The Two Flavors of Medicare
Medicare comes in two flavors: Parts A, B, and D together – hospital services, physician and other provider services, and prescription drugs are one flavor, and Medicare Advantage (Part C) is the other. The key difference is that the first flavor is fee-for-service. Providers bill for each service individually; there is a built-in incentive to provide more services, because more services mean more money.
The other flavor, Medicare Advantage, gets a set amount for each enrollee, which is based on the total expenses for the total population for the full year. There is, theoretically, no incentive to boost services provided, because this does not result in more revenue.
One of the key differences for beneficiaries is that while the first flavor, now called Original Medicare, allows a beneficiary to use any provider that accepts Medicare, Medicare Advantage Plans limit their choices to their network of hospitals, doctors, and other health care providers. If they use a provider outside the panel, the Plan does not pay, or may provide a lesser payment.
The original idea behind Medicare Advantage was the health maintenance organization movement of the 1960s. The idea was to put doctors on salary, remove the incentive to provide more services for the sake of more revenue, and watch costs drop, or at least stabilize. Another impetus was the notion that by “privatizing” Medicare services, money could be saved in the long run because the profit motive would operate as a brake on spending for unnecessary services.
Medicare bases payment to Medicare Advantage Plans on the cost of Medicare beneficiaries in the other flavor, fee-for-service, adjusted for the average health of beneficiaries in the Medicare Advantage Plan. If the bid from the Medicare Advantage Plan comes in below the benchmark, the Medicare Advantage Plan can use the excess to pay for additional benefits, not charge its enrollees a premium, or both. If it comes in above the benchmark, beneficiaries are charged a premium. In practice, what this means is that different Medicare Advantage Plans may be very different for their enrollees, even though they are all part of Part C, the “other flavor.”
Did It Work?
The shortest and most honest answer is “no.” Endless analyses can be performed that show savings in other than fee-for-service situations, but these tend to be transitory and unremarkable in both amount and duration. Medicine, at least in America, seems driven mostly by a growth imperative.
Are There Really Differences Between Providers?
Health care administration produces a vast amount of data. It is possible for managers to track how long it takes a provider to see a patient, how long it takes to arrive at a diagnosis, how many tests are ordered, what drugs are typically prescribed for each condition, and how much everything costs from start to finish.
When these metrics are used, it is clear that there are clear differences between providers in how they approach diagnosis and treatment and how much they spend doing them. There are also clear differences in how closely doctors hew to the “standard of care” for each illness and the outcomes they produce. Measuring these differences makes it possible to select doctors who are more likely to produce desired outcomes.
And that fact leads to the whole notion of provider panels. In theory, by picking among providers and including only those who meet various criteria, the Medicare Advantage Plan can produce any combination of cost and quality that it wants, within the limits of its panel of providers.
There are limits, of course. First of all, participation is voluntary. A provider may choose to service the enrollees of a particular plan, or not. Second, the Plan has to offer enough providers to actually offer care to its enrollees; discovering that the Plan cannot offer the services it promises because there are not enough providers is not good advertising. Third, the behavior of the providers who do enroll may not meet the cost and quality targets the Plan administration sets. But the Plan administrators can at least try. That, at least, is the theory.
Breadth of Provider Panels
Plan administrators want “enough” providers enrolled. Beneficiaries want enough providers that they have a reasonable degree of choice. On the other hand, enrolling almost every provider defeats the whole purpose of provider panels. So, there is a tension between quality, cost, and ease of access.
The Kaiser Family Foundation (KFF) did a study of the breadth of provider networks in plans around the country and found that there was an enormous difference between Plans. Some offered access to as few as 20% of providers; others offered 70% or more. Generally, the larger the plan, the larger the percentage of providers in the panel, but there was a wide range of variation and many exceptions. Some plans had as few as 1% of the providers in a county.
Access to Specialists
More and more medical care is provided by specialists; that is, providers who are not family physicians or general internists. It is generally not known that Medicare Advantage Plans do not need to cover all specialties the way Original Medicare must. While the Plan must provide care for your condition, it is not required to do so through a specialist in a specialty that the plan does not cover. This is a limitation that, if known, would tend to give potential enrollees pause.
Each Plan is required to provide a directory of the providers it has enrolled. As part of their study of the breadth of panels, the KFF assessed the accuracy and currency of provider directories. It found that the information provided by the Plans is often inaccurate.
So, what can one say about Medicare Advantage Plan provider panels?
- They are a mechanism that can potentially control costs and increase quality of care.
- That potential is rarely fully realized.
- When choosing a plan, breadth and size of a panel should be among the considerations a beneficiary takes into account.
- It is not the only issue in choosing between Original Medicare and Medicare Advantage, but definitely should be one of them.
To learn more about Medicare Advantage provider networks and how they work, reach out to Healthcare Solutions Direct today.