Who Really Benefits From Medicare Advantage Plans?

Every autumn, American television viewers are inundated with a barrage of commercials depicting the vibrant and wondrous life they could be living under the coverage of a Medicare Advantage plan. These advertisements are full of celebrity spokespeople, seniors showing off their athleticism and promises that MA plans provide better benefits than traditional government-operated Medicare plans. 

But ads often exaggerate value — and in the eyes of some health systems, these commercials paint an egregiously false picture of what MA plans really offer.

Over the past year, health systems have been increasingly dropping MA contracts, saying that they don’t pay enough and result in dangerous patient care delays. Both large and small health systems — from WellSpan Health and Vanderbilt Health to smaller community hospitals across the country — have been doing away with their MA contracts, citing large losses on the plans as the main reason for termination.

Most of the nation’s largest MA plan administrators, including UnitedHealthcare, Humana, Aetna and Cigna, did not respond to MedCity News‘ requests for comment for this article.

“Delay, deny or don’t pay”

In September, San Diego-based Scripps Health announced that its two largest medical groups will stop participating in MA plans starting January 1. More than 30,000 MA enrollees covered by UnitedHealthcare, Blue Shield of California, Anthem Blue Cross, Centene’s Health Net, SCAN Health Plan and a few other smaller payers will be affected.

A major reason for this decision is that MA contracts are causing Scripps to bleed money, said Tracy Chu, corporate vice president of population health and chief executive of Scripps’ accountable care organization, in an interview last month.

“We’re losing $75 million a year in taking these contracts. So our CEO, Chris Van Gorder, made the decision to not continue those contracts with those two medical groups. We could not come to consensus in terms of rates,” she explained.

Van Gorder uses the phrase “delay, deny or don’t pay” to describe the culture at MA plans, Chu added.

As Chu sees it, insurers are expecting health systems to be full from their leftovers. In other words, Medicare provides payers with funding to administer MA plans, payers take their cut of the profit, and then health systems get what is left over, she said. 

These leftovers “don’t even cover the cost of care or delivery,” Chu declared. She pointed out that health systems can’t afford to deliver care at a deficit because they have to be available to serve the needs of the community — it’s difficult to run a financially sustainable organization when losing millions of dollars a year from MA plans, she noted.

“Many organizations are choosing to step out of some of these contracts because it’s not a value add for them or for the patients. What we’re seeing is that it’s really a value add in terms of profit for the insurance plan — that is a difficult message for insurance plans that are really trying to say they are value-based,” Chu stated. 

Joe Abrutz, CEO of Cameron Regional Medical Center in rural Missouri, agreed with Chu, noting he “has been campaigning against Medicare Advantage for 15 years.” His hospital stopped accepting Cigna’s MA plans this year and will drop those administered by Aetna and Humana next year.

Abrutz cited delayed approvals and poor reimbursements as the main reasons for dropping MA contracts, as is the case with most health system leaders who have made the decision to stop taking MA plans.

“We serve inmates in this area, and we get higher reimbursement from inmate care than we do MA plans,” he declared.

Denials lead to patient safety concerns

In October, Abrutz sent a letter to Senator Josh Hawley (R-Missouri), a known MA advocate. In the letter, Abrutz explained that MA plans mandate prior authorization for most services and diagnostic tests ordered by their provider, which often causes care delays. 

For example, patients who need urgent CT scans often have to wait days or weeks to get approved for the service, and many MA-covered patients who need post-acute rehabilitation are denied by MA plans, he wrote.

Abrutz also mentioned that research from the Medicare Payment Advisory Commission (MedPAC), a nonpartisan legislative agency that advises the policymakers on Medicare funding, has found that the federal government is paying significantly more for MA plans than it is for traditional Medicare plans. This means that taxpayers are contributing more money to MA plans than they are to traditional Medicare — even though MA plans result in seniors getting much less timely care, and sometimes having to forego care altogether due to denials, he explained.

Sen. Hawley responded to his letter by saying, “I support Medicare Advantage and the protections and flexibilities it provides to our seniors,” but didn’t address the  issues Abrutz raised.

“If his parents had a neurological issue, and they had to wait three or four days for a CT test and then had a stroke while waiting, do you think he would still say there are protections? I don’t think so,” he declared. 

Hospitals across the country have expressed their frustrations with these types of denials from MA plans. Three weeks ago, the American Hospital Association urged the Biden Administration to ramp up oversight of MA plans, saying these plans are in violation of coverage requirements recently codified by CMS.

MA’s aggressive marketing practices

The majority of Medicare beneficiaries are now enrolled in MA plans, and participation is only expected to grow. MA didn’t begin gaining this scale of market share until about five years ago, when a flurry of commercials invaded Americans’ television screens, Abrutz pointed out.

Buying all that advertising isn’t cheap, he added. 

“Where does the insurance company get the money to pay for television commercials? From denying care,” Abrutz remarked. “So if you’re a Medicare Advantage company and you get paid an advance per month, your responsibility is to make sure that the patient gets care. But they delay the care so that way, they can keep more of the money that they get monthly as an advance — they’re very profitable at doing it. That’s why they can afford television commercials off the back of the senior citizen who’s not getting timely care.”

Additionally, a lot of MA advertising misleads patients, he noted. 

Cameron Regional provided some patient testimonials from former MA plan enrollees who felt duped by their plans. In one of these, a patient named Marchelle explained that she enrolled in an MA plan based on her insurance agent’s advice, only to find that her new plan delayed and denied her chemotherapy treatments. She and her family had to come up with thousands of dollars to pay for this care.

