Physician pay in Medicare Advantage (MA) programs is more strongly linked to traditional Medicare (TM) rates than negotiated commercial prices, although MA plans tend to pay less than TM plans, according to a retrospective analysis.
Nearly one third of people on Medicare have an MA plan, but the prices MA pays to physicians have not been well-studied.
MA insurers also often sell commercial insurance, so Erin Trish, PhD, from the Schaeffer Center for Health Policy and Economics at University of Southern California, Los Angeles, and colleagues wanted to see whether MA was paying physicians more like TM, where rates are set by the administration, or more like negotiated commercial prices.
The findings were published online July 11 in JAMA Internal Medicine.
The researchers analyzed 144 million claims from a large national insurer that operated in both the MA and commercial markets from 2007 to 2012 to evaluate how MA reimburses for physician services, laboratory tests, and durable medical equipment. They calculated TM rates from a 20% random sample of beneficiaries.
For a midlevel office visit with an established patient (Current Procedural Terminology [CPT] code 99213), the average MA price was 96.9% (95% confidence interval [CI], 96.7% - 97.2%) of TM.
For commercial patients, that same office visit code would mean physician reimbursement of 107.2% of TM (95% CI, 106.1% - 108.3%).
But for other expenses, such as laboratory services and durable medical equipment, MA takes advantage of lower prices that commercial payers have negotiated, meaning for these services, TM overpays.
For these expenses, MA pays lower prices from 67.4% of TM rates for a walker (Healthcare Common Procedure Coding Systems code E0143; 95% CI, 66.3% - 68.5%) to 75.8% for a complete blood cell count (CPT 85025; 95% CI, 75.0% - 76.6%).
"While the gap in pricing has likely narrowed recently due to Medicare implementing a competitive bidding program for durable medical equipment," the authors write, "these findings suggest that private insurers had already been correcting for Medicare's overpayments."
The comparisons the researchers make are for the same codes in the same local market by the same private health plan, James C. Robinson, PhD, from the Berkeley Center for Health Technology, School of Public Health, University of California, Berkeley, points out in an invited commentary.
So why do insurers and physicians put up with giving and receiving different rates for the same services or equipment?
For physicians, Dr Robinson suggests, it may be that they look at commercial insurance and MA together and join an insurer's network if the net revenue appeals to them. The insurers want to expand with MA, so they need willing physicians to do that.
"In this view, insurers subsidize the growth of their MA networks by paying high rates for commercial patients," he writes.
The findings also show that physicians, especially those who combine with merged hospitals, do have bargaining power.
"Trust me, if the health plan studied here could pay physicians at TM rates for their commercial as well as their MA patients, they would," Dr Robinson writes.
Also, MA plans cannot pay physicians much more than TM rates or they would lose money, leaving physicians with the choice of whether to accept that rate or leave.
"The facts on the ground say that enough clinicians accept TM rates for MA patients to ensure the growth of the MA program," Dr Robinson writes.
For insurers, he says, "Medicare Advantage is the most lucrative niche in the insurance market."
Medicare plans are favored as the patient population ages. And meanwhile, employers are slowly losing interest in offering commercial insurance plans.
Dr Robinson concludes: "Medicare Advantage is growing, implicitly subsidized by commercial insurance. Medicaid managed care is booming, with similar implicit subsidies. Commercial insurance is shrinking, burdened by these implicit subsidies. Will the last commercial insurer please turn out the lights?"
This work was funded by the Robert Wood Johnson Foundation. Research reported in this publication was also supported by the National Institute on Aging of the National Institutes of Health. One author reports serving as a Public Trustee of the American Academy of Ophthalmology, is on the Advisory Board of the National Institute for Health Care Management, and is a consultant to Summa Health, the Bipartisan Policy Center, and the Blue Cross Blue Shield Association. The remaining authors have disclosed no relevant financial relationships.
JAMA Intern Med. Published online July 11, 2017.
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Cite this article: Medicare Advantage Pay Rates Similar to Traditional Medicare - Medscape - Jul 11, 2017.
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