC schemes include:

• Global capitation for everything 19%
• Global cap for everything but not drugs 5%
• FFS + care coordination payment + some shared savings 7%
• FFS + some share savings 36%
• FFS + some bonus 19%
• FFS only 14%

What Humana doesn’t say is how much risk the middle group is at. Those are the 7% of PCP groups being paid “FFS + care coordination payment + some shared savings” and the 36% getting “FFS + some share savings.” My guess is not much. So they could have been put in the non-VBC group. But the interesting thing is the results.

First up Humana is spending a lot more on primary care for all their VBC providers, 15% of all health care spend vs 6.6% for the FFS group, which is more than double. This is more health policy wonkdom motherhood/apple pie, etc and probably represents a lot of those trips by Oak Street Health coaches to seniors houses fixing their sinks and loose carpets. (A story often told by the Friendly Hills folk in 1994 too).

But then you get into some fuzzy math.

According to Humana their VBC Medicare Advantage members cost 19% less than if they had been in traditional FFS Medicare, and therefore those savings across their 2.4m members in VBC are $4 billion. Well, Brits of a certain age like me are wont to misquote Mandy Rice-Davis — “they would say that wouldn’t they”.

But on the very same page Humana compares the cost of their VBC Medicare Advantage members to those 33% of their Medicare Advantage members in non-VBC arrangements. Ponder this chart a tad.

Yup, that’s right. Despite the strung and dram and excitement about VBC, the cost difference between Humana’s VBC program and its non-VBC program is a rounding error of 0.4%. The $90m saved probably barely covered what they spent on the fancy website & report they wrote about it

Maybe there’s something going on in Humana’s overall approach that means that FFS PCPs in Medicare Advantage practice lower cost medicine that PCPs in regular ol’ Medicare. This might be that some of the prevention, care coordination or utilization review done by the plan has a big impact.

Or it might be that the 19% savings versus regular old Medicare is illusionary.

It’s also a little frustrating that they didn’t break out the difference between the full risk groups and the VBC “lite” who are getting FFS but also some shared savings and/or care coordination payments, but you have to assume there’s a limited difference between them if all VBC is only 0.4% cheaper than non-VBC. Presumably, if the full risk groups were way different they would have broken that data out. Hopefully they may release some of the underlying data, but I’m not holding my breath.

Finally, it’s worth remembering how many people are in these arrangements. In 2019 34% of Medicare recipients were in Medicare Advantage. Humana has been one of the most aggressive in its use of value-based care so it’s fair to assume that my estimates here are probably at the top end of how Medicare Advantage patients get paid for. So we are talking maybe 67% of 34% of all Medicare recipients in VBC, and only 25% of that 34% = 8.5% in what looks like full risk (including those not at risk for the drugs). This doesn’t count ACOs which Dan O’Neill points out are about another 11m people or about 25% of those not in Medicare Advantage. (Although as far as I can tell Medicare ACOs don’t save bupkiss unless they are run by Aledade).

I did a survey in 1997 which some may recall as the height of the (fake) managed care revolution. Those around at the time may recall that managed care was how the health insurance industry was going to save America after they killed the Clinton plan. (Ian Morrison used to call this “The market is working but managed care sucks”). At the time there was still a lot of excitement about medical groups taking full risk capitation from health plans and then like now there was a raft of newly publicly-traded medical groups that were going to accept full risk capitation, put hospitals and over-priced specialists out of business, and do it all for 30% less. The Advisory Board, bless their very expensive hearts, put out a report called The Grand Alliance which said that 95% of America would soon be under capitation. Yeah, right. Every hospital in America bought their reports for $50k a year and made David Bradley a billionaire while they spent millions on medical groups that they then sold off at a massive loss in the early 2000s. (A process they then reversed in the 2010s but with the clear desire not to accept capitation but to lock up referrals, but I digress!).

