Medicare Advantage attracting healthcare providers looking to run their own plans

As baby boomers enter Medicare and value-based care transforms reimbursement, providers at large are seeing this as a perfect time to sponsor Medicare Advantage health plans.

A recent Avalere study shows that more than half of new entrants in the Medicare Advantage market are providers, according to Elizabeth Carpenter, senior vice president of the Washington, D.C.-based Avalere. Eighty-percent of the provider-sponsored Medicare Advantage contracts became effective during the last decade, she said.

This is driven by the reality that, while it's still not a safe way for providers to get into risk, there is an appealing upside, according to Zachary Hafner, a partner with the Advisory Board.

As they've done throughout every stage of their lives, baby boomers are driving the market. An estimated 10,000 Americans a day are turning age 65 years old, and many are choosing Medicare Advantage over traditional Medicare. Medicare Advantage enrollment has grown from six million in 2005 to 17 million in 2015.

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Medicare Advantage offers entry into risk without going large-scale on a commercial plan, according to Hafner. It also makes sense since providers are already investing in technology and resources to serve the senior population.

"They're looking to make investments in technologies to drive better outcomes, which include a reduction in utilization," he said. "To  make this equation work, they need a new economic model that rewards for these outcomes."

With Medicare Advantage, a private version of traditional Medicare, insurers evaluate the health of their members and build risk scores based on medical coding. They're paid out of a Medicare trust fund, receiving payments based on the risk scores.

That means the payers aren't left waiting for a check from the federal government, as is the case with some insurers who have sued over what they claim is a lack of payment for risk adjustment in the exchange market.

The challenges

Getting into Medicare Advantage takes time. If the process was started today, the Centers for Medicare and Medicaid Services might not grant approval in time for a 2018 target date, Hafner said. There's a 200-page application process, and the insurer has to submit its contracts with providers.

"There has to be thoughtful evaluation going in on how to move into it, rather than jumping in," Hafner said. "If Medicare Advantage is on your radar, you have to do a fact-based assessment of your capabilities and the gap-closing requirements."

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Also, a recent study published in Health Affairs found that Medicare Advantage plans actually paid 5.6 percent less for hospital services than regular fee-for-service Medicare, so on the reimbursement side there's a gap.

Building your own MA plan is also an expensive proposition, so some providers are using a traditional insurer as a back-office partner.

The successes

Advocate Health Care in Illinois has grown its Medicare Advantage program and has three commercial partners, according to Chief Medical Officer and Executive Vice President Lee Sacks.

"We'll continue to increase Medicare Advantage enrollment," Sacks said. "We think that offers the most value to patients and it's a sustainable program."

Medicare Advantage performance has shown to be good. Seventy percent of provider-sponsored Medicare Advantage plan enrollees are in a 4.5 or 5-star plan according to federal ratings, Carpenter said.

Medicare Advantage is also an individual sale, as compared to the commercial health insurance market, which involves more detailed product strategies and requires engaging with employer organizations.

"Commercial products need broader network coverage where employees seek care - that is, where they work and live."