Healthcare has a way of propping things up just to let them fall. We see things come and go all the time. The latest incumbent to stand on this precarious platform is the Medicare Advantage plan.
The big winners of the Affordable Care Act, Medicare Advantage plans were touted to embody everything right about risk in medicine. Each payer would bid for a regional MA contract, determine how much risk to absorb, and monitor the quality metrics to ensure the risk taken matched the projected clinical outcomes. It seemed like the perfect combination of socialistic compassion and capitalistic enterprise – until it proved otherwise.
At the start of 2021, we saw a trickle of articles reveal how MA plans encouraged physicians to overbill by documenting in excess of the care provided. They noted how MA plans coached physicians to code for more diagnoses to generate more revenue: legitimizing this practice through buzzwords like ‘coding density’.
As the year went on, we saw more articles show how MA plans turned coding and billing into a game that balances the desire for overpayments with the risk of healthcare billing fraud.
Officials have known as early as 2019 that some MA plans overbilled the government by exaggerating how sick their patients were or by billing for treating serious medical conditions they cannot prove their patients had. By the end of that year, it was estimated that MA plans were billing in excess of 30 billion dollars. Yet little was done.
Admittedly, the pandemic had a lot to do with the lack of action. Now that we are passed the acute phase of the pandemic, officials are turning their attention back to this problem of overpayment.
According to MedPAC, a government watchdog panel, the federal government incurred 12 billion dollars in “excess payments” to Medicare Advantage plans in 2020. MedPAC projected the figure will swell to 16 billion dollars in 2021 (calculations typically lag behind a year), which is already over half of all the overpayments incurred in the previous decade leading up to 2019. Clearly, MA plans used the pandemic as an excuse to push overbilling into overdrive.
Now it seems the MA gravy train is at least slowing. Public perception of MA plans is shifting away from the belief that they represent the future of healthcare delivery to a more grounded understanding that they represent one of many insurance options available.
If we trace the arc of MA plans’ popularity from their evolutionary explosion at the onset of the Affordable Care Act to the present day, then we would conclude we are either at the peak of or just beyond it. This isn’t some half-baked speculation either. There’s a logic to this prediction, and it’s based on trends seen in the past.
Remember HMO’s (Health Maintenance Organizations)? They were all the rage back in the 70s and 80s, just like MA plans are right now. The idea originated with Dr. Paul Ellwood, a pediatric neurologist turned health policy visionary and reformer. He conceived of a self-regulating health care system that aligned physician incentives with patient interests. Sound familiar?
Dr. Ellwood created the first of many integrated delivery systems built on a core of a multi-specialty group practice that linked to hospitals, labs, and pharmacies. The integration allowed Dr. Ellwood to benchmark a fixed reimbursement for care provided throughout the system, with additional profit garnered through lower costs of care. The model required a significant amount of capital as prepayment, but the risk premium came from keeping costs low. It was capitation before we reintroduced the term in the Affordable Care Act. The idea being that by replacing fee-for-service payments with a per capita prepayment, doctors would have an incentive to keep people healthy and to solve their medical problems in less costly ways. Sound familiar?
Of course it does, because conceptually, these models are all the same. Whether the plan is called an ACO, HMO, or MA, the framework is the same: benchmark care delivery with some degree of financial risk. The problem is that payouts don’t align with the delivery of clinical care, just like the quality of a sporting event can’t be determined by the final score.
We think we can match them up, so we concoct fancy financial models to do just that, but we’re consistently wrong. Somehow, somewhere along the way, the compensation veers off. In the heyday of HMOs, we saw a slew of plans fail to cover their expenses and fold. Today, we see a host of venture backed MA payers feast on Medicare dollars like gluttons at a buffet.
The scenarios may appear different, but they all originate from the same cognitive error: we erroneously believe healthcare is an outcome when it is an ongoing series of decisions and behaviors that manifest over time. The clinical metrics measured are wrong because they oversimplify patient care into an outcome.
So, of course we’ll be off financially. The thing is: we’ll likely never learn our lesson. So after we move on from this infatuation with MA plans, we’ll find another innovation that we’ll mint as the savior of healthcare. We’ll prop it up and glamorize it, only to let it fall, just like all the other models before.
