Medicare Advantage Plans

What does Medicare Part C mean for independent physicians?  

The Structure of Medicare 

Patients who qualify for Medicare can receive their coverage through one of two programs: Original Medicare, or Medicare Advantage Plans (also known as Part C or MA Plans).

Over the past few decades, the Medicare Advantage program has expanded to cover 31% of Medicare beneficiaries; during this time, Medicare Advantage plans shifted their focus from producing savings to expanding the coverage of plans and providing extra benefits to their patients. Consequently, the payment structure of the healthcare industry has evolved along with Medicare Advantage plans, and healthcare costs have risen significantly; in 2009, Medicare paid private Medicare Advantage plans 14% more per beneficiary than the cost of care for beneficiaries in traditional Medicare. Additionally, by requiring beneficiaries to see a primary care physician, many Medicare Advantage plans have served to centralize the role of primary care physicians in the provision of healthcare. Thus, it is extremely important that independent providers understand the role of Medicare Advantage and the changes that it continues to undergo due to the Affordable Care Act (ACA) of 2010.

Original Medicare

Before the introduction of Medicare Advantage plans, all Medicare patients were covered under Original Medicare. Even today, the majority of Medicare beneficiaries are covered under this traditional Medicare plan (Kaiser Family Foundation). In this program, the government pays for Medicare benefits through a fee-for-service arrangement; the health care provider bills Medicare a fee for the service provided to a Medicare beneficiary. Thus, the cost risk (i.e. the cost of providing care to the patient) is carried by the Medicare program.

Original Medicare is composed of Part A (hospital insurance) and Part B (outpatient insurance). For Part A, Medicare estimates the expected resources required to provide hospital care for a specific patient, and then determines a payment to the hospital. If the hospital can provide care to the patient at a lesser cost, the hospital retains the difference as profit.

For Part B, Medicare reimburses physicians and other health professionals according to a fee schedule. This fee schedule is determined by considering the average costs of providing a specific service to patient, and adjusting this cost to account for other provider expenses, such as malpractice insurance and office-based practice costs.

Currently, the Department of Health and Human Services (HHS) is proposing a new rule that would determine payments to clinicians according to the “Quality Payment Program”, also known as MACRA, which is composed of the Merit-based Incentive Payment System (MIPS) and the Advanced Alternative Payment Models (APMs). Medicare claims that this rule will improve the relevance and depth of Medicare’s value and quality-based payments, which will better reward clinicians for providing high quality, efficient care.

Medicare Advantage Plans 

By contrast, in Medicare Advantage Plans, Medicare pays private companies a predetermined monthly rate for each beneficiary. This payment rate is determined according to the financial risk of the beneficiary, but does not depend on the cost of services actually used by the beneficiary. Then, the private company pays the health care provider. Thus, the cost risk is carried by private insurance companies.

All Medicare Advantage Plans are required to cover all of the services covered by Original Medicare, except hospice care. Thus, the plans cover emergency and urgent care, and many plans offer extra benefits such as dental care, eyeglasses, and wellness programs. Additionally, most plans include prescription drug coverage (also known as Medicare Part D). Under most plans, patients are required to pay a Part B premium for outpatient care, as well as a monthly premium for services included in the Medicare Advantage Plan.

Medicare Advantage plans began in the 1970s, when private insurers claimed that they could meet the medical needs of senior citizens and the disabled more cost-effectively than the government. In actuality, Medicare Advantage plans have produced mixed results. They have successfully expanded patients’ choice of healthcare providers and grown the role of the private sector, but they have also increased Medicare’s complexity and costs. Although the structure of Medicare Advantage places private insurers in competition with one another to enroll as many beneficiaries as possible, the costs of healthcare have increased nevertheless. These increased costs have been passed on to beneficiaries through higher Part B premiums, and also on to taxpayers.

Currently, 30% of all Medicare spending goes to Medicare Advantage plans, and Medicare Advantage plans cover currently covers 13 million beneficiaries, or 27% of Medicare patients. However, in recent years, federal rate cuts from the Affordable Care Act have reduced payments to Medicare Advantage, leading some Medicare Advantage insurers to reduce their network of physicians. Physicians who were removed from a network have been placed in a difficult position; many must refer patients to other doctors that are in-network, while others choose to continue treating their long-time patients despite the lack of payment.