In the 1997 IFTF/Harris Health Care Outlook survey I asked doctors how they/their organization got paid. And the answer was that they were at full risk/capitation for ~3.6% of their patients. Bear in mind this is everyone, not just Medicare, so it’s not apples to apples with the Humana data. But if you look at the rest of the 36% of their patients that were “managed care” it kind of compares to the VBC break down from Humana. There’s a lot of “withholds” which was 1990s speak for shared savings and discounted fee-for-service. The other 65% of Americans were in some level of PPO-based or straight Medicare fee-for-service. Last year I heard BCBS Arizona CEO Pam Kehaly say that despite all the big talk, the industry was at about 10% VBC and the Humana data suggests this is still about right.

So this policy wonk is a bit depressed, and he’s not alone. There’s a little school of rebels (for example Kip Sullivan on THCB last year) saying that Medicare Advantage, capitated primary care and ACOs don’t really move the needle on cost and anyway no one’s really adopted them. On this evidence they’re right.

Matthew Holt is the Publisher of THCB and is still allowed to write for it occasionally.

By RICHARD FRANK

By relying on virtual cardiometabolic solutions for continuous care, Medicare Advantage can produce better outcomes, curb costs, enhance member satisfaction — and improve Star ratings in the process.

Medicare Advantage is a hot market. Enrollment is steadily climbing and Medicare Advantage (MA) members now make up half the Medicare population. Though members keep rolling in, competition among MA plans is tight and turnover remains high. Nearly 16% of MA members switch plans at least once during their first year, while over a third end up switching by year three. Higher-need Medicare members tend to disenroll altogether, impacting Stars ratings.

On top of fierce competition for members, MA plans struggle with ballooning costs as rates of cardiometabolic conditions like diabetes, obesity, and hypertension persistently rise. It’s hard to overstate what a toll cardiometabolic conditions take on our nation’s seniors — especially since those conditions tend to co-occur and compound with age. We’re long overdue for more innovative solutions.

Poorly managed cardiometabolic conditions are significant drivers of MA medical expense trend and spend, member dissatisfaction, and, by extension, poor Star performance. But increasingly, virtual care companies are starting to turn some of those trends around. MA plans should take note. 

Virtual care provides value-based pricing and cost-saving interventions

There’s no question that costs associated with cardiometabolic conditions are escalating at an alarming rate. Chronic diseases account for 86% of total healthcare spending in the US, most of which are rooted in cardiometabolic disorders with growing prevalence. Over 40% of Americans have obesity, which increases their risk of developing diabetes six-fold. More than 75% of seniors deal with high cholesterol, and nearly half of adults exhibit high blood pressure, though less than 25% have it under control. 

While these chronic diseases cost approximately $3.7 trillion annually in healthcare spending and lost productivity, virtual cardiometabolic care is making a sizable dent to improve health metrics and reduce costs. Many virtual companies are pursuing value-based pricing models that place an emphasis on outcomes rather than simply charging fees for service. Some companies even offer performance guarantees and strategies to reduce healthcare utilization in a medically appropriate manner. By providing access to health coaches and tools designed to help behavior change, virtual cardiometabolic care can prevent unnecessary hospitalizations and even works to get people off expensive medications. 

When some of those expensive medications (like GLP-1s for weight loss) are in high demand, virtual cardiometabolic care companies can offer pre-authorization and a clinically rigorous, step therapy approach to keep costs in check while still delivering meaningful outcomes. Health coaches and registered dietitians help manage the side effects of the drugs and guide the necessary behavior changes to sustain results.

Medicare Advantage members value the continuous support and convenience of virtual care 

It’s easy to assume that MA members would be reluctant to use tech-based solutions to improve their health. But research shows the opposite is true. Seniors find virtual care solutions convenient and effective, with over 60% of boomers reporting behavioral change success via digital means. Since the pandemic, 50% more MA beneficiaries use virtual care, and overall digital health technology usage has soared.

Obesity, diabetes, high blood pressure, and other chronic conditions take a heavy toll on seniors’ health, mobility, pocketbooks, and overall quality of life. They need more help than brick-and-mortar providers can give. By contrast, virtual care: 

• Improves access.  More than 1 in 5 older Americans live in rural areas with low access to specialist care. The virtual care no-show is 7.5% vs. 36% for in-office appointments.
• Provides better continuity of care. Provider care teams made up of physicians, registered dietitians, diabetes educators, health coaches, and therapists encircle members and efficiently coordinate care.
• Offers user-friendly tools for success. Remote-monitoring devices and app-based programs help members track progress and gain more health literacy through engaging content.
• Costs less out of pocket. Virtual care doesn’t require fuel, parking, and public transportation costs for members. 

