how has the increase in medicare advantage plans affected hospitals'

Hospitals in states with higher shares of Medicare Advantage enrollees may have lower FFS

reimbursement overall. As a result, some hospitals and other health care entities may be reimbursed less that they would if the allocation of funds took into account payments received on behalf of Medicare Advantage enrollees. 3.

Full Answer

How has Medicare Advantage enrollment changed over the years?

Medicare Advantage enrollment has grown rapidly over the past decade, and Medicare Advantage plans have taken on a larger role in the Medicare program. This data analysis provides current information and trends about Medicare Advantage enrollment, premiums, and out-of-pocket limits.

Why do Medicare Advantage enrollees affect reimbursement?

Hospitals in states with higher shares of Medicare Advantage enrollees may have lower FFS reimbursement overall. As a result, some hospitals and other health care entities may be reimbursed less that they would if the allocation of funds took into account payments received on behalf of Medicare Advantage enrollees. 3.

How will Medicare expansion impact the financial stress on hospitals?

Our analysis reached one broad conclusion: The greater the degree of Medicare expansion, the greater the financial stress on hospitals. With any of these approaches, a health system’s ability to weather the impact will depend on the strength and coherence of its revenue and expense control strategies.

Will Medicare Advantage reimbursements increase in 2021?

For 2021, Medicare Advantage plans saw an increase in their reimbursement rates, as was the case in 2020, 2019, 2018, and 2017. And these increases came on the heels of similar increases in 2014, 2015, and 2016 – despite the fact that in all three years, payment cuts had been proposed and then essentially reversed or off-set with payment increases.

MA enrollment increases

Meanwhile, the Centers for Medicare & Medicaid Services has projected Medicare Advantage enrollment will reach an "all-time high" in 2019 with 22.6 million Medicare beneficiaries amid unprecedented growth. And industry analysts like L.E.K.

What this means for hospitals

To prepare for the expanded supplemental benefits, hospitals taking payment from MA plans need to offer an array of outpatient services having already made large investments in primary care, urgent care, surgery centers, home health, and hospice.

Health insurers and MA

Aetna and UnitedHealth Group are also paying out more than half of their reimbursements to providers via value-based contracts as they take on greater share of seniors choosing Medicare Advantage. UnitedHealth had nearly 5 million Medicare Advantage enrollees at the beginning of the year from the 4.4 million a year ago.

How do hospitals compete with insurance companies?

Analysts say hospitals and health systems have several opportunities that don't necessarily involve forming their own insurance companies to compete with health insurers.

What percentage of Medicare is the floor?

Currently, 110 percent of traditional Medicare seems to be the rate ceiling in markets with powerful hospitals that use “more of their muscle” to get the higher payments, while 100 percent of traditional Medicare is generally the floor, with the majority reporting in the 100–105 percent range.

What is the most common payment method used in MA plans?

By far the most common payment method used in MA plans is traditional Medicare’s diagnosis-related group (DRG) system, or MS-DRGs, for inpatients and traditional Medicare’s ambulatory payment classification for hospital outpatients.

Do Medicare Advantage plans use commercial insurance?

Our study confirms earlier reports that Medicare Advantage plans and hospitals peg their MA payment rates not to commercial insurance rates but instead to rates used by traditional Medicare. In some cases, rates are exactly the same as the rates that Medicare administrative contractors would determine. In other cases, rates are slightly above or without a commitment to all of the traditional Medicare payment adjustments. We heard three predominant, complementary explanations for this payment equivalence: statutory provisions that constrain out-of-network payments to traditional Medicare rates, de facto budget constraints that MA plans face because of the need to compete with traditional Medicare and other MA plans, and a market equilibrium that permits relatively lower MA rates as long as commercial rates remain well above traditional Medicare rates. Market characteristics, such as market share enjoyed by health plans or hospitals, had little effect on the equivalence of MA hospital payment rates to rates in traditional Medicare.

Is Medicare a ceiling or floor?

In short, traditional Medicare rates act as both a ceiling and a floor in negotiations. In the words of a health plan respondent, “When we request decreased prices [below 100 percent] because of pressure on our rates, the fist goes down on the table. ‘Absolutely not!

