Medicare Advantage Plans Cherry-pick Patients
1. At time of enrollment, some of the most costly patients are shunted away from Medicare Advantage plans.
Personal Experience
2. Patients leaving Medicare Advantage plans are sicker and more costly to care for than those who stay.
Description of plans:
Medicare Advantage plans are run by private insurance companies typically using either a health maintenance organization (HMO) or preferred provider organization (PPO) to care for patients.
Traditional fee-for-service Medicare is run by government. A Medigap policy, offered by private insurers, can help pay for deductibles and out-of-pocket costs that original Medicare Part A & B don’t cover.
1. Medicare Advantage plans have a history of cherry-picking patients to obtain a favorable and less costly set of patients to insure. This continues to occur with plans shunting away a subset of very costly, sick, poorly reimbursed patients as detailed below.
I personally called the Medicare Advantage plan enrollment departments of a number of individual insurance companies and asked about a high-risk patient. The patient I described had congestive heart failure with two hospitalizations per year, monthly doctor visits with multiple doctors, and on 5 medications. Not one plan recommended that this patient enroll in their insurance company’s Medicare Advantage plan. As summed up by one private insurance Medicare Advantage plan representative, “For a patient like you, a Medicare supplement policy is a much better option. It covers every nook and cranny of the deductibles and all your doctors will be covered.” Given the relative cost structure of most of these plans, this insurance representative’s summary of the situation was not unreasonable for a new enrollee with the medical conditions described above.
My experience as a cardiologist is that a patient with multiple prior hospitalizations for a chronic condition is much more likely to require multiple hospitalizations in the future than the average patient. A key predictive factors for future expensive readmissions for congestive heart failure is prior repetitive hospital admission. If this type of very expensive patient was fully adjusted for by the Medicare risk adjustment factor, the plan would be adequately compensated for caring for this sick patient. However, recurrent prior admissions for a chronic condition is very difficult to adequately adjust for in a Medicare risk adjustment factor. By shunting this patient away, the Medicare Advantage plans avoided a very expensive patient, with a Medicare risk adjustment factor that would not fully reflect the high future expenses of the patient. (At time of enrollment of this patient into traditional Medicare, the information about multiple prior admissions would not even be recorded in the database.)
The Medicare Advantage plans have two opportunities to influence patients that enroll in their plan. First, the details of the plans themselves are important. Most Medicare Advantage plans have a high deductible for hospitalizations ($250-$350 per day for up to 5-6 days) so the cost of each hospitalization is frequently $1500-$1800. Second, in the enrollment process of many individuals, the prospective enrollee is talking directly to a representative of a private insurance company who is providing advice and information. There are myriad details in deciding between Medicare Advantage plans and traditional Medicare with or without a supplemental policy. The average person in this process will be quite amenable to advice. One of the companies I spoke with actually had a plan with details that would work reasonably well for the chronically ill patient I presented. However, that plan, with a low deductible for a hospitalization, was marketed as a “ bare bones” policy and did not have a pharmacy plan with it. The fact of the matter is that the pharmacy plan could be bought separately for $30-$40/month. However, the average patient would not know this and would probably think this plan option was not suitable. Having a company representative being part of the process for many enrollees gives the private insurance company the opportunity to cherry-pick a more favorable set of patients.
The net effect is to selectively shunt under compensated, very expensive patients (often costing $50,000 or more annually per patient) from Medicare Advantage plans to traditional Medicare plans. The Medicare Advantage plan becomes more profitable by avoiding this patient. Having too many of these patients would ruin the profitability of a Medicare Advantage plan and could ultimately lead to the plan’s demise. The result of this type of expensive patient going to traditional Medicare is that the government picks up the expense. Since the risk factor adjustment doesn’t adequately reflect the cost of this patient, the traditional Medicare patient group looks less cost efficient and the Medicare Advantage plan looks inappropriately more efficient than traditional Medicare.
2. Withdrawal from the Medicare Advantage plans by higher cost patients
Sicker, more costly patients withdraw from Medicare Advantage plans at a higher rate than healthier patients.* There is an approximately 4% annual withdrawal rate from Medicare Advantage plans that moves away more costly patients. These patients are sicker and more costly to care for than the average patient who stays in the plan. As a group they have medical expenses 28% higher than their Medicare risk factors predict, making it even more financially beneficial for the Medicare Advantage plans to have these patients leave their plan.
How do Medicare Advantage plans obtain all this information when the applicant doesn’t even have to tell his diagnoses at time of applying?
One might ask, “How would the Medicare Advantage insurance companies even obtain information on the patient since they are not allowed to ask about diagnoses at time of enrollment?” The insurance representatives truly do need to help the applicant see if he is a good fit in their plan. This results in asking the applicant, “What doctors do you see? What medications do you take? What hospitals do you use? and What concerns are important to you about a health plan?” The applicant wants to know if his doctors and medical needs are covered by the plan. These very appropriate questions naturally lead to a discussion of the applicant’s health status, particularly when the applicant has significant medical problems. The applicant has no obligation to give this information, but it is in his best interest to do so. Hence, private insurers have detailed information about a new applicant at time of enrollment.
Summary
Medicare Advantage plans have features built into their plans that influence new Medicare enrollees with a history of frequent prior hospitalizations from enrolling in their plans. On the other side of the equation, Medicare Advantage plans have a history of higher withdrawal rates of sicker, more costly patients from the Advantage plans.
*High-Cost Patients Had Substantial Rates Of Leaving Medicare Advantage And Joining Traditional Medicare by Rahman et al, Health Affairs Vol. 34, No. 10
www.NutritionHeart.com/Medicare-at-Risk
