Medicare Advantage plans that share risk with physicians are the nation’s largest and most-established accountable delivery system. The textbook Medicare Advantage program does not share risk with physicians or function as an accountable delivery system; however, the shared-risk MA structure — with its well-established guidelines and predictable income — is an ideal choice for hospitals and health plans seeking a first step to more coordinated and accountable care.
The Medicare Advantage program has been refined in practice over the past 15 years, pioneering advances in accountable care and trailblazing for other system structures, including commercial plans. It is widely considered the most administratively efficient structure for all involved parties, including providers, payers, and the Centers for Medicare and Medicaid Services.
Legislative basis: The Balanced Budget Act of 1997 created Medicare+Choice (or Part C) plans, which expanded the options available to Medicare beneficiaries receiving their Medicare benefits through private insurance plans rather than original Medicare. The 1999 amendments to the Balanced Budget Act and the 2003 Medicare Modernization Act refined the program and rechristened the plans “Medicare Advantage.” The 2010 Patient Protection and Affordable Care Act further amended the program, with controversial payment reforms for Medicare Advantage.
Rules and regulations: CMS governs and regulates Medicare Advantage plans through federal regulations such as those in the Balanced Budget Act and its amendments, the Medicare Modernization Act, and the Patient Protection and Affordable Care Act. These plans are subject to federal fraud, waste, and abuse statutes such as the Stark Law, Anti-kickback Statute, and False Claims Act in addition to various state Department of Insurance rules. To aid plans in their compliance efforts, CMS publishes the Medicare Managed Care Manual, which contains guidance and regulatory interpretations for Medicare Advantage contractors.
Funding model: Medicare Advantage is federally funded through bid-based contracts with managed care organizations — including health maintenance organizations, preferred provider organizations, and point of service plans — that accept a capitation fee. For organizations that run their Medicare Advantage plans as accountable delivery systems, risk is shared with network physicians and hospitals based on the terms of each provider contract. These contracts set specific cost and quality goals, with aligned incentives to encourage physicians to make effective, efficient care decisions.
Care model: Medicare Advantage plans provide the same coverage as original Medicare (parts A and B) and often include extras such as vision, dental, fitness, and Part D prescription drug coverage. In these plans, accountable physicians coordinate all aspects of care for their patients. This is usually a primary care physician — but for patients with complex or chronic conditions, a specialist might coordinate care.
Critical success factors: The key to Medicare Advantage success is the ability and willingness of physicians to serve as gatekeepers responsible for directing and coordinating patient care across the continuum. Primary care physicians and specialists alike will be successful in this role only if they thoroughly understand and support the care model, and have the tools and information necessary for informed decision-making. Additional success factors for Medicare Advantage include successful management of chronic conditions; coordination of care, particularly during high-risk transitions; and the ability to implement effective contracts, particularly with specialists, hospitals, and outpatient care facilities.
Challenges: One of the top challenges facing Medicare Advantage today is hospital costs, as they are typically significant and under the least direct control of the patient’s primary care physician. Hospitals are increasingly purchasing physician groups and outpatient facilities, which in some cases can mitigate this challenge; for example, a hospital-employed physician may have more insight into hospital costs than a community physician. It can, however, potentially also worsen the problem, creating less transparency into hospital-owned providers for those outside the system. In all cases, carefully executed provider contracts with appropriate incentives can help address concerns about hospital costs.
Advantages and disadvantages: Advantages of the Medicare Advantage system structure include:
- Most advanced risk-adjustment system to date, incorporating time-tested evidence-based guidelines
- Payments now based on Medicare star ratings, the industry’s most mature pay-for-performance program
- For many organizations, an ideal first step toward more coordinated and accountable models of care; experience with risk adjustment is valuable experience for other care models (e.g., state health insurance exchanges)
- Substantial claims and program history that supports predictability
- Meaningful opportunities for collaboration with patients
Potential disadvantages of the Medicare Advantage system structure include:
- Rocky history, including overpayment and ideological differences about the program, create political uncertainty and a sense of insurance regulators (such as CMS and the Office of the Inspector General) as punishers rather than partners
- Path to parity translates to lower reimbursements, and CMS has technical tools to potentially reduce reimbursement further
Also in the series
Accountable care delivery and payment structures: An overview
Medicare shared-savings accountable care organizations
Pioneer accountable care organizations
State health insurance exchanges
Medicaid health maintenance organizations
Private accountable care organizations
Bundled payment arrangements