The Biden Administration versus Medicare Advantage

When does the failure to answer a phone call in 8 seconds cost the company receiving the call $190 million? When the caller is a spy working for the agency that runs Medicare and the receiving entity is a private insurance company.

According to documents filed in a recent lawsuit, there is a particular hearing problem that afflicts some elderly patients, and because of that when they want to contact their insurer, they have to use a computer device to do so. Under rules established by the Centers for Medicare and Medicaid Services (CMS), a Medicare Advantage (MA) plan is required to answer these phone calls within 8 seconds.

To ensure compliance, CMS hires “secret shoppers” to place artificial calls to see if the rules are being followed. On 63 straight calls, the insurer Elevance Health (formerly Anthem) passed inspection. But the 64th call was not answered at all.

That last call is a matter of dispute. Elevance Health claims it was never received. Nonetheless, it caused the company to be given a lower “star” rating—a quality measure that affects how much MA plans get paid. That one missed call cost Elevance Health $190 million.

If this doesn’t strike you as a bit over the top, you need to know that the Social Security Administration takes 35 minutes to answer its calls, on the average. As for the IRS, it doesn’t answer the phone at all most of the time, picking up only 29 percent of its calls. What penalty do public employees suffer when they are unresponsive to customer queries? None that we know of.

What makes all this especially strange is that the Medicare Advantage program comes closer to meeting the standards the government wants health plans to meet than any other place in the health care system.

The Strengths of Medicare Advantage

The Medicare Advantage program is the only place in our healthcare system where a doctor who discovers a change in a patient’s health status can send that information to an insurer (in this case Medicare) and receive a higher premium payment—reflecting the new expected costs of care.

Accordingly, MA plans have financial incentives to discover patient problems early and solve them. Since the MA premiums are fixed, the plan makes money by catching problems early, getting patients the care they need, and keeping patients away from the emergency room and out of the hospital.

Unique in our health care system are MA plans that specialize in such chronic conditions as diabetes, heart disease, cancer, etc. These MA plans actually seek to enroll patients that other plans would like to avoid.

Nowhere else in our health care system will you find a health plan that wants to attract an enrollee with expensive medical problems. No employer. No commercial insurer. No Obamcare exchange plan.

Numerous studies have found that MA plans are providing higher quality care at a lower cost. When enrollees with comparable characteristics are compared:

• Health care spending is 25 percent lower for MA enrollees than for enrollees in traditional Medicare.
• MA enrollees experience 20-25 percent fewer hospitalizations and make 25-35 percent fewer emergency room visits.
• They produce better outcomes for such conditions as knee and hip replacements, strokes, and heart failure.

An obvious reason for these results is financial. In traditional fee-for-service Medicare, there are 10,000 tasks doctors are paid to do. If a task is on the list, doctors get paid. If it is not on the list, they don’t get paid. For example, until the Covid pandemic hit, the phone was not on the list for most purposes. Nor was email, or Zoom, or Skype. So those types of interactions rarely occurred.

Most important of all, Medicare’s list of 10,000 does not give doctors any reward for keeping patients healthy. The reward for keeping a diabetic out of the emergency room? Zero. How about keeping a patient out of the hospital? Zilch. What about avoiding an amputation for a diabetic? Nada.

Biden Administration Is Hostile to MA’s Successes

So, what has been the Biden administration’s response to these successes? Nothing short of outright hostility. It seems that every day there is a new attack on some aspect of Medicare Advantage from some part of the government’s health care bureaucracy.

MA plans are accused of overbilling Medicare; of “upcoding” to represent enrollees as sicker than they really are in order to get higher risk-adjusted premium payments; and of unreasonably requiring prior authorization for medical procedures. I’ll address some of these accusations in a future article.

For now, I want to focus on a particularly wrongheaded policy change: the Biden administration’s decision to eliminate 2,000 billing codes from the MA risk-adjustment formulas.

A Particularly Wrongheaded Policy Change

Take diabetes. It usually appears along with other medical problems. The more problems there are, the sicker the patient is likely to be. According to the Medicare Payment Advisory Commission, MA plans usually find more cases of “diabetes with complications” (as opposed to ordinary diabetes) than traditional Medicare. In fact, about one-fifth of MA plans have twice as many “complication” cases as traditional Medicare.

The Biden solution: compress the coding so that plans get the same risk-adjusted payments, regardless of the severity of the case.

I have no doubt that financial incentives are at work here. As noted, MA plans get more money if they find more medical problems, and they make money by catching problems early and curing them. By contrast, a garden variety, fee-for-service Medicare doctor gets no extra payment for getting the coding right and gets no financial reward for keeping patients healthy. So, I would expect coding practices to be different, even if the underlying medical facts are the same.

Further, patients with a lot of accompanying medical problems not only cost more on average, there is a much larger variance around the average. Things can go very wrong and when they do, the treatment cost can be very expensive. An amputation, for example, costs more than $100,000.

If we want MA plans to seek out and treat the most difficult cases, they not only have to be paid more to cover expected costs, they need to also be compensated for taking on more risk.

But here is the bigger problem. If the administration really cares about patients, instead of harassing MA plans, it should be investigating how to get Medicare’s fee-for-service doctors to practice more like MA doctors.

Kaiser Permanente’s former CEO, George Halvorson notes that

“Diabetes is the number one cause of amputations in America. In fee-for-service Medicare, 20 percent of diabetic patients will develop foot ulcers, and 20 percent of those ulcers turn into amputations. In contrast, even the less successful [MA] programs end up with half as many ulcers and less than a third of the amputations compared to fee for service. Some best-care settings get the amputation rate down to two percent.”

Halvorson also addresses the issue of blindness:

“We can reduce blindness in older diabetics by more than 60 percent by managing the blood sugar levels of patients. [In] fee-for-service Medicare for low-income people. . . we currently have less than 30 percent of those patients with controlled blood sugar and they have high levels of blindness. . . . Fee-for-service Medicare caregivers . . . often make more money when they treat patients with blindness multiple times rather than prevent the blindness.

“[By contrast,] Medicare Advantage plans are capitated in their payment model, so they routinely identify every diabetic and then those plans all tend to do the right things to help blood sugar management for those patients. Far too many low-income people who are not on Medicare Advantage plans go blind and then they stay blind for life.”

Good as Medicare Advantage plans are, they could be better if there were less regulation. For example, if an MA plan has its amputation rate down to 2 percent, it cannot advertise that fact during open enrollment. If its blindness rate is really low, it can’t advertise that fact either. If these facts are established by an independent research origination with no financial interest in the study conclusions, that has to be kept secret as well.

Similarly, if a plan has fewer pre-authorizations or if pre-authorizations are cleared up faster than in other plans, consumers don’t get to learn about those facts either.

Every communication from an MA plan to potential enrollees has to have the government’s approval! And CMS appears to really not like quality comparisons among plans.

This is not the way a normal market works.