Extra Benefits for MA Enrollees Average $73, Vary Widely by State

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.

By James Gutman, Managing Editor
March 29, 2012 Volume 18 Issue 6

Medicare Advantage beneficiaries generally are getting substantial amounts of supplementary benefits and/or reduced cost sharing now, and that is likely to continue through next year, according to a new analysis by consulting firm Avalere Health LLC and comments in an interview with its CEO. Specifically, Avalere’s analysis issued March 12 of newly released CMS data found that MA enrollees in 2010 got a weighted average of $73 worth of supplementary benefits or lower cost sharing per month, with the figures ranging widely from a high of $154 in Florida to zero in Alaska.

The figures seem to correlate with underlying fee-for-service (FFS) costs in the state, Avalere noted. That’s because where underlying FFS costs are highest, it tends to be easier for MA plans to operate more efficiently than FFS Medicare and thus to be able to bid under the “benchmarks” for that area. Bids below the benchmark in a service area, which may be a county rather than the whole state, result in CMS giving the plans “rebates” that must be used either to furnish extra benefits or to lower premiums.

The Avalere analysis shows that MA HMOs were more likely to offer large amounts of supplementary benefits to enrollees than were local or regional MA PPOs. The consulting firm, which excluded MA private-fee-for-service plans from the analysis since many of them exited the market after “deeming” of PFFS networks ended Dec. 31, 2010, attributed the HMO dominance in these figures to the higher ability to control costs in this form of care.

“What the [overall] analysis showed is there are significant subsidies for enrollees in Medicare Advantage,” Avalere CEO Dan Mendelson tells MAN.
Asked how the coming cuts in MA pay rates under the health reform law would affect these extra benefits, he responds that there will be an impact “over time.” However, Mendelson adds, CMS is offsetting some of the effects with its star-rating quality bonuses, and he doesn’t expect to see many changes in the supplementary-benefits patterns through next year. He notes that minimum medical loss ratio requirements, which could affect extra benefits and cost-sharing levels, begin for MA plans in 2014 (MAN 5/19/11, p. 1).

Mendelson points out this is the first time CMS has released the extra-benefits data, which he says are “very useful.” They show, for instance, how closely the extra benefits and/or lower cost sharing track with prevailing FFS costs in high-cost states such as Florida and Louisiana, which placed second in Avalere’s analysis at an average of $143 per month.
Mendelson acknowledges that the intense competition for a large number of seniors could be a factor contributing to Florida’s top figure, noting the state is “one of the most competitive markets” (MAN 3/15/12, p. 1). The continued reliance on prevailing FFS costs as the base for MA payments as reform-law provisions are being phased in means “you can carry this legacy forward” for a while in terms of Florida’s high supplementary benefits, he adds.

Louisiana ranks high mostly because of historical payment rates and not because of intense competition, according to Mendelson. He contends that what happens to supplementary benefits in states like this in the next couple years could be related partly to what star-rating bonuses plans there are getting, since the health reform law and CMS rules require that the bonus-related additional rebates be used to furnish additional benefits or reduce premiums. Plans with a rating of three stars or below will get only a 50% rebate beginning in 2014, while five-star plans will get 70%.

Given the various reform-related factors at play, including rebasing of county payment rates (MAN 3/1/12, p. 1) and gradual reduction of base pay rates to 100% of FFS, the market “will see more consistency” on supplementary benefits “over some period of time,” Mendelson predicts. But that won’t occur “next year or the year after; it’s more like a slow drip,” he says.

View the CMS data used in the Avalere analysis at www.cms.gov/Plan-Payment/PPData/list.asp