Does Medicare pay more than MA plan?

“The MA plan never has to pay more than [traditional] Medicare,” said one hospital interviewee. Most prominently mentioned was section 1866 of the Social Security Act and CMS’s implementing regulation (42 CFR 422.214) that stipulate that providers must accept payment for out-of-network hospital care for MA plan members at the rate applicable under traditional Medicare. Thus, unlike the situation with commercial insurance, in which hospitals generally can bill patients or their insurer their full charges for out-of-network services, most respondents thought that hospitals have little bargaining power to obtain negotiated rates above 100 percent of traditional Medicare. In practice, this statutory provision means that hospitals can be out of network yet constrained to be paid 100 percent of traditional Medicare, or in network and paid at a negotiated rate approximating 100 percent. About half of all respondents spontaneously provided this explanation without prompting. Most of the others agreed on its importance when we asked about this explanation, having heard it from others.

Can MA plans pay hospitals more than Medicare?

Thus, the explanation goes, MA plans cannot afford to pay hospitals much more than Medicare rates in order to be competitive with traditional Medicare and with other MA plans.

Does Medicare have multiple lines of business?

With the exception of one health plan that only does Medicare business, the plans have multiple lines of business, including Medicare Advantage, commercial, and, sometimes, Medicaid. The plans’ MA line of business ranged from very small to a substantial portion of their overall business.

How many Medicare Advantage enrollees are in a plan that requires higher cost sharing than the Part A hospital

Nearly two-thirds (64%) of Medicare Advantage enrollees are in a plan that requires higher cost sharing than the Part A hospital deductible in traditional Medicare for a 7-day inpatient stay, and more than 7 in 10 (72%) are in a plan that requires higher cost sharing for a 10-day inpatient stay.

What percentage of Medicare Advantage plans are high quality?

11. The majority (78%) of Medicare Advantage enrollees are in plans that receive high quality ratings (4 or more stars) and related bonus payments. In 2020, more than three-quarters (78%) of Medicare Advantage enrollees are in plans with quality ratings of 4 or more stars, an increase from 2019 (72%).

How much does Medicare Advantage pay in 2020?

However, 18 percent of beneficiaries in MA-PDs (2.8 million enrollees) pay at least $50 per month, including 6 percent who pay $100 or more per month, in addition to the monthly Part B premium. The MA-PD premium includes both the cost of Medicare-covered Part A and Part B benefits and Part D prescription drug coverage. Among MA-PD enrollees who pay a premium for their plan, the average premium is $63 per month. Altogether, including those who do not pay a premium, the average MA-PD enrollee pays $25 per month in 2020.

How much is the deductible for Medicare Advantage 2020?

In contrast, under traditional Medicare, when beneficiaries require an inpatient hospital stay, there is a deductible of $1,408 in 2020 (for one spell of illness) with no copayments until day 60 of an inpatient stay.

What percentage of Medicare beneficiaries are in Miami-Dade County?

Within states, Medicare Advantage penetration varies widely across counties. For example, in Florida, 71 percent of all beneficiaries living in Miami-Dade County are enrolled in Medicare Advantage plans compared to only 14 percent of beneficiaries living in Monroe County (Key West).

How many people will be enrolled in Medicare Advantage in 2020?

Enrollment in Medicare Advantage has doubled over the past decade. In 2020, nearly four in ten (39%) of all Medicare beneficiaries – 24.1 million people out of 62.0 million Medicare beneficiaries overall – are enrolled in Medicare Advantage plans; this rate has steadily increased over time since the early 2000s.

What is the analysis of Medicare Advantage 2020?

It also includes analyses of Medicare Advantage plans’ extra benefits and prior authorization requirements. The analysis also highlights changes pertaining to Medicare Advantage coverage that have occurred in 2020 in response to the COVID-19 crisis. 1. Enrollment in Medicare Advantage has doubled over the past decade.

Why did Medicare enrollment drop?

When the ACA was enacted, there were expectations that Medicare Advantage enrollment would drop because the payment cuts would trigger benefit reductions and premium increases that would drive enrollees away from Medicare Advantage plans.

