No, We Still Don’t Have Proof That Private Medicare Plans Are Better

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A growing debate over the Medicare Advantage program has big ramifications for the future of American seniors’ health coverage. Medicare Advantage, an alternative to the traditional public Medicare program, allows seniors to opt in to private insurance coverage financed by the government. Currently, 16 million of the 54 million Medicare beneficiaries receive coverage through Medicare Advantage plans.

While most discussion of the Medicare Advantage program centers on its higher cost, there’s been some recent focus on the quality of care provided by the private plans, which historically has been worse than traditional Medicare. On Monday, a post in The Upshot at The New York Times made the case that the quality of Medicare Advantage has not only improved, but actually surpassed that of the public Medicare program. The piece relied in particular on a 2013 Health Affairs study showing seniors on Medicare Advantage to be more likely to receive certain screenings and vaccinations, as well as expressing comparable levels of satisfaction in their doctors and specialists as seniors on Medicare.

However, these findings aren’t as conclusive as they may initially appear. Data limitations make it difficult to directly compare quality between Medicare Advantage plans and traditional Medicare. As a result, this study used only five clinical quality indicators, along with survey results on vaccinations and patient satisfaction, to compare quality of care. All five of these indicators measured clinical processes (i.e., giving preventive screenings to appropriate patient groups) rather than clinical outcomes (i.e., making people healthier). While process measures are important, we shouldn’t draw firm conclusions on quality of care without comparative data on outcomes as well. Notably, the government’s “star rating” quality guides to Medicare Advantage plans for consumers place more than twice as much weight on outcomes measures as they do on process measures.

What’s more, this study only looked at health maintenance organizations, or HMOs, which account for 64 percent of Medicare Advantage plans. Since some of the other plan types have averaged lower quality “star ratings” to date than the HMOs, this limits the ability of this study to represent how Medicare Advantage plans taken as a whole are performing. And even among HMOs, quality of care varied considerably within this study, with the more established, not-for-profit HMOs performing well, and newer, for-profit HMOs showing more mixed results, performing worse than traditional Medicare on some measures and better on others.

Finally, this study only covers the period from 2003 through 2009, and thus doesn’t capture the effect of the Affordable Care Act’s Medicare reforms. Importantly, the ACA eliminated cost-sharing for many preventive services in Medicare, providing free access to screenings such as mammograms. As a result of removing these barriers to care, utilization of these preventive services in traditional Medicare is likely to rise — potentially improving Medicare’s scores on the same clinical process indicators measured in the study.

MedPAC, the government agency that advises Congress on Medicare policy, continues to report that we lack the information to truly compare quality of care between Medicare Advantage and traditional Medicare. While it does looks like Medicare Advantage plans have improved in quality, the evidence remains too inconclusive to say that they’ve surpassed traditional Medicare –- or to justify reversing long-needed payment reforms.

Medicare Advantage was created with the idea that the private sector could provide coverage more efficiently, saving the government money. In reality, Medicare Advantage has proved to be more expensive, with the government in recent years paying an average of 14% more compared to traditional Medicare. Research shows that only one-fifth of this overpayment actually gets passed along to patients by improving benefits or lowering premiums, with much of it instead going to company profits or advertising budgets.

The Affordable Care Act included provisions to reduce these overpayments and bring Medicare Advantage payments in line with traditional Medicare. These reductions, which the Congressional Budget Office projected would save $156 billion over 10 years, were to be phased in gradually, taking full effect in 2017. However, these reductions have only been partially implemented. The insurance industry pushed back aggressively, and the resulting political pressure led to the Centers for Medicare and Medicaid Services canceling the last two scheduled reductions in 2013 and 2014. As a result, Medicare Advantage payments are still 6% higher than traditional Medicare.

Given this context, it’s important not to overstate what the limited evidence can tell us about quality of care in Medicare Advantage versus Medicare. Ultimately, private insurance companies should still have to compete on the same playing field as the public Medicare program.

Thomas Huelskoetter is the Special Assistant for Health Policy at the Center for American Progress.