Bob Herman of Stat casts a cold eye on a new claim from AHIP that Medicare Advantage provides superior value to the federal government:
America’s Health Insurance Plans, the industry’s primary lobbying group, funded a new report that was conducted by actuaries at Wakely Consulting Group. AHIP claims the report proves Medicare Advantage...is “saving Americans billions of dollars every year.” The actuaries, however, never use that language in the report.
STAT spoke with several independent Medicare policy experts, all of whom said AHIP’s report was incomplete at best and refuted by other studies that analyzed the same data.
AHIP's press release asserts that "in 2019, rather than being 2% more expensive than original Medicare, on an apples-to-apples basis, average MA spending was actually about 7% lower than original Medicare."
That conclusion is based on two claims grounded in the Wakely analysis:
1) If you were to add an out-of-pocket cost cap to FFS Medicare (as MA provides), the per-person cost would increase 3.5%.
2) "Apples to apples" requires excluding from the FFS cost calculation those enrollees who are enrolled only in Part A or only in Part B*, rather than in both. Single-part enrollees in Part A in particular spend significantly less in Part A than enrollees in both parts. The Wakely report asserts in the executive summary, "Costs associated with non-ESRD** FFS beneficiaries who are enrolled in both Parts A and B are about 5.9% higher than the total non-ESRD FFS population."
The first claim is not exactly "apples to apples," but it makes a fair point. An OOP cap is valuable, it's included in MA plans, it's not included in FFS Medicare, and if it were, current costs might be comparable. More on that below.
The second claim looks erroneous to me, and implicitly contradicted in the rather brief analysis section of the Wakely report. Excluding single-part Medicare enrollees from the per-person FFS cost calculation would not result in a 5.9% increase in the estimated cost.
To calculate the per-person cost of FFS Medicare, MedPAC includes all FFS enrollees, including those enrolled only in Part A or only in Part B. MedPAC acknowledges that if enrollees who have only Part A or Part B were excluded, the per-person FFS cost estimate would be about 1% higher, as single-part enrollees (in Part A in particular) tend have lower per-person costs (see notes to Figure 12-3, p. 431 in the 2022 report).
As of 2019 (the year on which the Wakely calculations are based), about 16% of 39 million FFS Medicare enrollees were enrolled only in Part A (5.1 million) or only in Part B (1.3 million). Since MA enrollees by definition are enrolled in both Part A and Part B, AHIP argues that excluding single-part FFS enrollees creates an apples-to-apples comparison..
Wakely's estimate of the effect of including single-part enrollees in the per-person cost calculation depends on its estimate that spending on Part A for enrollees enrolled in both A and B is 13.4% higher than Part A spending for Part A-only enrollees. Part B is a wash:
Wakely independently calculated the cost difference with the 2019 100% FFS data. We found that Part A spending was 13.4% higher for beneficiaries that were enrolled in Part A and B compared to those only enrolled in Part A. This compares to the 8% in MedPAC’s study. We believe one cause of the cost differential increasing is that MA penetration has been increasing over time, leaving fewer beneficiaries in FFS. Since beneficiaries must be eligible for both Part A and B, those with Part A only enrollment comprise a greater percentage of the total remaining in FFS.
For Part B spend, we also found there was no material difference between the two populations. Combining the impact based on overall cost, the total non-ESRD FFS spend is 5.9% higher for those enrolled in Part A and Part B vs those enrolled in Part A and/or Part B.
That last term in the comparison, "those enrolled in Part A and/or Part B" is an odd way of saying "all enrollees" -- but that is what it means. Yet the contrasts outlined above are between those enrolled in both Parts A and B vs. those enrolled in only one part. And only the contrast with those enrolled in Part A only appears to matter.
About 13% of FFS enrollees are in Part A only, and (coincidentally), Wakely finds that their Part A costs are 13% higher than those of Part A/B enrollees. That suggests that the Part A cost estimate would be about 1.5% higher if those enrolled in Part A only were excluded.
Part A accounts for about 48% of the combined costs of Parts A and B (as of 2018). Thus it seems to me that Wakely's estimate of the effect of excluding single-part enrollees from the cost calculation should be pretty close to MedPAC's -- raising the estimate by about 0.75% (vs. MedPAC's 1%). But that's not what's claimed in the executive summary -- or, in more circumlocutory fashion, in the analysis above.
AHIP takes the claim in the executive summary and runs with it, proclaiming that in an "apples-to-apples" comparison, MA costs 9.4% less per person than MedPAC's 2019 estimate for FFS, and 7% less than FFS net. Three quarters of that difference from MedPAC estimates is derived from the alleged effect of removing the single-part FFS enrollees from the FFS cost estimate. Most of that effect appears questionable. It's six times higher than MedPAC and FFS estimates.
What about the first, more modest claim -- that if FFS Medicare had an OOP cap, costs would be 3.5% higher? Adding the hypothetical cap would all but zero out MedPAC's 2022estimate that MA costs 104% of what the federal government would pay if all MA enrollees were in FFS Medicare.
“That’s sort of a different point than when you look at actual spending,” Jeannie Fuglesten Biniek, a senior Medicare analyst at KFF, told Stat's Herman. “We’re still paying Medicare Advantage plans more. Maybe you’re getting more for it, but that’s a different question.”
That "different question" is worth asking. If MA costs 104% of the cost of FFS per person, and that extra 4% includes an OOP cap and, in total, $2,000 worth of average extra benefits by MedPAC 's estimate, MA does have a fair claim to offer savings to the federal government. The question is, should the federal government be incentivizing enrollees to opt for those extra benefits in exchange for a limited network, prior authorization, and higher risk of coverage denials constitutes a legitimate source of savings.
Put another way, would the extra money the federal government lavishes on MA would be better spent improving benefits in FFS, thereby reducing MA's growing funding advantage? On this front, AHIP has in a sense undercut its own argument. MedPAC argues annually that the payment formulas for MA are on various fronts too generous, and that the efficiencies MA does attain (spending about 85% per member of what FFS Medicare spends) should be constrained within payment at par. If that were were achieved, the extra 4% paid to MA plans (or 3%, by KFF's estimate***) could fund the FFS OOP cap, according to Wakely's calculations. That in turn would negate a key advantage held by Medicare Advantage.
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