Star ratings drive member attraction and retention 

Since Star performance ratings play such a crucial role in attracting and retaining MA members, plan leaders need all hands on deck to meet their marks. With Star ratings increasing their emphasis on member experience (Consumer Assessment of Healthcare Providers and Systems, or “CAHPS”) alongside clinical quality as measured by the Healthcare Effectiveness Data and Information Set (HEDIS), MA plans would do well to invest in virtual solutions that offer a continuous care experience members appreciate. Member complaints about health plans may drive the most significant impact on contract performance, so plans will want to avoid those as much as possible.

Many virtual solutions are designed to completely encircle members with specialized care teams to coach through behavior changes, provide personalized eating plans, teach health literacy skills, and even manage medications — prescribing and deprescribing as appropriate. They’re highly effective at keeping members out of the hospital and empowering folks to take charge of their own health. 

Medicare Advantage plans could gain a lot from partnering with virtual cardiometabolic solutions that save on costs while producing clinically significant outcomes and placing members at the center of care. After all, healthier MA members make more satisfied MA members, too.

Dr. Richard Frank is the Chief Medical Officer for Vida Health.

BY GEORGE HALVORSON

We know from the current annual report from the Medicare trustees that Medicare Advantage is saving Medicare, and that Medicare will be a much stronger program as Medicare Advantage continues to grow.

When we look at actual numbers from that report, we see that Medicare Advantage cost Medicare $403.3bn last year.

The report shows that Medicare is growing 6.7% each year in total revenue. We see that Medicare Parts A and B have expense growth that slightly exceeds 8%, and that Medicare Advantage is projected to have expense growth of 4.2% for the year.

That means we’re losing money from the fee-for-service part of the Medicaid program — and that is eating into the Medicare trust fund. We also can see that Medicare Advantage is making a surplus for Medicare, and is increasing the size of the fund.

We know that Medicare Advantage bids against the average cost of Medicare in every county to create the capitation levels for each year. Those bids are typically discounted by 15% (or more) from the average Medicare cost.

Those discounted bids cost Medicare less in actual dollars each month. The Medicare Advantage critics speculate about coding levels for the plans, but the Medicare trust fund doesn’t care about codes.

They only care about actual dollars. When you look at actual dollars, we see that Medicare spent $403.3bn to pay for the coverage with Medicare Advantage plans.

Medicare Advantage costs less than Medicare because the plans deliver much better care in many key areas. Fee-for-service Medicare for low-income people has some of the highest blindness rates in the world.

Medicare Advantage plans have quality goals and processes that are anchored on the medical reality that you can reduce the blindness rate by 60% when blood sugar is controlled for diabetic patients. So the plans all have blood sugar management goals and their performance in those areas improved under Covid.

Low-income Medicare patients for fee-for-service Medicare have some of the highest amputation rates in the world. Medicare spends billions on amputations. The Medicare Advantage plans all know that 90% of the amputations are caused by foot ulcers.

They know that we can reduce foot ulcers by more than 40% with dry feet and clean socks. They have much lower costs for amputations, because over 90% of the Medicare Advantage special-needs plan patients have clean socks.

The Medicare Advantage capitation levels and benchmarks are based on using the average cost of fee-for-service Medicare in every county as the starting point for the process. The plans have much better care in a number of areas, so the plans bid at discounts that exceed 15% from those Medicare average cost levels.

The plans still make a profit from those lower bids, because care is so much better. The program was designed as part of the Affordable Care Act to take the possible profits for the plans and turn them into higher benefits for the members.

That worked extremely well.

The plans offer dental, vision, and hearing benefits along with other community support benefits from the profits they make with better care. Fee-for-service Medicare is an extremely poor and expensive care purchasing and delivery process. The average cost of care that sets up the bidding benchmarks in every county for the plans creates a cashflow that is a much better and more competent use of the Medicare dollar than traditional Medicare.

