Medicare Advantage P4P Quality

Will Medicare Advantage be the future of Alternative Payment Models

CMS has focused in recent years on payment reform–especially alternative payment models–in Medicare’s fee-for-service (FFS) reimbursement system, but much less has been paid to beneficiaries enrolled in Medicare’s managed care program (i.e., Medicare Advantage).  Currently, however, more than 1 in 3 beneficiaries are enrolled in an Medicare Advantage plan, and by 2028 that number could be 1 in 2 beneficiaries.  However, there is good reason to believe that the Medicare Advantage program may actually be a more attractive option for payment reform than the FFS population.  A report for the Duke Margolis Center notes 4 key reasons why this could be the case:

First, the financing of MA plans provides an incentive to innovate; plans are able to keep savings, enhance benefits, or lower beneficiary cost-sharing if they reduce costs while maintaining or improving quality (as measured through the Star Ratings program). Second, MA plans represent a growing part of the Medicare program, covering more than one-third of Medicare beneficiaries in 2018. Third, MA plans are already engaged in payment reform, reporting over 40 percent of their payments through APMs in 2016 (the last year data are available). Finally, CMS leadership under the current administration has emphasized the importance of the private sector in developing and testing new payment reforms…In its recent Request for Information, the CMS Innovation Center highlighted “Market-Based Innovation Models” and “Medicare Advantage Innovation Models” as two key focus areas for the center over the next few years.[CMS: Innovation Center New Direction]

Despite the promise of alternative payment models in Medicare Advantage, we don’t actually know much about whether these interventions are working or not.  This is sensible in a market based system.  If an MA plan finds a value-based purchasing program that improves quality and reduces cost, this is a key competitive advantage.  Privately held managed care plans are unlikely to share this information with their peers and help out their competition. There is some evidence of innovations that work–such as the Hospital at Home program–but this level of evidence represents the exception rather than the rule. Further, CMS did announce in April 2018 that it would release encounter data to researchers.

Note that direct mandates from CMS for MA plans to use alternative payment models are unlikely.

CMS interprets the statutory “non-interference clause” (42 USC § 1395w-24(a)(6)(B)(iii)) as prohibiting CMS from requiring, or directly setting payments to MA plans based on using a specific value-based provider payment model.

Further, some plans noted that network adequacy regulations make it difficult to negotiate with providers who may be hesitant to join APMs. On the other hand, CMS is looking at innovative approaches such as its  Value-Based Insurance Design (VBID) initiative.

In short, despite a lot of heterogeneity across plans and limited (but growing) data publicly available, Medicare Advantage may prove to be the most likely source for real innovation in alternative payment models.


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