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Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
My previous three posts on Medicare elicited strong reactions on the quality of health care delivered under traditional Medicare and under Medicare Advantage plans that operate under Part C of Medicare. Two rival theories can be discerned in the commentary.
Today’s Economist
Perspectives from expert contributors.
Theory I holds that the profit motive will induce Medicare Advantage plans to short-change patients by skimping on the quality of their care.
Theory II holds that Medicare Advantage plans have powerful incentives to improve the quality of the care they procure for patients, because the plans are subjected to far more systematic quality monitoring than is traditional Medicare. Poor quality ratings hurt them financially, because these ratings are made known to patients who are free to switch plans or return to traditional Medicare.
These theories appear to be based mainly on personal experiences — that is, on anecdotal evidence. The question is what systematic, more robust empirical evidence might shed light on these two theories.
A good place to start is the evidence gathered by the Medicare Payment Advisory Commission, known as Medpac, established by Congress in 1997 to advise it on matters related to Medicare. It is a body of experts and stakeholders, supported by an excellent research staff.
In its latest annual report (in March 2012) to Congress, the commission devoted Chapter 12 to a variety of issues concerning the Medicare Advantage program, including the quality of the care the plans procure for patients and their own administrative services. To my surprise and disappointment, the report devotes no more than 173 words to a comparison of the quality of care in Medicare Advantage plans and traditional Medicare, along with one table (see Table 12-8, Pages 327-8).
A wider search for literature specifically addressed to this question yields meager results as well. It is therefore not surprising that personal anecdotes or those in the media inform the prevailing folklore on the subject. I can think of two reasons for the paucity of conclusive research on this issue.
First, the label Medicare Advantage encompasses a variety of plans. These include coordinated care plans (C.C.O.’s), like traditional health maintenance organizations (H.M.O.’s); local preferred provider organizations (P.P.O.’s); regional P.P.O.’s, each embracing several states, and special-needs plans for patients with special medical needs. Medicare Advantage also includes private fee-for-service plans that offer free choice of providers and unmanaged care just like traditional fee-for-service Medicare.
As Medpac reports, the performance on quality metrics among these plans varies systematically between types, and it is apt to vary also within plan types (see Table 12-4, Page 323). H.M.O.’s and local P.P.O.’s tend to rank highest in quality, private fee-for-service plans lowest.
Even if on average the quality of care under these plans were found to be good, the variance among plans around that average can undoubtedly yield the kind of anecdotes that fuel Theory I above. It is a problem with any average, yet conclusions from social science are based on central tendencies – averages or medians.
Second, as already noted, there is far more extensive and intensive monitoring of quality in Medicare Advantage plans than there is for the open-ended traditional Medicare.
Both traditional Medicare and Medicare Advantage plans are monitored annually through surveys of patients, using the Consumer Assessment of Health Care Providers and Systems, known in the trade as Cahps. The findings from this survey make it possible to compare traditional Medicare with Medicare Advantage plans on quality. As Medpac reports in Table 12-8 of Chapter 12 of the March 2012 report, the commission found little difference in the relatively few quality-performance scores of the traditional Medicare and Medicare Advantage plans.
In addition to the Cahps survey, Medicare Advantage plans – but not traditional Medicare – are monitored closely by two further survey systems.
The first is the Health Effectiveness Data and Information Set, or Hedis. The Hedis scores are based on information from surveys of beneficiaries, from administrative and claims data, and from patients’ clinical records. The scores are taken very seriously by private health plans in both the private and public sector of health care.
The second is the Medicare Health Outcomes Survey, or HOS. It retrieves self-reported information on health status from Medicare beneficiaries in Medicare Advantage plans.
Finally, and very importantly, the Affordable Care Act of 2010 established a bonus system for Medicare Advantage plans tied to so-called star ratings. These ratings are based on 53 metrics drawn from the Cahps, Hedis and HOS systems, with 1 denoting “poor performance” and 5 denoting “excellent performance.”
Medicare’s star system sets high standards. In 2012, for example, only 11 of about 500 health plans earned the highest score. Six of these were part of Kaiser Permanente, with another Kaiser plan earning a 4.5. A difference of one point in this rating system can spell considerable sums in the form of earned or lost bonus payments from Medicare.
As noted, a search for literature on the relative performance on quality by traditional Medicare and Medicare Advantage plans yields slim pickings.
Several studies undertaken by or at the behest of the American Health Insurance Plans, or AHIP, report that hospital readmission rates under Medicare Advantage are substantially lower than they are under traditional Medicare. Although not all hospital readmissions result from poor clinical care during the original admission, lower readmission rates are widely taken as indicative of superior quality.
Another study published by researchers from AHIP reports that hospital admissions for diabetes were found lower in a Medicare Advantage plan concentrating on special-needs patients than they were for a comparable sample of patients in traditional Medicare. These data, too, would be interpreted as superior quality.
A study by researchers independent of the insurance industry found that patients in Medicare Advantage plans had fewer preventable hospital admissions than did comparable patients in traditional Medicare. That study also focused on referrals by primary-care physicians to specialists, finding mixed results. It is not clear to me what that metric tells us anyhow, as a low referral rate by primary-care physicians to specialists may be judged either good or bad.
Another study by independent researchers comparing the clinical quality of care between traditional and Medicare Advantage plans found that “Medicare Advantage plans scored substantially better (4-16 percentage points; median, 7.8 percentage points) on eight measures, slightly better (1.5 percentage points) on one measure and worse than fee-for-service (2-5 percentage points; median, 4.1 percentage points) on two measures.”
Finally, yet another independent study came to the carefully hedged conclusions that “overall, Medicare Advantage H.M.O. enrollees might use fewer services and be experiencing more appropriate use of services than enrollees in traditional Medicare.”
In my search of the literature, I may have missed studies that come to conclusions opposite to those reported here. If so, I sincerely wish to be apprised of them.
Until I hear of such studies, I slouch toward Theory II above, although having served on the board of a Medicaid managed-care company may make my posture suspect in the eyes of some.