In the latest issue of Health Affairs, my coauthors and I published a paper where we examined use of services, quality of care, and patient experiences for Medicare beneficiaries enrolled in private Medicare Advantage health plans as compared to those in traditional Medicare.

We found that enrollees of MA plans use fewer services, which we found consistently when examining overall use of services such as the hospital or the emergency department as well as discretionary services such as total joint replacement and back surgery.

They did not, however, have fewer outpatient visits or lower use of nondiscretionary services such as cardiac interventions.

In contrast, measured technical quality using Healthcare Effectiveness Data and Information Set (HEDIS) measures was consistently better in MA HMOs (more so than PPOs) and patient experiences actually improved over the past decade.

This analysis is particularly timely because enrollment in the Medicare Advantage program has grown dramatically over the past decade; almost half of eligible beneficiaries are enrolled in MA plans as of 2022.

That enrollment is growing is not a surprise. Beneficiaries are flocking to MA plans because of better coverage provisions, which are available at much lower premiums than typical Medigap policies (recently, Michael Chernew and colleagues estimated that proposed cuts to MA payments would only modestly impact such benefits).

Insurers have seen outsized profits in MA by leveraging increased capitated payments that result from more intensive coding, as well as generous bonus payments from the star ratings quality program.

Indeed, in its most recent report to Congress MedPAC estimates that enrollees in MA plans cost, on average, 6 percent more than similar enrollees who remain in traditional Medicare.

This results in excess payments to MA plans on the order of hundreds of billions per year.

Thus, the economics of MA and, as Richard Gilfillan and Donald Berwick referred to it, the "MA Money Machine," have been a large focus of attention of policy makers and others trying to improve the functioning of the Medicare program.

In fact, over the past decade, numerous startups, many in the primary care space, have emerged, largely to leverage the potential for outsized profits afforded by learning to play the coding game.

According to the most recent MedPAC estimates (based on 2021 data), MA risk scores were almost 11 percent higher than scores for similar traditional Medicare beneficiaries.

This focus on the MA financing system, however, shifts focus away from what the core potential offered by integrated managed care can achieve.

When first introduced, the allure of managed Medicare was that participating health plans would provide coordinated and comprehensive care with a focus on prevention and health maintenance that would ultimately result in more cost-efficient delivery of care.

The ability of MA plans to improve care while also eliminating some wasteful care is ultimately what should drive the long-term success or failure of the MA program, and the impact of MA plans on clinical care is often ignored in current policy debates.

Research from our team published a decade ago showed that MA HMOs had lower utilization of services while also delivering higher quality care as measured by HEDIS and Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures.

However, earlier enrollees in managed care might have been more amenable to the techniques used by health plans and/or healthier in unmeasured ways, which suggests that maintaining this performance advantage might have become more difficult as more and more beneficiaries enrolled in MA over the past decade.

Unrelated to the current financing scheme, MA plans can employ a variety of strategies to achieve their goals of controlling spending while maintaining or improving the quality of care delivered to their members.

First, MA plans can employ selective contracting when forming the networks by including high-performing physicians or hospitals (in fact, a recent analysis shows that MA networks tend to include "average" quality hospitals with lower use of both higher and lower quality hospitals).

Second, MA plans can use techniques such as prior authorization to explicitly limit use of services.

Third, MA plans can employ financial incentives of a variety of other techniques (for example, measurement and feedback) to directly influence how physicians manage their MA enrollees. Such incentives can even spill back over onto the care of traditional Medicare beneficiaries if physicians adapt their practice style to match their overall incentives.

I think we are just beginning to delve into a greater understanding of techniques that can be used within the Medicare Advantage program as well as other contractual environments that put providers and provider systems at risk for the costs and quality of care (for example, the Medicare Shared Savings Program) to achieve better performance.

Though such techniques can be context dependent, using rigorous evaluation to identify the most effective approaches that can then be disseminated more broadly should be a key focus of researchers and policy makers in the next decade.

Ultimately, as US spending on health care approaches 20 percent of GDP with little evidence of slowing down, such techniques will prove of increasing importance for the future viability of the US health care system.

About Health Affairs

Health Affairs is the leading peer-reviewed journal at the intersection of health, health care, and policy. Published monthly by Project HOPE, the journal is available in print and online. Late-breaking content is also found through healthaffairs.org, Health Affairs Today, and Health Affairs Sunday Update.

Project HOPE is a global health and humanitarian relief organization that places power in the hands of local health care workers to save lives across the globe. Project HOPE has published Health Affairs since 1981.

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