Some of the plans use their profits from those bids to buy Medicare Part D drug coverage for their members. Medicare Part D is an extremely good and solid program for getting prescription drugs to Medicare members. The plans both work with that program to provide the right drugs, and they sometimes even pay the Part D premiums for their members from the profits.

That payment of that premium does not increase the overall cost of Medicare. The profits that were needed to buy that Part D coverage were actually included in the $403.3bn total cost of Medicare Advantage that we saw in the trustee report. 

Medicare broke even overall this year on the reserve levels. We know from the fact that Medicare Advantage capitation costs will increase by 4% this year, in the face of the overall program receiving 6.7% in additional revenue, that every member of Medicare Advantage will financially strengthen Medicare.

The highest-need and the lowest-income Medicare members have dual eligibility for both Medicaid and Medicare. Some of those members have been badly damaged by social determinants of health issues and inequities. And some of them actually received team care for the first time in their life when they enrolled in Medicare Advantage Special Needs Plans.

The costs are also lower for Medicare when that happens. The 2023 Medicare trustee report said that Medicare Part A had a decrease in their expenses when some of the most expensive patients enrolled in Medicare Advantage Special Needs Plans. That’s far better care for those members.

The Medicare Advantage Payment Increase for 2024 is now Projected to be 3.32%

What we know for an absolute fact from that trustee report, is that the $403.3bn expense that we saw for 2022 for Medicare Advantage will not grow beyond the 6.7% income increase level that we’ll see for the Medicare program overall. CMS is currently projecting a 3.32% increase in the payment for 2024.

We know that we’re absolutely safe and financially secure with the long-term financial future for those Medicare Advantage members, because there’s no possible combination of circumstances or processes or transactions that can achieve what the Health Affairs pieces have been projecting explicitly and directly about the future bankruptcy of Medicare, based on Medicare Advantage upcoding processes.

Those warnings never made sense to anyone who looked at the obvious and highly visible fact that the plans were already discounting their prices 15% from the average cost of Medicare. And there was nothing to be gained by having higher codes in any of those areas as a source of revenue for the plans. 

That was a fake news process, but it has had followers. We need everyone to now look at the actual Medicare trustees 2023 annual report and then look at the 2023 Medicare Advantage and Part D Rate Announcement from CMS, and have that information from those credible sources give us a chance to relax, enjoy, understand, and appreciate the financial future that the current payment model now creates for us all — and how well that payment approach is doing right now for Medicare.

CMS eliminated any possibility of upcoding in 2020. CMS replaced the actual coding system in 2020 with individual encounter reports, which include the diagnosis information for each patient. 

That data is now current and close to perfect. 

You can see from the CMS payment directions, and from the actual 2023 rate announcement narrative, that encounter-based data-gathering approach is what we use now for every plan. They report actual encounters as opposed to coding anything in a way that creates those negative outcomes that critics claim are happening. 

You can see from the CMS reports, and from the current trustee report, the correct data is resulting in a 4.2% increase in plan revenue for next year. That low increase in plan cost is actually saving Medicare in a very gentle, useful, and effective way.

Anyone challenging that conclusion will see it validated entirely in a year from now. The 2024 Medicare trustees report will show how much Medicare Advantage will cost in 2025, how strong the trust fund is now, and how strong it will continue to be.

George Halvorson is Chair and CEO of the Institute for InterGroup Understanding and was CEO of Kaiser Permanente from 2002-14.

Medicare Advantage (MA) has passed the tipping point, delivering coverage and care to more than half of the senior population in the US. The Congressional Budget Office projects more than 60 percent of people 65 years and older will be in the program by 2030. As enrollment soars and interest in value-based health care grows, it is imperative policymakers modernize the program that is expected to cost $7.5 trillion over the next decade.

Rather than taking the standard Washington posture of declaring victory or defending the status quo, our provider-aligned, nonprofit member plans spent nearly two years developing a detailed vision for MA for Tomorrow. The policy proposals being released at a Capitol Hill briefing on June 12 are concrete reforms from executives with decades of experience and a track record of achieving the highest quality ratings in the program.

