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The model hits the core of the Health and Human Service’s goal to allow patients to define and drive value, and offers enormous opportunities for providers.

Innovation and disruption

Medicare Advantage: The “Godfather” of Value-Based Models?

  • Jennifer Boese
  • 11/14/2018

Medicare Advantage plans have been around for decades, well in advance of recent “value-based” models coming out of the Department of Health and Human Services (HHS) and its Center for Medicare and Medicaid Innovation. In essence, one can view these plans as the “Godfather” of value-based models. They already operate under a risk-based approach and are responsible for coordinating high quality care for beneficiaries. The Centers for Medicare and Medicaid Services (CMS) sees this as a successful example of moving towards value.

Due to the ongoing policy changes offering additional flexibilities and opportunities, the agency appears to view these plans as an important lever in moving value-based care forward in Medicare (and Medicaid, for dual eligible). Research supports this view, as these plans have lowered costs and improved quality even with patient populations that, on average, have more complex conditions than traditional Fee-For-Service (FFS) Medicare beneficiaries.

In 2018, HHS pushed through significant expansions for Medicare Advantage in its annual rate announcement and call letter, including reinterpreting “primarily health related” for supplemental benefits. This change will allow plans to consider and even address social determinants of health, such as buying an air conditioner for an individual with asthma or providing transportation assistance. Congress added to this flexibility by passing the Bipartisan Budget Act of 2018 (BBA of 2018) in February, which opened up even more growth opportunities in the coming years by making Special Needs Plans (SNPs) permanent and allowing for additional use of telehealth.

As Medicare Advantage plans continue to focus on value, providers should understand how to integrate these plans into their own health care system or determine potential opportunities to partner with plans as they emerge.

Medicare Advantage as it stands today

As HHS continues its effort to transform federal health care programs like Medicare and Medicaid, it is not a coincidence that Medicare Advantage plans are a focal point. Medicare Advantage plans are paid a capitated rate that is risk adjusted. Reimbursements are actuarially sound, incorporate patients’ disease complexity, require higher levels of care coordination, and are risk-bearing. In other words, Medicare Advantage plans have key features that align with the goals of the agency — increasing financial risk while delivering lower costs with high quality outcomes and satisfaction.

HHS Secretary Alex Azar stated as much in announcing a six percent average decrease in Medicare Advantage premiums for 2019. “Medicare Part D and Medicare Advantage demonstrate the successes possible when we harness consumer choice and private-sector innovation to improve care and lower cost …”

Currently, HHS puts Medicare Advantage enrollment at roughly 20 million individuals, or 33 percent of all Medicare enrollees. According to Kaiser Family Foundation research, a decade ago that number was 5.3 million, or 13 percent. To put this into context with other value-based models being tested, consider the most well-known model to date, the Accountable Care Organization (ACO). It has approximately 10 million Medicare beneficiaries (in all versions, including non-risk bearing), which is only 17 percent of all Medicare beneficiaries.

HHS estimates that even more Medicare beneficiaries — approaching 23 million — will choose Advantage plans in the coming plan year. In a speech in October, Seema Verma, Administrator for CMS, highlighted ongoing support for Medicare Advantage.

"The lesson here is a basic law of economics: choice increases competition, and competition drives up value ...This administration has taken critical steps to modernize Medicare Advantage by providing additional flexibility to plan sponsors to offer innovative benefits and services that respond to the needs of their customers."

Flexibilities include telehealth, step therapy, and more

Congress and HHS continue to offer new flexibilities for Medicare Advantage, which allows plans to further innovate.

  • Telehealth as a base benefit. While telehealth has been allowed as a supplemental benefit, the BBA 2018 allows plans to offer telehealth as a base benefit beginning in the 2020 plan year. On October 26, 2018, CMS released its proposed rule on implementing these provisions. Under the proposal, Advantage plans would be allowed to offer, as part of the basic benefit package, additional telehealth benefits beyond what is currently reimbursable under Medicare’s telehealth benefits for Part B. The BBA of 2018 requires that these telehealth benefits have been identified for the applicable year as clinically appropriate to furnish through electronic information and telecommunications technology.

    CMS is broadly interpreting this statutory language. For example, CMS proposes that “clinically appropriate” will not be determined by CMS, but by each respective Medicare Advantage plan. In addition, the agency would place very limited parameters around technology, indicating asynchronous or other forms of communications are appropriate, and that flexibility is needed as technology rapidly changes.
  • Step therapy. Beginning January 1, 2019, CMS allows plans to create approaches known as "step therapy" for physician-administered drugs in Part B. Step therapy is already used in private insurance, and typically begins with a lower-cost drug before moving to more costly drugs. This approach has not previously been allowed in Advantage plans.
  • Drugs negotiations. Many Medicare Advantage plans also have a Part D plan. Beginning January 1, 2019, CMS will allow these Advantage plans to cross-negotiate for Part B drugs. The agency believes this will allow greater ability for plans to negotiate overall better drug costs for beneficiaries.
  • Encounter data. For the first time ever, CMS will release Medicare Advantage encounter data to researchers. Doing so opens up opportunities to learn care trends, patient conditions, and other valuable data points. This data will be released annually.
  • International reference pricing. Additional changes are potentially forthcoming from the agency impacting drugs, such as the potential to base Part B drug pricing on international prices. While the agency recently floated this idea, it has not officially released a proposed rule.