Another Cameron Regional patient, Nancy Summers, said the price for her monthly procedure went from $12.33 to between $865 and $3,949 when she switched from her government-run Medicare plan to an MA plan.

“Don’t give up your traditional government Medicare. The devil is always in the details! You may have a zero-dollar premium up front with an Advantage plan, but you’ll pay on the back end through copayments and out-of-pocket expenses. Contrary to their advertising, nothing is free,” Summers said in the testimonial.

Different business goals cause friction

MedCity News reached out to the five of the largest administrators of MA plans — UnitedHealthcare, Humana, Aetna, Cigna and Blue Cross Blue Shield — to respond to health systems’ complaints. All of these payers declined to comment or did not respond, except for the BCBS Association.

When MedCity News reached out to BCBSA using its media contact email, a statement was provided. However, it mainly touted the popularity of MA plans without addressing health systems’ gripes about excessive denials, low reimbursement rates and dangerous patient care delays.

“Over half of the Medicare beneficiary population selected a MA plan this year, highlighting the significant growth of the program over the past decade and its popularity. Flexibility in product design and supplemental benefits allow plans to tailor benefits to best meet the needs of consumers. This has driven greater competition within markets among MA plans, which only improves the program,” the statement read.

The insurer added that it is “committed to working with CMS and the administration to strengthen and improve the program so patients can continue to get the high-quality care they need at the right place and right time.”

Additionally, MedCity News reached out to two smaller administrators of MA plans, Alignment Health and SCAN Health Plan. Alignment Health CEO John Kao initially agreed to provide responses via email but declined to provide commentary once questions were sent. SCAN CEO Sachin Jain, on the other hand, rarely passes up an opportunity to defend MA.

Jain declared that an MA plan is “essentially a completely different business” than a traditional health system. 

“Most health systems have been built on a fee-for-service chassis wherein they are paid for services. They do better financially when people are sick. In MA, if you’re in a full-risk contract, as many health systems are, the goal is to keep people healthy,” he explained.

Jain contended that keeping seniors healthy is SCAN’s top priority. SCAN trusts health systems and medical groups to do most of their own utilization management, which isn’t the case with all MA plan administrators, he pointed out.

Utilization management refers to the set of strategies payers use to monitor and control the use of healthcare services. The goal is to ensure that resources are used efficiently and appropriately, balancing the delivery of high-quality care with cost containment. Jain said that “big, national for-profit” payers “oftentimes are overly aggressive with utilization management,” which causes “a lot of unnecessary friction between health systems and health plans.”

He declared that SCAN is Scripps’ biggest MA partner, and that his health plan has delegated all utilization management to the health system. Though Scripps cited denials and low reimbursement as its reason for dropping all MA plans, Jain argued that the health system never proposed a rate to his health plan, nor did SCAN deny claims.

He also thinks that some health systems decrying MA might be leaving out some details.

Many health systems have multi-line business relationships with large payers, Jain pointed out. In some cases, the health system might be getting paid well from a payer on the commercial side of things and less on the MA side, he explained.

“They’re looking at their MA rates in isolation, when they’re actually negotiating their rates as a bundle of rates across all lines of business. The same health systems that say they’re getting underpaid on one side may be getting paid substantially higher on another line of business,” Jain said.

He also argued that many health systems don’t keep up with the level of precision in coding and documentation required to be successful in an MA environment. This work is crucial for health systems because accurate and thorough documentation directly impacts risk adjustment scores, which determine reimbursement levels, Jain remarked.

In his view, it’s concerning that so many health systems are beginning to throw in the towel in the MA game. Many MA beneficiaries are low-income individuals who can’t afford traditional Medicare but do not qualify for Medicaid, he noted.

“When a big health system decides to terminate a MA plan, part of what they might be doing is rationing medical care away from low-income people who choose these plans because they provide them with a higher degree of income security than traditional fee-for-service Medicare does,” Jain remarked.

Where do we go from here?

Anna Basevich works with both payers and providers — she is senior vice president of enterprise partnerships and customer enablement at Arcadia, a health data platform. In her eyes, there isn’t a clear-cut right or wrong side to be on when it comes to MA.

“I don’t think that there’s one group that’s just raking in the dough here,” Basevich declared.

She believes two trends are starting to emerge to mitigate the antagonism between health systems and MA plans. The first is closer collaboration between providers and MA plans. One recent example of this is Aledade’s 10-year partnership with Humana, which was announced in March. Under the collaboration, Humana’s Medicare Advantage members will receive primary care from Aledade physicians using value-based arrangements. 

If an MA plan is truly committed to collaborating more closely with a provider, they might want to let providers handle more of the utilization management duties, Basevich noted, echoing what Jain said.

“The health system has a lot of context for each patient. The health system is equipped to do their own analytics to understand who is the best provider for a patient at any given point in time so that they can have the right patient experience and outcomes. The flip side of that is there’s a ton of opportunity for health systems to share that data back to the health plan to inform them,” she explained.

Health systems might also want to start their own MA plans, Basevich pointed out. This way, incentives are inherently aligned and there aren’t different sides of the negotiating table, she said.

This option may become more common as more and more health systems terminate their contracts with MA plans while the consumer trend is inexorably toward higher MA enrollment.

Note: The story has been updated to provide additional commentary about SCAN Health Plan’s relationship with Scripps Health.

Photo: Ieremy, Getty Images