MA for Tomorrow is built on five pillars: (1) Raising the Bar on Quality; (2) Improving Consumer Navigation; (3) Achieving Risk Adjustment for Care, not Codes; (4) Modernizing Network Composition; and (5) Transforming Benchmarks. Taken together, the policies foster greater competition, reduce provider burden, push quality standards higher, enhance the shopping experience and curb improper payments.

With consistently high-quality ratings, expanded benefits and a proven ability to reach minority populations, the MA public-private partnership is an undeniable success. More than 31 million seniors are enrolled in MA, a growth of over 107 percent since 2014. In the past five years, as seniors voted with their feet, MA grew by 9.1 million enrollees while fee-for-service Medicare shrunk by 5.1 million. 

But even the most successful programs must evolve. To serve current and future retirees, MA must keep pace with medical and technological advances; it must improve the shopping experience to match other retail sectors; it must address loopholes and bad behaviors that dampen competition and choice. While fundamentals of the program remain strong, change is necessary to ensure the MA program of the future is equitable, affordable and focused on health outcomes.

Raising the Bar on Quality to Address the Lake Wobegon of Stars 

MA is the only government program that measures and rewards high-quality care. ACHP is proud to have played a major role in creating the original 5-scale quality ratings program.  While groundbreaking when it was introduced in 2012, the star ratings today resembles Lake Wobegon. Most plans get a trophy in the form of 4 or 5 stars, diluting the distinction of truly superior performance.

Even worse, the most aggressive risk-adjusters have discovered it is easier to code their way to revenue than achieve it through quality, which means that a 3.5-star plan can collect more federal dollars than a 5-star plan, according to data from the independent Medicare Payment Advisory Commission, or MedPAC.

For too long, MA has relied on process measures as a quality indicator rather than health outcomes and patient satisfaction. Created as the initial baby steps in the stars program, process measures focus on simply checking the box. As a result, a system intended to drive meaningful competition and reward the highest quality has been watered down by easy to achieve process measures, resulting in nearly 75 percent of MA consumers in a plan with 4 or more stars.

Raising the quality bar requires using the right survey tools. The predominant means of collecting data to measure quality today do not fully or accurately capture the senior population, often excluding consumers with limited technological access, people of color and consumers with English as a second language. Effectively evaluating quality begins with having tools to collect information accurately and comprehensively, increasing response rates and accounting for cultural, geographic and health equity differences. 

To push performance higher and emphasize health, ACHP and its member companies propose to eliminate 10 outdated process measures that are poorly designed or have clustered rates of performance at the top of the measure. For example, we propose eliminating the price accuracy process measure which evaluates information posted on Medicare Plan Finder. In 2023, the average performance was above 90 percent and the difference between achieving three stars and five-stars on that measure was just six percentage points. This is not a meaningful measure for quality ratings. In contrast, we propose maintaining the breast and colorectal cancer screening measures that drive early detection and treatment, particularly in underserved communities. In place of the topped-out process measures would be quality metrics that focus on patient experience and health outcomes. 

Finally, MA for Tomorrow raises the quality bar by limiting the number of plans that can achieve a 4-star or above rating. The MA quality bonus would remain in place but would be rewarded to a smaller number of high achievers, reducing the amount of quality bonus dollars and saving taxpayer dollars. All told, health plans would have multiple incentives to strive for a higher rating, driving more competition on what really matters and greater value for seniors and taxpayers. 

Improving Consumer Navigation to Protect Seniors

Seniors deserve unbiased, actionable and easy-to-navigate information to make informed decisions about their coverage and care. That can be challenging when the average consumer has 44 health plan options to choose from. Further exacerbating the already complicated enrollment process, the Senate Finance Committee found substantial evidence of misleading marketing by third-party marketing organizations and lead generation firms. The committee documented repeated instances of seniors being presented with false, incorrect and misleading information and then being unknowingly disenrolled from their selected health plan. In one example, a senior was involuntarily disenrolled four times from their chosen health plan within one enrollment period.  

In the 2024 MA and Part D rule, CMS established guardrails on marketing and advertising practices to crack down on the most egregious abuses. CMS must implement these new guardrails with strong enforcement. And further action is needed to directly regulate third-party marketing organizations and lead generation firms which are outside the jurisdiction of CMS. 

