In this episode, we learn about the commercial side of value-based care contracting and Medicare Advantage from Bethany Palmer, Senior Director of Contract Strategy and Clinically Integrated Network Management for CHESS Health Solutions.
Bethany, Welcome to the Move to Value Podcast! Let’s talk a bit about Medicare Advantage. Can tell us what it is and how it works?
Sure. So, before I get into specifically Medicare Advantage, I did want to just give an overview that Medicare consists of four parts being Part A, Part B, Part C, and Part D. Medicare Advantage is Part C of Medicare. And what that is, is it’s not necessarily a supplement to Parts A and Parts B but rather a placement. So, if someone is in Medicare Advantage, they’re going to be on Medicare Part C. And then some Medicare Advantage plans also have what’s called Part D, which is your drug spend. So, you will see a lot of plans that have both Part C and Part D.
The difference between Medicare Advantage and traditional Medicare in a nutshell is that the government, instead of the government managing the Medicare Part A and Part B, private sectors are actually taking on the Medicare Advantage population. So, the government is literally shifting those patients within to the private sector or publicly traded organizations. And what the government is doing is they’re basically giving those organizations an allotted amount of money that is risk adjusted to take care of those patients.
What’s interesting about Medicare Advantage, or commonly referred to as MA, is now in today’s age, nearly half of Medicare eligible patients are actually on a Medicare Advantage plan. So, we’ve seen explosive growth since its inception.
How did Medicare Advantage get its start? What’s the catalyst for that?
So, before there was Medicare Advantage, there was Parts A and Part B, which would be coined as traditional Medicare or original Medicare. And in 1965, President Lyndon B Johnson signed this into law. It um, for traditional Medicare. So fast forward several decades, Medicare Advantage was signed into law in 1997 by President Bill Clinton under the name Medicare Plus Choice. However, the base of Medicare Advantage actually goes back into the 70s. But that was kind of a breaking point in terms of that. It was truly becoming Medicare Advantage in 1997. But the goal of MA was really to give beneficiaries a choice for purposes of their health insurance and cost savings derived from managed care efficiencies that ultimately would save the government money that the government wasn’t necessarily putting into place by themselves. The name actually shifted to Medicare Advantage in 2003 and this was also when Part D, which is drug spend, was created. And that is the Medicare prescription benefit and that officially went into effect in 2006.
Bethany, would you explain to us the differences between traditional Medicare and Medicare Advantage?
Sure. So, traditional Medicare includes Part A, which is considered institutional coverage, and Part B, which is medical coverage; or think really outpatient coverage. As a Medicare eligible patient, you’re covered at 80% in respects to Part B. So, for many, they do, that are on traditional Medicare, they’ll typically select a supplemental plan that covers that additional 20%. Which again is different than Medicare Advantage, which is a replacement plan compared to a supplemental plan. And traditional Medicare is funded entirely by the government. Typically, when someone becomes Medicare eligible, Social Security will actually enroll them in Parts A and Parts B. So, we look at that as those, generally speaking, those over 65 will receive Parts A based off of the amount of time they or their spouse have paid into Medicare taxes. And then for Part B, they’ll be paying a monthly premium that’s really income dependent. But just to give you an example, so in 2022, the monthly premium for Part B services was $170.10 at the base. But again, that can be adjusted based off of your modified adjusted gross income. So, if a person elects to stay on traditional Medicare, it is recommended to get a supplemental plan because it does help cover that 20%. And keep in mind, for traditional Parts A and Parts B, there is not necessarily a maximum out of pocket. The supplemental plan will help with that. So, that’s where you have your Parts A and Parts B.
Now shifting to Part C, which is Medicare Advantage, that is where you have your replacement. So, instead of being on Parts A or Parts B, you can elect to be on Part C. So, with Medicare Advantage plans you do have a max out of pocket compared to original Medicare. Medicare Advantage plans are also required to offer extra benefits that original Medicare do not include. So, examples of that would be vision, hearing, and dental services. Part D is also included in most Medicare Advantage plans, opposed to if you’re on just Parts A and Parts B, you typically have to buy a separate dental plan.