How did the ACA reduce Medicare costs?

Cost savings through Medicare Advantage. The ACA gradually reduced costs by restructuring payments to Medicare Advantage, based on the fact that the government was spending more money per enrollee for Medicare Advantage than for Original Medicare. But implementing the cuts has been a bit of an uphill battle.

How much does Medicare Part B cost in 2020?

Medicare D premiums are also higher for enrollees with higher incomes .

What is Medicare D subsidy?

When Medicare D was created, it included a provision to provide a subsidy to employers who continued to offer prescription drug coverage to their retirees, as long as the drug covered was at least as good as Medicare D. The subsidy amounts to 28 percent of what the employer spends on retiree drug costs.

What percentage of Medicare donut holes are paid?

The issue was addressed immediately by the ACA, which began phasing in coverage adjustments to ensure that enrollees will pay only 25 percent of “donut hole” expenses by 2020, compared to 100 percent in 2010 and before.

How many Medicare Advantage enrollees are there in 2019?

However, those concerns have turned out to be unfounded. In 2019, there were 22 million Medicare Advantage enrollees, and enrollment in Advantage plans had been steadily growing since 2004.; Medicare Advantage now accounts for well over a third of all Medicare beneficiaries.

How many Medicare Advantage plans will be available in 2021?

For 2021, there are 21 Medicare Advantage and/or Part D plans with five stars. CMS noted that more than three-quarters of all Medicare beneficiaries enrolled in Medicare Advantage plans with integrated Part D prescription coverage would be in plans with at least four stars as of 2021.

How many baby boomers are delaying Medicare?

In addition, currently around 40 percent of baby boomers are delaying their enrollment into Medicare until after the end of their initial enrollment period. These consumers look and act differently than enrollees who enter Medicare on time.

What happens if you don't do good during the AEP?

So, if you did good during the AEP, be careful, and if you didn’t do good during the AEP, there is still an opportunity,” he says. A more competitive market. The Medicare Advantage market is also heating up.

When did the Open Enrollment Period return?

Even then some had buyer’s remorse. The Open Enrollment Period (OEP) returned for the first time in six years and consumers took advantage of it. Five percent switched to another Medicare Advantage plan or to Original Medicare during the 2019 OEP.

Will baby boomers be on Medicare?

Baby boomers and Medicare. While leading-edge baby boomers have already aged into the Medicare program, the tailwind of baby boomers will continue to come into the Medicare space for the next eight or so years, notes Brousseau. Health plans need to prepare for these trailing edge baby boomers to enter Medicare and make sure they are targeting them ...

Is there a guarantee that Medicare beneficiaries will stay in their plan?

MA plan switching. There is no longer a guarantee that a Medicare beneficiary will stay in your plan even after enrollment during the Annual Election Period (AEP). Brousseau notes that after a three-year decline, the MA switch rates spiked during the 2019 Medicare AEP. Even then some had buyer’s remorse.

MA Enrollment Increases

• Meanwhile, the Centers for Medicare & Medicaid Services has projected Medicare Advantage enrollment will reach an "all-time high" in 2019 with 22.6 million Medicare beneficiaries amid unprecedented growth. And industry analysts like L.E.K. Consulting project Medicare Advantage enrollment will rise to 38 million, or 50% market penetrationby the end ...

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What This Means For Hospitals

Health Insurers and MA

How Do Hospitals Compete with Insurance Companies?

Study Data and Methods

Study Results

• Medicare Advantage Payment Compared To Traditional Medicare Payment
  With rare exceptions, we found that respondents from MA plans reported that they were currently paying at or slightly more than 100 percent of the traditional Medicare payment for hospital services. Indeed, the most common report, by both hospitals and health plans, was an agreemen…
• Reasons For 100 Percent Equivalence
  We asked why hospitals were willing to accept MA payment rates that were very close to traditional Medicare rates although they were successful in obtaining much higher rates from commercial insurers. Respondents often gave multiple reasons, which were not mutually exclusi…

See more on healthaffairs.org

Discussion

Acknowledgments

Notes