To build on the initial CMS actions, MA for Tomorrow establishes a cap on health plan payments to marketing organizations, provides a fast-track review process for 5-star MA plans and strengthens oversight and penalties for misleading and inaccurate marketing. These proposals will streamline and reduce the amount of marketing materials seniors receive and ensure that what they get is easy-to-understand and accurate. Further, health plans will be incentivized to deliver high-quality through a speedier review process that reduces their administrative burden.

For many seniors, brokers offer important assistance in understanding their health plan options and finding the best plan for their individual needs. Today, CMS limits broker commissions to approximately $600 per enrollee. But there are no caps on additional, rather creative, “administrative payments” for services such as marketing, compliance, IT or health risk assessments. Brokers can collect upwards of $1,300 per consumer, creating a misaligned incentive to steer seniors and unnecessarily increase administrative costs. Yet the program offers no such additional payment or incentives for brokers to promote quality or value-based care, a stated priority of policymakers.

MA for Tomorrow standardizes broker compensation and adds incentives for enrolling consumers in top-performing plans. Combined, the two policy reforms deter brokers from steering consumers to health plans that pay the most. Brokers will have appropriate incentives to help consumers identify the right health plan for their individual care and coverage needs. This will also protect the Medicare dollar, reducing administrative costs. 

Using Risk Adjustment for Care, Not Codes

Risk adjustment is designed to provide sufficient resources for health plans and providers to manage care effectively. Too often, however, for-profit MA plans or new entrants seek to maximize risk adjustment to drive financial goals. Coding is king; care becomes the afterthought. Used properly, risk adjustment should provide clinical teams the resources to address the unique clinical and social needs of a beneficiary. High-quality plans meeting consumers’ needs should be rewarded over plans that simply chase risk adjustment revenue. In today’s upside-down world of risk adjustment, however, aggressive coding delivers bigger payments to plans than top quality ratings, as evidenced in MedPAC’s March 2023 data.

The current risk adjustment model is calibrated using fee-for-service claims and does not account for differences in coding patterns between volume-based and value-based care.

MA for Tomorrow recalibrates the risk adjustment model to use MA encounter data, which documents a consumers’ diagnoses, treatments and services. The change would improve payment accuracy and mitigate the effects of overly aggressive coding. CMS has collected MA encounter data for more than a decade and has the authority to use this information to recalibrate its model. 

The Affordable Care Act requires CMS to apply a coding intensity adjustment to account for differential coding practices between traditional fee-for-service Medicare and MA. CMS currently applies a standard adjustment to all MA plans despite the significant variance in coding intensity by plan. As coding practices differ, so should the coding intensity adjustment. MA for Tomorrow applies different levels of coding intensity adjustments, tiering plans based on coding aggressiveness and targeting larger adjustments to plans significantly higher than the industry average. By tiering the coding adjustment, CMS will deter outliers, rein in aggressive coding practices and level the playing field in MA. 

Risk Adjustment Data Validation (RADV) audits serve as an important program integrity tool to recover improper overpayments and act as a deterrent to abuses. These audits are expensive and time consuming for regulators and health plans. Given the federal government’s limited time and resources, the audits must target health plans with a higher likelihood of coding abuses or an established pattern of outlier behavior. Under MA for Tomorrow, RADV audits will be targeted using criteria that focus on health plans with practices that differ widely from the industry average. Establishing clear RADV guidelines creates a more efficient, effective program that curtails bad actors and protects the taxpayer dollar. 

Modernizing Network Composition and Transforming Benchmarks

All consumers deserve access to a network of high-quality providers measured by standards that support competition and recognize care delivery innovation. Network adequacy requirements based on time and distance are simply outdated. A large and growing share of physical and mental care appointments are no longer completed through a traditional “office visit.” Virtual and team-based health care are game changers, allowing clinicians to work to the top of their license, partner with care teams for the patient and address workforce shortages, especially in rural and underserved areas. 

We live in a digital era and consumers expect nothing less than convenient, 24-7 access to health care. The COVID-19 pandemic demonstrated the value of creative ways of delivering care. MA for Tomorrow would establish contemporary network adequacy standards that recognize innovations in care delivery such as remote monitoring and reflect unique needs of populations and communities. Antiquated time and distance standards must be modernized for today’s consumers.

