Medicare Advantage Carriers See 'No Choice' But to Accept Cuts

With Medicare programs taking a $300 billion hit to help fund value-based healthcare reforms under the Patient Protection and Affordable Care Act, Medicare Advantage health plans are feeling the pinch.

Among the lawmakers in attendance, last week's House Ways and Means healthcare panel hearing on Medicare Advantage featured partisan fireworks over reimbursement rate cuts to the value-based healthcare insurance program.

The testimony of a key witness, Chris Wing, CEO of Long Beach, CA-based SCAN Health Plan, displayed some of the economic responses insurers are making to adjust MA drug and health insurance policies in response to the federal cutbacks.

With $300 billion slated to be slashed from MA and traditional fee-for-service Medicare programs to help fund the Patient Protection and Affordable Care Act, insurers have to respond, he testified. "We are evolving to these cuts, we have no choice," Wing stated in his opening remarks.

SCAN is a not-for-profit Medicare Advantage Prescription Drug plan with about 170,000 members in California and Arizona. Wing, who offered testimony on both MA prescription drug plans and MA health plans, said 38 percent of seniors in California are enrolled in MA health plans. Affordability is a prime enrollment draw, and 90 percent of SCAN members pay no premium for their Medicare prescription drug benefit. "No wonder people are voting with their feet and choosing Medicare Advantage. But there are storm clouds on the horizon," he testified.

Wing stated that improving collaboration between MA payers and providers is an effective way insurers can offset the financial blow of lower federal reimbursement rates. "The goal is: how can we work together to improve the model"

In an interview after last week's hearing, Wing noted that seniors will have to bear some of the burden as cuts to MA reimbursement continue to be made through the rest of this decade.

"Over the past few years, the MA program has sustained a series of significant funding reductions," he said. "Some seniors have already begun to feel the impact of these cuts in higher out-of-pocket costs, reduced benefits, and more limited provider choice. Many more seniors will be impacted as the vast majority of the ACA cuts—80 percent—take effect over the next few years."

Wing said SCAN had stepped up its efforts to collaborate with healthcare providers who are serving Medicare Advantage patients.

"Reimbursement rates cannot continue their recent steep decline… SCAN is pursuing a collaborative approach. In California, we have always enjoyed the trust of our physician groups. Several years ago, we launched what we call our 'Provider Integration' initiative. We are now creatively collaborating with our physician partners to meet the financial challenges of MA while delivering the 'triple aims' driving healthcare reform: lower cost, higher quality and improved access."

Assessing MA's Future

Despite the billion-dollar blows ahead, officials at Hartford-based Aetna Inc. are bullish on the MA program.

"Over the last several years, we have seen how the growing popularity of Medicare Advantage among beneficiaries has translated into political support for the program. Members of Congress from both sides of the aisle have successfully weighed in with CMS the last two years to push for changes to lower proposed rate cuts," Aetna officials said in a prepared statement Monday in response to questions about the program's future.

The commercial payer gave assurances that achieving value-based healthcare delivery and hitting star-ratings benchmarks for quality will be critically important in attaining MA success for years to come,

"Medicare Advantage plans are able to demonstrate value for beneficiaries in health outcomes, care management, and innovation through new programs and partnerships. As long as we continue to provide good value to consumers and maintain a high star-rating performance, Aetna is well-positioned to offer high-quality and innovative products to employers and beneficiaries despite this challenging environment."

With healthcare providers spending at least 85 cents of every healthcare dollar, Aetna said working with providers to improve efficiency and establish value-based payment models will also be a critical factor for carriers as they absorb federal reimbursement cuts.

"Medicare's ACOs alone won't solve all of Medicare's financial issues, but moving toward this model is a huge step in the right direction," they said. "We have demonstrated that ACOs can not only reduce healthcare costs, but can also help improve the coordination and quality of care, without drastic cuts to benefits."

SCAN's CEO said MA health plans are an essential element of value-based care delivery in the broader Medicare program. "Nationally, 30 percent of Medicare beneficiaries are now enrolled in MA and more than half of new Medicare beneficiaries are choosing MA."

"MA plans offer lower costs than traditional Medicare and that is extremely important for lower income and chronically ill seniors… Almost all quality measures point to Medicare Advantage as better than traditional Medicare. Medicare Advantage plans also have made a measurable, positive difference in quality of care relative to hospital readmission rates, quality of life and effective management of chronic conditions."

When it comes to cutting the budgets of federally administered programs such as MA, where you sit often dictates where you stand on the issues, Paul Clark, a legal analyst at New York, NY-based Wolters Kluwer, said after last week's Ways and Means hearing.

"CMS and HHS are increasingly looking for value for the money they spend on federal healthcare programs, including every part of Medicare. Every change delivered under the guise of quality incentive or improvement can be looked at a couple of different ways—the federal government is cutting back on funding for hospitals, or home health agencies, or physicians. Or, the federal government is looking to get the best value for its healthcare dollar."

In addition to the reimbursement cuts linked to the PPACA, Clark said the evolution of value-based reforms in traditional, fee-for-service Medicare will play a decisive role in the future of Medicare Advantage.

"It will be interesting to see how overall Medicare program changes put into effect the last few years will affect MA enrollment in the future," he said.

"Ten years ago, MA plans could distinguish themselves by offering preventive healthcare or prescription drug benefits that were not necessarily available under traditional Medicare. But now a beneficiary can get preventive health care at no extra cost under traditional Medicare, or a prescription drug benefit under Part D, so there may be less incentive for a beneficiary to sign up for Part C. The evidence doesn't show that happening yet – MA enrollment keeps on growing. But if MA enrollment starts declining in the next few years, you have to look beyond just MA reimbursement for the cause."