Patient Eligibility for Medicare Advantage 

In order to be eligible for a Medicare Advantage plan, a patient must:

o   Have Medicare Part A (Hospital Insurance)

o   Have Medicare Part B (Medical Insurance)

o   Live in the plan’s service area; information about the service area can be obtained by contacting the plan

o   Not have End-Stage Renal Disease (ESRD), which is permanent kidney failure requiring dialysis or a kidney transplant

Patients are able to join Medicare Advantage plans when they first become eligible for Medicare (i.e. the time period from 3 months before turning age 65 to 3 months after the month when they turn 65). Additionally, if patients receive Medicare due to a disability, they can join Medicare Advantage plans during a 6 month time period, from 3 months before to 3 months after their 25th month of disability.

Each year, patients can only enroll in Medicare Advantage plans and Medicare Prescription Drug Coverage (also known as Medicare Part D) during the Open Enrollment Period from October 15 – December 7. Then, patients’ coverage will begin on January 1 of the following year. During the Medicare Advantage Disenrollment Period from January 1 – February 14 of each year, patients that have an existing Medicare Advantage plan may leave the plan and switch to Original Medicare. Since Original Medicare does not include drug coverage, these patients also have until February 14 to join a Medicare Prescription Drug Plan (Medicare Part D).

Types of Medicare Advantage Plans

o   Health Maintenance Organization (HMO) plans: patients may only see doctors, health care providers, and hospitals in the plan’s network, except in urgent or emergency situations. In many cases, patients need a referral from their primary care doctor in order to receive tests or to see other doctors or specialists.

o   Preferred Provider Organization (PPO) plans: patients pay less if they use doctors, hospitals, and other health care providers that belong to the plan’s network; they pay more if they go outside of the network.

o   Private Fee-For-Service (PFFS) plans: the plan determines how much it will pay doctors and other health care providers. Patients can go to any health care provider as long as the provider accepts the plan’s payment terms.

o   Special Needs Plans (SNPs): provide focused and specialized health care for specific groups of people, such as those living in a nursing home, or those with certain chronic medical conditions.

o   HMO Point-of-Service (HMOPOS) plans: allow patients to get some services out-of-network for a higher copayment or coinsurance.

o   Medical Savings Account (MSA) plans: Medicare deposits money into a bank account; this amount of money is usually less than the deductible. Patients can then use the money to pay for health care services during the year. These plans do not include Medicare drug coverage.

What Independent Physicians need to know about Medicare Advantage 

The most popular managed care plans, the health maintenance organization (HMO) plans, negotiate special payment rates with health care providers in their networks. Managed care plans can drop providers from their networks if the providers begin to cost too much.

Most HMOs strive to reduce costs by requiring beneficiaries to see a primary care physician; these physicians are encouraged to take care of all medical problems and to refer to specialists only when necessary. Patients cannot see specialists without a referral from their primary care physician. However, Medicare requires that HMOs allow patients with serious conditions (such as heart disease, kidney failure, and cancer) to see specialists even without a referral. Additionally, certain services (such as annual mammogram screenings) do not require referrals. Lastly, many HMOs also require that primary care physicians receive approval from the plan before providing certain medical services; if the plan disagrees with the physician and decides that a procedure is not necessary, the plan may refuse to pay for the procedure.

For PPO plans, beneficiaries do not need to designate a primary care physician, and generally, referrals are not necessary to see specialists.

PFFS plans do not require that patients designate a primary care physician or obtain referrals to specialists. They determine the payment amounts paid to physicians and healthcare providers on an event-by-event basis, depending on the service that is required. The healthcare provider must then decide whether to accept these payment terms and treat the patient. Some PFFS plans also have networks; in these plans, in-network providers agree to treat plan members at all times, including plan members that they have not treated before. Beneficiaries can also choose to see out-of-network providers that are willing to accept the PFFS terms, but these patients may need to pay more.

The Future of Medicare Advantage

The Affordable Care Act of 2010 enacted significant changes to payment policy; by reducing federal payments to Medicare Advantage plans over time, the ACA aims to lower the costs of care of private plans so that they are comparable to those of traditional Medicare. Independent health providers should carefully monitor the decisions made by companies offering Medicare Advantage plans; these decisions will affect the location of the plans’ service areas, their ability to efficiently deliver care to enrollees, and their quality ratings and bonus payments.