Benchmarks are the cornerstone of MA payments, establishing the maximum per beneficiary monthly payment that may be paid to a health plan to cover basic Medicare benefits. The benchmark methodology is based on average spending in traditional fee-for-service Medicare, adjusted by county. That formula is outdated now that a majority of Medicare eligible seniors are enrolled in MA. With MA enrollment continuing to surge and fee-for-service shrinking, it is time to revisit whether basing MA payment benchmarks solely on fee-for-service accurately forecasts the actual costs of delivering care to seniors in MA. 

MA for Tomorrow transforms benchmarks to reduce reliance on local fee-for-service costs and establish benchmarks that better reflect the changing Medicare enrollment composition and incorporates stronger incentives for delivering high-quality care. The fiscal sustainability of the MA program for seniors and taxpayers necessitates action. 

Ensuring a Better MA for Tomorrow 

ACHP and its nonprofit member companies are committed to engaging constructively with policymakers and other stakeholders on changes to MA that provide superior customer service, protect the taxpayer and Medicare Trust Fund, and improve health for the consumers and communities they serve. Tomorrow’s seniors deserve MA for Tomorrow. 

To learn more, visit MAforTomorrow.org.

Ceci Connolly is the President and CEO of Alliance of Community Health Plans. Michael Bagel is the Associate Vice President of Public Policy of Alliance of Community Health Plans.

I just got to interview Glen Tullman, CEO Transcarent (and formerly CEO of Livongo & Allscripts) & Aneesh Chopra, CEO Carejourney (and formerly CTO of the US). The trigger for the interview is a new partnership between the two companies, but the conversation was really about what’s happening with health care in the US, including how the customer experience needs to change, what level of data and information is available about providers and how that is changing, how AI is going to change data analytics, and what is actually happening with Medicare Advantage. This is a fascinating discussion with two real leaders in health and health tech — Matthew Holt

Yes it’s time to talk Medicare Advantage (MA). It’s been a huge couple of weeks for the world of MA. On the commercial side, CVS bought the biggest pure play MA provider, Oak Street Health for $10bn. This pissed me off as if they paid $2 a share more I’d have made a profit on the stock I foolishly bought “on a dip” in 2021.

But this amazed many of us on THCB Gang, as they paid a huge premium and it works out to some $60k per patient. Now health care organizations have been overpaying for patient “lives” as long as I can remember–going at least as far back as Aetna nearly going out of business when it bought US Healthcare in 1996. So why is today’s incarnation of Aetna buying providers?

Well that’s to do with the regulatory side of MA. I have been on record since the very first post of THCB that Medicare FFS is an inefficient and expensive program–even if 80% of American hospitals say they lose money on it and have to charge commercial insurers more to make up for it. But while it’s possible to agree with George Halvorson that MA delivers better care at a lower cost than FFS Medicare, it is simultaneously possible to believe that MA costs more than it should. That’s because of aggressive RAF upcoding that’s been built both into home visits from companies like Signify and also into the EMRs doctors have been using to code MA members’ health status.

There are lots of proposals on how to fix this–including this one from Chenmed on how to change MA from paying for inputs (i.e how sick people are when they join MA) to outputs (how much better they got while in MA). But it’s clear that CMS is now officially coming after upcoding including full cross plan audits back to 2018. Even if not back to 2011. The MA plans will grumble about those past audits and tie CMS up in court but they know going forward the game is up

To make more money in MA they need to get hold and shake loose or frack some of the 85% of the premium that goes to provider organizations. Hence they are all getting into bed with them or buying them outright. UHG, Humana & now Aetna/CVS have been buying physician groups that serve MA populations at a quickening rate, and their goal is to put more of the 50% of seniors already into MA into those groups.

Will this save any money?  Well probably not, at least not yet. Humana has been reporting on the costs in its full risk capitated MA groups versus its FFS ones for a couple of years, and the difference is a rounding error. But the point is that the next war in Medicare Advantage is going to be what happens inside these plan-owned medical groups. So expect a lot more scrutiny of both costs, outcomes and patient experience within MA focused medical groups starting about now.