Medicare Advantage—Delivering Value and Cost Savings for Beneficiaries and Taxpayers

By Mary Beth Donahue and Jerry Penso, M.D.

As Medicare’s annual open enrollment period begins, Medicare beneficiaries will find high-quality and affordable coverage options to choose from, including increasingly popular Medicare Advantage plans. The Centers for Medicare & Medicaid Services (CMS) estimates that nearly half of Medicare beneficiaries are choosing Medicare Advantage. CMS projects that a record-setting 31.8 million seniors and individuals with disabilities will make an active choice to enroll in Medicare Advantage in 2023.

As beneficiary preference for Medicare Advantage grows, Medicare Advantage is also covering an increasingly diverse population and supporting improved access to care. For example, enrollment among minority and dual-eligible beneficiaries has grown 111 percent and 125 percent, respectively, since 2013.

The Biden Administration recently announced that Medicare beneficiaries will see “lower premiums for Medicare Advantage and Medicare Part D prescription drug plans in 2023.” Specifically, according to the Centers for Medicare & Medicaid Services (CMS), the projected average premium for 2023 Medicare Advantage plans is $18 per month, a decline of nearly 8% from the 2022 average premium of $19.52.

Medicare Advantage plans will continue to offer a wide range of supplemental benefits in 2023 not offered in Medicare Fee-For-Service (FFS), including eyewear, hearing aids, preventive and comprehensive dental benefits, access to meals, over-the-counter items, and fitness benefits.

Medicare Advantage continues to provide superior outcomes to beneficiaries in comparison to Medicare FFS. For example, MA beneficiaries experience a 43% lower rate of avoidable hospitalizations for any condition and 21% higher rate of seeing a physician within 14 days of a hospital discharge compared to Medicare FFS.

Amid this backdrop of the value Medicare Advantage is providing seniors, we were discouraged to read a misleading and incomplete story included in last week’s New York Times regarding Medicare Advantage payment and coding practices.

As longtime health care advocates and leaders of the Better Medicare Alliance (BMA) and the American Medical Group Association (AMGA) respectively, we bring unique perspectives and insights on the value of Medicare Advantage and how it is working effectively to meet the health care needs of Medicare beneficiaries.

Through value-based payment and care management that results in improved outcomes, additional benefits, and lower costs for beneficiaries and the federal government, Medicare Advantage is addressing the needs of today’s seniors.

Moreover, Medicare Advantage’s coordinated care model—which emphasizes prevention, early detection and management of chronic disease, and whole-person and comprehensive care—is driving improvements in quality of care and leading to better health outcomes for patients.

Ensuring complete and accurate coding is an essential part of the Medicare Advantage care model because it allows plans to identify beneficiaries that would benefit from care management programs and allows plans to monitor beneficiary progress and patient outcomes.

As a family physician who leads AMGA (Penso), I know firsthand the value of Medicare Advantage’s care coordination model in providing care for medically complex and vulnerable patients.  I had an MA patient with heart failure who came to the emergency room once a month with shortness of breath because of their condition.  A care manager was then engaged who helped the patient with their medications, diet and arranged transportation to their physician office visits.  With coordinated, whole-person care, the patient did not need to go back to the emergency room for over two years.  The patient felt better and could lead a more normal life.

As someone who has cared for patients with Medicare Advantage and those with traditional Medicare, I have seen many stories like this, and understand both in real-world and clinical terms the many benefits for patients and their physicians that Medicare Advantage affords.

Unfortunately, the recent article published in The New York Times largely ignores the strong and demonstrated record of providing superior value to Medicare Advantage beneficiaries, while selectively focusing on allegations—some more than a decade old—to present a misleading and inaccurate picture of a vital part of Medicare that is providing more affordable and higher-quality care to nearly 30 million beneficiaries today.  