With Medicare Advantage there will sometimes be a case where you do pay a premium. So, think about going back to the Social Security you’re still paying. When you’re in Medicare Advantage, you’re still paying that Part B premium that was roughly $170.10. But then you might have another separate premium with Medicare Advantage. Typically, you will have a less premium within Medicare Advantage than you will in a supplemental plan. One of the things that I think people they see with Medicare Advantage is they typically will have a defined network, um, opposed to just having the open market and being able to go wherever. Now there are different plan options and I think we’ve seen throughout the years that there’s been a lot more concerted effort to have plans that have more of what you would considered an open network. But there are still large portion of Medicare Advantage organizations that will have defined network for those plans.
So, I know a lot of people wonder kind of what is the cycle for enrollment for Medicare Advantage plans. And sometimes you’ll see certain things within the year when more marketing seems to be prevalent with Medicare Advantage than others. So, for someone that becomes Medicare eligible, initial enrollment, or better known as age-ins, you can enroll 3 months prior to your birth date or three months after your birth date. Then there’s something what’s called annual enrollment period for Medicare Advantage and that, or better known as AEP, and that typically runs from the middle of October every year through the beginning of December. And so, within that time period, someone can elect to be on a Medicare Advantage plan. There’s also another season, not to be confused with annual enrollment, but open enrollment and that runs from January 1st through the end of March, where a patient can actually switch once during that time to either another Medicare Advantage plan or back to original Medicare. So, there’s really a layered approach of how patients are able to elect a Medicare Advantage plan. And then there’s also something called a special election period, and there’s several different areas where, or patient populations, that fall into that space as well.
I would like to know how provider groups partner with Medicare Advantage with in value based care?
So, great question. So, at the beginning, it starts with providers coming into the picture once those MA patients are attributed to them. So, in order for a provider to really work with an MA plan, they have to have some type of patient attribution. The Medicare Advantage organization and provider group can then work together to help take the best care of the patient as possible. So how does that work? So, think about it in both the MA organization and the provider have an aligned goal to really produce value for the patient population by decreasing any type of unnecessary medical costs, reducing producing inpatient and ER admissions, ensuring that that population is completing preventative visits and screenings. And those really are all foundational to an MA organization working together with a provider group.
And a lot of those things can be done through some type of contractual value-based agreement. So. it’s really important for the provider group to really understand what the MA plan is being measured. And then for the MA plan to really understand the provider group in terms of what resources they have. Because I think by being able to understand one another, you can really align incentives and then also reduce any type of duplication within those resources and being able to maximize benefits that are mutually beneficial for both parties. So, really, collaboration is key when working together, but keeping the same goal in mind of taking better care of the patient population and improving that patient population is vital to the success of that provider and MA organization working together.
We would like to know about the STARS program. Can you tell us about this?
Sure. So, what’s also known as the stars quality measures program is basically what CMS has come out with in terms of the MA quality program. So, it’s a star rating of one through five that an MA organization can receive. The stars program is really twofold in terms of goals. So, one being for the consumer to be able to see how their health plan is rated. So, when they’re going into select a health plan, they’re able to see every single health plan and what their star rating is and some of the components that are included in that. Secondly, the stars program is really help, it’s helping to incentivize MA organizations to take good care of the patients within quality, and then also incentivizing them to be able to put money back into their benefits for a future year to be able to increase the their robust benefits.
So, the stars, I will say that the stars program, how health plan is rated, is fairly complex and it does change annually. But some examples of categories that a plan is rated on is member or patient experience, both at the provider level and the plan level. Management of chronic conditions including measures that may focus on diabetic measures as an example of diabetic patients. Then there’s preventative screening, so such as breast cancer and colorectal cancer screening. And then finally, a lot of, there’s some metrics that are really focused on MA plan internal metrics. So, plan customer service and how customer service is being measured is another example. So, you can see that the actual star rating itself is fairly comprehensive and a portion of that is directly impacted by the provider and the care they provide to the patient.
So, that’s something to keep in mind. That plans are really incentivized to work with providers to be able to maintain or increase their star rating year over year. Plans really do need to, they’re incentivized to stay competitive within their benefits and how the quality program works is if they do to a certain threshold, they may receive a quality bonus payment. And they also could receive a percentage of rebate dollars that are allocated to their benefits for future performance years. And as you do better in stars, your rebate percentage that goes directly back into your benefits actually increases. So, again, the quality program really is built to be consumer facing but it’s also a way for MA organizations to build their benefits and ultimately grow their population. And I think we’ve seen that in the industry, in the past several years, that MA plans that are successful in creating, maintaining, and improving their star rating are able to capture a larger population by increasing how well their benefits are structured.
