Risk Selection and Health Outcomes in Private Medicare Plans

By | December 18, 2017

A new study in the January 2018 issue of Medical Care, “Changes in Case-Mix and Health Outcomes of Medicare Fee-for-Service Beneficiaries and Managed Care Enrollees During the Years 1992-2011” by Dr. Siran Koroukian, et al., finds that while Medicare Advantage private plans continue to benefit from favorable risk selection, Medicare Advantage (MA) enrollees do not have better health outcomes.

The study of risk selection between MA and traditional fee-for-service (FFS) Medicare has been of long-standing interest to researchers and policymakers. Historically, the general consensus was that Medicare private health plans (previously called Medicare+Choice and now called Medicare Advantage) benefited from favorable risk selection leading to higher payment rates [PDF]. However, after changes to the Centers for Medicare and Medicaid Services’ risk adjustment formula, recent studies have reported mixed results. While some have found evidence that favorable risk selection has attenuated overall, other studies focusing on the most vulnerable beneficiaries have continued to find that sicker beneficiaries switch away from Medicare Advantage towards traditional Medicare.

Contributing to this literature, the authors took a novel approach. The authors used a statistical technique, propensity score matching, to select FFS beneficiaries who were most like the MA beneficiaries using a comprehensive set of characteristics collected by the Health and Retirement Survey. Using this approach, Dr. Koroukian of Case Western Reserve University, along with colleagues from AHRQ, University of Nebraska, Michigan State University, and George Washington University, examined several outcomes: self-reported health, multi-morbidity, two-year self-rated worse health, and two-year mortality. The authors find that MA enrollees were consistently less likely to report the highest level of multi-morbidity (a combination of chronic conditions, functional limitations, and geriatric syndromes). On the other health measures, the authors find some evidence that MA enrollees had lower mortality rates and better self-reported health, though the results were not consistent across time period or outcome modeling approach.

Overall, the authors conclude that “even though [MA enrollees] are healthier than their FFS counterparts, they do not experience more favorable health outcomes.” This conclusion suggests that MA plans may not be delivering better quality of care or outcomes to its beneficiaries than what they would experience in FFS. One rationale of higher payment rates to Medicare private plans has been its higher quality ratings and better outcomes; however, these results suggest that this justification may not hold.

This study has some important limitations to note:

  • The study examines changes over time by breaking down time into three study period (1992-1998, 1999-2004, 2005-2011), but these time periods are quite long. Important payment policy changes, such as the 2008 full phase-in of the HCC risk-adjustment methodology and lock-in period and the launch of Part D in 2006) occurred in the middle of these time periods, which could have resulted in meaningful changes in both case-mix and outcomes.
  • This study does not include data on the most recent program years, during which MA has implemented its pay-for-performance program, payment rates have slowed, and enrollment rates have risen.
  • While the study uses a comprehensive set of covariates to match MA and FFS enrollees based on observed characteristics, there may still be meaningful differences between these groups on unobserved characteristics, such as motivation and propensity to use health care services.
  • The authors report including survey weights in their outcome models, but do not report accounting for other aspects of the complex survey design, such as the strata. This omission is troubling, because accounting for the survey design strata would likely increase the standard error estimates.
  • The use of propensity scores in combination with complex survey data is an evolving area where there is conflicting guidance on how to best incorporate survey weights. The authors do not address the implications of their choices or the robustness of their approach versus other recommended approaches.

The motivation behind contracting out Medicare benefits to managed care organizations is to increase value for Medicare beneficiaries. Ideally, Medicare private plans would improve quality and reduce costs by using strategies to promote uptake of prevention and early screening, reduce low-value services and unnecessary care, coordinate care, and obtain lower negotiated rates with providers. If the private plans don’t lower costs, the hope would be that they would at least excel in quality. But, if MA private plans are not superior to traditional Medicare on price or quality, then as policymakers plan to turn to Medicare reform in 2018, the question they should be asking is: how can we increase the value of private plans for Medicare beneficiaries?

Ivy Benjenk

Ivy Benjenk

Ivy Benjenk RN, MPH is a PhD student in health services research at the University of Maryland and a clinical instructor of psychiatric nursing at the George Washington University. Previously, she has worked in quality improvement and as an inpatient psychiatric nurse. Her interests include quality improvement, patient safety, behavioral health, and nursing workforce issues.
Ivy Benjenk

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Eva DuGoff

Eva DuGoff

Eva DuGoff is a health services researcher in the Department of Health Services Administration at University of Maryland and Department of Population Health Sciences at the University of Wisconsin-Madison. She holds a PhD from Johns Hopkins Bloomberg School of Public Health and a MPP from the Trachtenberg School of Public Policy and Administration. George Washington University. Dr. DuGoff’s research focuses on improving the care delivery and health outcomes for older adults with multiple chronic conditions and Medicare policy. She can be reached on twitter at @evadugoff.