Pulling it all together: supplemental benefits and SNPs

Defining SNPs

  1. Chronic conditions or C-SNP: Individuals that have one or more severe or disabling chronic conditions, such as cardiovascular disorders, end stage renal disease, dementia, HIV/AIDS, or neurological disorders.
  2. Institutional or I-SNP: Individuals who live in an institutional setting, such as a nursing home, or who require nursing care at home.
  3. Dual eligible or D-SNP: Individuals who have both Medicare and Medicaid coverage.

CMS views Medicare Advantage as a vehicle to address the agency’s goal of moving away from FFS into a value-based world. Supplemental benefits and SNPs are two new opportunities providers should consider.

A SNP is a type of Medicare Advantage plan designed to focus on specific individuals, such as those in an institutional setting or with specific diseases or conditions. SNPs then coordinate care, identify providers, and assist with a variety of different activities aimed at keeping members healthy. There are three types of SNPs: C-SNP, D-SNP, and I-SNP. Under the BBA of 2018, SNPs are made permanent, which create stability and flexibility.

While enrollment remains a small part of total Medicare beneficiaries at just over 4 percent, enrollment has grown from 670,000 in 2007 to about 2.36 million in 2017. Now that SNPs are permanent, we can expect that number to increase.

"Our vision is for plans to be able to design new benefit packages and provide services to keep people healthy and independent. Advantage plans will be better able to address the social determinants of health and increase access to important supplemental benefits beyond dental [and] vision to over-the-counter items, meals, nursing hotlines, transportation. They could provide adult day care services, in-home support services, caregiver support services, and home-based palliative care." Seema Verma, CMS Administrator

Let’s take a look at how a post-acute provider could utilize a SNP and leverage some of these new flexibilities.

A post-acute nursing home provider wants to better coordinate care for the residents in its facilities. After strategic evaluations, it decides that it can best coordinate that care by creating its own I-SNP. The provider knows it will need to use a comprehensive annual health risk assessment in order to ensure its Hierarchical Conditions Categories (HCCs) scores reflect the medical complexity of its patient population, as these HCCs scores drive higher capitation rates. The provider also understands that ensuring appropriate Per Member Per Month rates is important for the plan’s financial stability. Among other actions, it decides to aggressively leverage the use of telehealth. While the provider already utilizes care coordinators, it now creates a virtual rounding program in its long-term care facilities in order to assess patient needs rather than immediately sending patients to the ER, as studies have shown this approach to reduce hospital readmissions and costs, and improves quality of care.

Now, let’s take a look at how a plan could use enhanced flexibility in supplemental benefits to meet its unique patient population needs.

A plan has a population of chronically ill patients and already uses an in-depth health assessment with each patient. Through this assessment, it determines a significant cohort of patients has asthma or Chronic Obstructive Pulmonary Disease (COPD) along with obesity. Since those with asthma have a higher risk of getting COPD, it wants to start treating both populations aggressively, hoping to keep those with asthma from progressing to COPD and helping both populations manage their diseases and maintain health. It looks to the enhanced opportunities to offer supplemental benefits as a key to managing this population.

The plan also offers a Part D pharmacy plan, and utilizes the ability to best negotiate drugs costs between Part B and D. It provides each individual a care manager, who will utilize the enhanced telehealth capabilities to check in remotely every week. In doing so, the care manager coordinates care and watches for worsening physical symptoms or mental health care needs (such as depression). In addition, the care manager encourages beneficiaries to attend wellness and nutrition sessions, and for those with COPD, highlights the importance of pulmonary rehabilitation with a local provider. The plan will provide transportation to these activities under the supplemental benefits option. Additional benefits will include air purifiers in homes, air conditioning (if necessary), and healthy grocery delivery.

As these two small examples demonstrate, a Medicare Advantage benefit package can be uniquely tailored to the needs of the patients.

How we can help

Medicare Advantage remains the “Godfather” of value-based models for transforming government health care programs. Moving forward in the evolving health care landscape, it will be important to consider how these plans will fit into your future. CLA can help you strategically analyze value-based models, examine your health risk assessment and HCC scores to see if they fully reflect the complexity of your patient population, assist with understanding and implementing telehealth, and more.