So as we’re talking about ma and value based care which is really important to our organization tell us one way that total cost of care is looked at?
Yeah. So, a major component in Medicare Advantage is cost management, which is something that’s important to Medicare Advantage organizations for several reasons. But one of the main ones is to have some type of margin and then also to be able to adequately take care of the patient population from that managed care perspective. But really it can be boiled down into one foundational concept known as the medical loss ratio. Which at its fundamental definition is going to equal your total cost of care of the population divided by your total revenue of the population. So, that MLR ratios really looked at at the holistic population, which again can be broken down into different layers but as a whole they’re looking at what that ratio is and how it continues to look and track.
So, this concept is used really to ensure plans are using a certain amount of premium to actually take care of the patient through their benefit structure. So, they’re actually guardrails in place between CMS and the health plan to ensure a certain proportion of money is being derived directly to the patient care. But what happens is that medical loss ratio can actually trickle down into provider contracting. So, it’s really used as a method of measuring that total cost of care when aligning financial incentives. So, it does come from that CMS to Medicare management plan relationship, but it will, you’ll see it at times directly within a contract that a provider is aligning on.
So, keep in mind that there are really two parts of the equation. So, you have your total cost and then your total revenue. So, total cost can really be made-up of all medical spend that may include pharmacy. So, what does that look like? Again, going back to managing unnecessary spend, unnecessary inpatient or ER visits, readmissions are just examples of managing that spend. But then there’s the revenue side, which is what CMS is paying the plan at a per member per month basis. That revenue is actually risk adjusted and the benchmark is actually at the county level. So, it’s geographically stratified as well. So, there are ways to play into the equation on both the numerator and the denominator and it’s really important as the provider that you’re, when you’re looking at managing cost, you’re keeping in mind both sides of the equation as well.
If you had a crystal ball that you could gaze into what do you see the future holding for us in this space
Well, I hope it would hold me winning $1,000,000, but outside of that, I think Medicare Advantage will has been growing and will continue to grow its popularity and the amount of patients that serving. So, roughly right now about 50% of Medicare eligible patients are within Medicare Advantage. I don’t necessarily see that going away. Medicare Advantage is very much here to stay.
What’s really interesting though is within the quality realm, CMS is really starting to shift away from measuring and waiting heavily clinical measures through HEDIS and PQA in the stars formula. And they’re shifting more towards, those are still well so important within the stars formula of how the health plan is rated, they’re really shifting the focus more to patient experience. And so, this is really important for providers to understand around how they’re, how patient experience is being measured directly correlating to the providers. Because patient experience for health plan is being measured as how their experiences is with the health plan but also how their experience is with the care delivery. And so, it’s really important for providers to understand what that measurement looks like and what types of questions are being asked so they can align better with the health plan on strategies to increase their ratings here.
I think we’re also going to see a ton of, continue to see a lot of focus on health equity in several components across MA plans. Not just necessarily in quality. And finally risk adjustment, which is always a compliance favorite; I think will continue to be a debate within the industry of whether or not, um, HCC RAF, risk adjustment factor, is the right methodology and is being used appropriately.
What can a care provider do right now to be most effective within the Medicare Advantage world?
I think providers really, I think foundationally they really need to understand at the core what they’re being measured upon. Because it can vary between MA plans. But also making, ensuring that whatever they’re being a measured on is really aligning to how the health plan is being measured at the CMS level. Fairly. Um, so again, I think there’s things that provider groups can do collectively with MA organizations to just understand and educate themselves.
I think they can also collaborate together to understand and maximize the resources because MA plans will produce a ton of resources for these patients. But sometimes the provider organization or the provider group does not know that those resources exist. So, I think being able to communicate and educate one another on what is being, what is available to your patient population is really key to working together to ensure success of taking the best care of the patient population as possible.
Outstanding. Bethany Palmer, thank you for joining us today on the Move to Value Podcast.
Thank you so much for having me. It was a pleasure talking with you, Thomas.