Medicare Advantage (MA) Benefit Design and Beneficiary Choice

1. Medicare Advantage (MA)Benefit Design and Beneficiary Choice June 29, 2009 AcademyHealth Annual Research Meeting, Chicago, Illinois Marsha Gold, Sc.D. Senior Fellow

2. Research Questions and Topics Covered • What do MA enrollment choices show about beneficiary preferences and plan features considered? • Does MA benefit design protect beneficiaries financially and how does it compare against alternatives? • What policy changes might simplify or better support choice and minimize risks? • Medigap Context: Beneficiaries value protection for sharing but it can be expensive.

3. Data and Methods • Main analysis uses file created from downloadable Medicare Options Compare on MA plans available for individual enrollment merged with enrollment data at the contract/plan/county level. • 3,307 plans nationally in 2008 and 3,354 in 2009 (similar patterns; some erosion PFFS relative benefits in 2009). • Analysis excludes special needs plans. • Statistic weighted by enrollment unless noted.

4. Overview of findings • Enrollees are attracted to zero/low premium plans with augmented drug coverage. Want provider choice (most new growth in PFFS). • MA provides less comprehensive financial protection than Medigap, but better coverage (for most?) than Medicare alone, enhanced preventive services and first dollar coverage. • Financial risks still there. Unclear whether beneficiaries understand the trade-offs or how well they are conveyed.

5. Post MA Enrollment Growth Dominated by PFFS Source: Centers for Medicare & Medicaid Services (CMS) Monthly Summary Report, December (1999-2008), March 2009. Note: “Other” includes 1876 cost plans, 1833 cost plans (HCPPS), PACE, and demonstrations.

6. MA-Prescription Drug (PD) Premiums by Plan Type , 2009 Source: MPR analysis of CMS’s Medicare Options Compare, CMS’s March 2009 enrollment data. Note: Statistics exclude group and SNP plans.

7. Most Individual Enrollees Choose Plans with Part D Coverage (MA-PD) • A/B overpayments support favorable Part D benefits relative to free standing plans (KFF) • Mean premium for Part D $14 in 2009 ($12 in 2008) • 94 percent of enrollees (2009) in MA-PD had “enhanced” benefits, 65 percent had some coverage in the gap, and 94 percent no deductible • PFFS accounts for many MA only enrollees but some may have firm’s companion PDP

8. MA Plans Simplify Medicare’s Cost Sharing • Most eliminate inpatient hospital day limit • Cost sharing shifted to fixed copayments • Inpatient cost sharing varies by length of stay versus fixed deductible • Majority of MA plans limit out-of-pocket A/B costs but limits can be relatively high

9. Sharing for Some Services May Exceed Traditional Medicare Source: MPR analysis of files from CMS Medicare Options Compare. Excludes SNPs and group plans. aEnrollment based on July 2008 data. 2009 statistics are for plans continuing in 2009 and assume 2008 enrollment levels.

10. Many MA Plans Add Out of Pocket Limits (OOP) but Limit Does Not Mean OOP are Low Source: MPR analysis of Medicare Options Compare. aAlso includes local and regional PPOs. All MA plans excluding group and SNP.

11. Estimated Annual Out-of-Pocket Costs for Hospital and Physician Services by Plan Type and Enrollee Health Status, 2009 Source: MPR analysis of CMS’s Medicare Options Compare data (assumptions of hospital and physician use are based on HealthMetrix). Note: Statistics are enrollment-weighted (March 2009) and exclude group and SNP plans. aAssumes a mix of 72 percent healthy, 19 percent with episodic needs, and 9 percent with chronic needs, which is equal to the distribution of community-residing beneficiaries in good, fair, and poor health. bAssumes enrollees’ use of in-network benefits. Includes provider-sponsored plans.

12. MA Enrollees Get Some Benefits Medicare Does Not Cover Source: MPR analysis of files from CMS Medicare Options Compare. Excludes SNPs and group plans. Note: Enrollment based on July 2008 data. 2009 statistics are based on 2008 enrollment for continuing plans.

13. MA Enrollees Get Some Benefits Medicare Does Not Cover Source: MPR analysis of files from CMS Medicare Options Compare. Excludes SNPs and group plans. Note: Enrollment based on July 2008 data. 2009 estimates use 2008 enrollment for continuing plans.

14. Assessing Medicare Options Compare (systematic look in Chicago zip code) • Lists plans uniformly with layered data to allow sorting • Number of choices may be overwhelming (Chicago has 30+ and is below average) • Weak information on provider network/access • Out of pocket cost comparison with traditional program biased (Part D effect/overemphasis) • Quality ratings outdated and often absent

15. Areas for Policymaker Consideration to Simplify Choice and Add Protection • Encourage limit on A/B cost sharing versus first dollar extras like eyeglasses? • Improve Medicaid Options Compare to show trade-off low premium versus out of pocket costs risk • Standardize (some?) benefits to reflect market • Require minimum enrollment to participate • Rethink complexity of MA plan choice

16. Additional Information in Three Reports from the AARP Public Policy Institute • Gold M. and M. Hudson. “A First Look at How Medicare Advantage Benefits and Premiums in Individual Enrollment Plans are Changing from 2008 to 2009, March 2009 • Gold M. and M. Hudson “Medicare Advantage Benefit Design: What Does it Provide, What Doesn’t It Provide, and Should Standards Apply?” March 2009 • M. Gold “An Illustrative analysis of Medicare Options Compare: What’s There and What’s Not?” April 2009 • Available at http://www.aarp.org/research/ppi/ or www.mathematica-mpr.com