Dear John,

The December issue of Health Affairs contains many articles that examine how health care markets function.

Topics covered include coding practices that affect risk adjustment, competition in the Medicare Advantage (MA) market, provider payment rates by Affordable Care Act (ACA) Marketplace plans, and more.

R I S K   A D J U S T M E N T

Daniel Crespin and colleagues use regression models based on observable characteristics of patients’ hospital stays in five states.

They estimate that about two-thirds of the 41 percent increase between 2011 and 2019 in the share of hospital discharges coded as the highest severity was associated with upcoding.

Cyrus Kosar and coauthors examine the risk profile of Medicare enrollees discharged to a skilled nursing facility (SNF) during 2018–19.

When they examined patients of similar risk according to an assessment conducted by the receiving SNF, enrollees in MA had risk scores that averaged 4.1 percent higher, with about 60 percent of that increment associated with chart reviews.

Although much of the risk adjustment literature focuses on excessive coding by MA plans, Niru Ghoshal-Datta and colleagues focus on undercoding in traditional Medicare.

Using 2017–19 data, they find that about one-quarter of the risk-score gap between MA and traditional Medicare is due to failure to consistently capture chronic conditions in fee-for-service claims.

I N S U R A N C E   M A R K E T S

Joseph Hnath and coauthors explore a seeming paradox in the MA market: increasing concentration among a few plans nationally, but increasing competition locally.

Using Medicare program data from the period 2012–23, the authors explain that when MA penetration in a market is low, plan competition is relatively robust, but as penetration grows, consolidations and acquisitions reduce competition.

Continued growth in MA portends less competitive local MA markets in the future.

Using data from the National Association of Insurance Commissioners, Jean Abraham and coauthors calculate that in 2022, health insurers managed benefits for 118 million employees and dependents through administrative services only (ASO) contracts—a figure almost four times the number covered by fully insured plans.

The three largest ASO contractors account for more than 60 percent of the market, and their profits per enrollee exceed those of smaller contractors.

P R O V I D E R   P A Y M E N T

In a Policy Insight, Michael Chernew and coauthors explore the implications of introducing an inflation factor into the Medicare Physician Fee Schedule.

Taking an “incentive paradigm” designed to optimize efficient outcomes, as opposed to fairness or cost paradigms, they explore how various options for an inflation update interact with evidence on patients’ access to providers and incentives for physicians to consolidate.

In 2021, more than twenty million Americans had health insurance coverage through the ACA Marketplaces, non-Marketplace individual coverage, or the employer small-group market.

Caroline Hanson and coauthors estimate how payment rates for professional services and inpatient and outpatient hospital services in these three market segments compare with Medicare rates.

They find that Marketplace plans paid an average of 152 percent of Medicare rates, which is lower than the 179 percent of Medicare rates paid, on average, by employer small-group plans.

In 2019, Oregon limited in-network hospital payments in its state employee health plan to 200 percent of Medicare rates.

Roslyn Murray and colleagues estimate $7.1 billion in aggregate national savings if such an approach were adopted by all state employee health plans, representing 0.35 percent of state budgets.

Enforcing Hospital Price Transparency: Lessons From CMS Actions

John (Xuefeng) Jiang et al.

part of our Provider Prices in the Commercial Sector series

Uses of Health Care Price Transparency Data: Status, Innovations, Opportunities

Addressing Health Disparities Amid Growing Health Care Costs