From Dr. Tom's Desk

CMS is planning to release Medicare Advantage data to private researchers for the first time.
 
The implications will be profound.
 
Up to now, studies using this unreleased data were performed only by the Federal government.
 
They were used mostly to further pre-determined agendas.
 
Not anymore.
 
With the long-awaited release of this information, limited and flawed though it may be, independent organizations are going to be able to analyze the efficacy of the Medicare Advantage payment model.
 
They may just find that, compared to traditional Medicare, Medicare Advantage as it’s currently executed is inefficient in transferring value from government to beneficiary---and that any offsetting “quality” improvements are chimerical.
 
Indeed, the studies based on privately obtained data are already bearing that out (see below).
 
Be prepared for dueling narratives regarding how good a deal Medicare Advantage is for taxpayers and patients, keep your cost structures low and your provider engagement high.
 
You’ll be glad you did.

You Should Know


Speaking of research, a recent study out of the University of Texas at Austin puts the percent of Medicare Advantage resources which are actually passed through to patients in the form of benefits and premium support at 54%.
 
That’s right, 54 cents on the dollar is spent on patient benefits.  That leaves 46 cents going to Medicare Advantage organizations (MAOs). Subtract their expenses and that leaves a pretty attractive profit potential.
 
Now you know why so much capital is being invested in Medicare Advantage plans.
 
Even more concerning, researchers discovered the less the competition among Medicare Advantage organizations in a region, the lower the amount spent on benefits.
 
Finally, the higher the base capitation rate for a given county, the lower the amount spent on benefits as well.
 
And that explains the MAO’s twin strategies of provider consolidation and regulatory capture.
 
This is the type of information that’s going to become far more common as the government begins to release previously confidential Medicare Advantage data for private analysis.
 
This study is the first step towards empirically questioning the efficacy of the Medicare Advantage model. It understandably hasn’t received a lot of publicity yet, but it is indeed a big, big deal.
We’re in the “gold rush” period of Medicare Advantage now. Organizations are grabbing premium though increasing their market share. On the capitation side, they’ve finally come around to the fact that risk scoring is a data problem, best addressed through quantitative analysis and system creation.
 
But none of that will matter if premiums are cut and competition increased.  Marketers and quants are expensive propositions and if the money is not there to support them, they’ll disappear---and the capital being used to support them will flow elsewhere to other sectors of the economy and away from healthcare.
 
Your tactic?
 
Recognized that, once fully unmasked by this new flow of data, the era of spending 54 cents on the dollar of government money on patient benefits are going to be over---sooner than you think.
 
Create robust internal systems for data collection, market inexpensively through both a network of insurance agents and a reputation for high-quality care.
 
And prepare to care for the patients of the Medicare Advantage Organizations who do not.
 
There’s going to be a lot of them.

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