Report suggests standardizing Medicare Advantage bidding process
A new report from the USC-Brookings Schaeffer Initiative for Health Policy and the Center for Health Policy at Brookings proposes two changes to the Medicare Advantage (MA) bidding process, which the researchers said would lower prices and offers more choices for consumers.
The authors propose changing the process to improve price competition and standardize MA benefits that would improve comparison shopping for Medicare beneficiaries.
The report estimates the changes would save the federal government $10 billion annually. The researchers also said the plan would reduce Part B premiums for both traditional and MA beneficiaries by about 2% per year.
Despite payer and beneficiary interest and reported successes in MA, the report said the current MA bidding process is problematic. The issue leads to “inefficiently high plan bids, a complex choice environment for consumers and uneven subsidization of MA enrollees based on location.”
The authors suggested an improved process by “incentivizing (Medicare Advantage organizations) to compete on price for a standardized product, rather than competing primarily on benefit generosity, as is largely the case today.”
MA now makes up about one-third of Medicare enrollment. There were nearly 21 million members at the end of 2017, an 8% increase over the previous year.
It’s not just beneficiaries who are increasingly interested in MA. Payers have also found success, with multiple companies expanding MA membership. UnitedHealthcare and Humana dominate the market, but Aetna has increased its MA reach this year, adding nearly 250,000 members in the first quarter. That’s better than Humana’s 157,700 MA-member gain, but less than the 330,000 beneficiaries that the No. 1 MA payer, UnitedHealthcare, picked up in the quarter.
MA membership is expected to keep rising in the coming years. UnitedHealthcare predicts eventually half of all Medicare beneficiaries will have an MA plan.
CMS also views MA as a success, and is increasingly looking for ways to make the program even more beneficial for payers. In fact, payers will get a 3.4% payment increase in MA next year. This is higher than the proposed 1.84% increase.
CMS wants to give MA plans more flexibility in devising supplemental benefits that go beyond direct medical coverage. A recent CMS final rule gives plans the ability to offer non-medical benefits like meal delivery and transportation to specific beneficiaries. The move, which goes into effect June 15, could also help ride-hailing companies like Uber and Lyft, which have increasingly viewed patient transportation to doctor visits as a potential growth area.
Another major company is interested in MA. Walmart is reportedly discussing a possible deal for Humana, which would give it access to the second-largest MA beneficiary population.