Here is what The New York Times article doesn’t tell you:

MA delivers better value to the Federal Government

An actuarial analysis by Milliman found that Medicare Advantage provides $32.5 billion in additional value to beneficiaries and the federal government by redeploying savings by providing Medicare-covered services for less. Medicare Advantage covers all Medicare-required benefits, such as hospital and physician services, for 24% less than fee-for-service Medicare, according to the Milliman report.  These savings—which are the result of Medicare Advantage providing Medicare-covered benefits for efficiently than fee-for-service—result in significant savings to beneficiaries in the form of reduced out-of-pocket costs, additional benefits, or both.

Non-partisan experts have recognized that Medicare Advantage provides benefits more efficiently than fee-for-service Medicare and that “plan efficiencies have led to more competitive bids that enable plans to offer greater coverage of extra benefits.”

Comparing Medicare Advantage and fee-for-service Medicare spending directly, Milliman found that per-member, per-month spending in Medicare Advantage is $7 lower than per-member, per-month spending for beneficiaries of a similar health status in fee-for-service Medicare ($942.43 in Medicare Advantage v $949.39 in FFS Medicare).

Doesn’t Hold Medicare FFS Accountable

Scrutiny of Medicare Advantage payment policies fails to account for payment inaccuracies that exist in fee-for-service Medicare.  A recent report by the U.S. Department of Health and Human Services (HHS)—which annually calculates improper payment rates in fee-for-service Medicare and Medicare Advantage—found that the net improper payment rate was 3.18% which is roughly half the net improper payment rate under fee-for-service Medicare (6.04%).

More Affordable for Seniors

Debates around Medicare payments and costs also overlook the important value that Medicare Advantage provides to beneficiaries, including lower out-of-pocket costs and premiums.

A study by ATI Advisory found that Medicare Advantage beneficiaries report spending nearly $2,000 less in out-of-pocket costs and premiums annually compared to fee-for-service Medicare beneficiaries. This results in a 35% lower rate of cost burden in Medicare Advantage, providing meaningful affordability and peace of mind, especially for lower-income beneficiaries who would otherwise be at-risk for being under-insured.

Better Health Outcomes

Because of Medicare Advantage’s innovative, whole-person care model, health care coverage and delivery are effectively coordinated so that patients receive the right care, at the right place, and at the right time. In Medicare Advantage, patients have a primary care physician who keeps track of their health and creates a customized treatment plan. Specialists and primary care physicians communicate regularly. Alternatives to expensive emergency room visits and hospitalizations are offered. And the payment system allows physicians to create extended care teams that are centered around patient needs.

The benefits of the Medicare Advantage whole-person coordinated care model is also delivering better health outcomes—especially for patients with complex, chronic conditions.  For example, research by Avalere Health found that Medicare Advantage beneficiaries with hypertension, hyperlipidemia, and diabetes have nearly 29 percent fewer potentially avoidable hospitalizations, 41 percent fewer avoidable acute hospitalizations, and 18 percent fewer avoidable chronic hospitalizations than FFS Medicare beneficiaries.

High Beneficiary Satisfaction

Medicare Advantage beneficiaries also report high health care satisfaction and access, particularly as it relates to access to care, having a usual source of care, ease of seeing their primary care physician, and overall satisfaction with quality of care. A December 2021 Morning Consult poll found that Medicare Advantage has an overall 94% consumer satisfaction rate.

By providing coordinated care that emphasizes prevention, early detection, and effective management of chronic disease, Medicare Advantage is working to advance the health and well-being of all beneficiaries.

As policymakers and other stakeholders explore ways to strengthen Medicare Advantage and build on its success, one-sided, incomplete, and misleading articles (such as the recent New York Times article) that ignore Medicare Advantage’s impact on seniors including better benefits, better outcomes, and lower patient out-of-pocket costs do a great disservice.

Mary Beth Donahue is the President and CEO of the Better Medicare Alliance, the nation’s research and advocacy organization supporting Medicare Advantage.

Jerry Penso, M.D., is the President and CEO of AMGA which advances multispecialty and integrated systems of care as the preeminent model to deliver high-performance health care.