Getting What We Pay For: How Do Risk-Based Payments to Medicare Advantage Plans Compare with Alternative Measures of Beneficiary Health Risk?

Abstract

Objective: To estimate the relative health risk of Medicare Advantage (MA) beneficiaries compared to those in Traditional Medicare (TM).

Data sources/study setting: Medicare claims and enrollment records for the sample of beneficiaries enrolled in Part D between 2008 and 2015.

Study design: We assigned therapeutic classes to Medicare beneficiaries based on their prescription drug utilization. We then regressed nondrug health spending for TM beneficiaries in 2015 on demographic and therapeutic class identifiers for 2014 and used coefficients from this regression to predict relative risk of both MA and TM beneficiaries.

Principal findings: Based on prescription drug utilization data, beneficiaries enrolled in MA in 2015 had 6.9 percent lower health risk than beneficiaries in TM, but differences based on coded diagnoses suggested MA beneficiaries were 6.2 percent higher risk. The relative health risk based on drug usage of MA beneficiaries compared to those in TM increased by 3.4 p.p. from 2008 to 2015, while the relative risk using diagnoses increased 9.8 p.p.

Conclusions: Our results add to a growing body of evidence suggesting MA receives favorable, or, at worst, neutral selection. If MA beneficiaries are no healthier and no sicker than similar beneficiaries in TM, then payments to MA plans exceed what is warranted based on their health status.

Keywords: Medicare advantage; coding intensity; risk adjustment.

Figure 1

Ratio of MA‐to‐TM Prescription Drug‐Based Risk Scores, All Enrollees Compared with Part D Enrollees, 2008–2015

1. Notes. Prescription drug‐based risk scores derived using the sample of Medicare beneficiaries enrolled in Traditional Medicare (TM) or Medicare Advantage (MA) who also had Part D coverage. The ratio of MA‐to‐TM risk scores for all enrollees was constructed by multiplying the prescription drug‐based score for Part D enrollees in either MA or TM in each year by the average CMS–HCC score (version 12) for all MA or TM enrollees divided by the average CMS–HCC score for MA or TM enrollees with Part D coverage.

Figure 2

Ratio of MA‐to‐TM Prescription Drug–Based and CMS‐HCC Risk Scores, 2008–2015

1. Notes. Prescription drug‐based risk scores derived using the sample of Medicare beneficiaries enrolled in Traditional Medicare (TM) or Medicare Advantage (MA) who also had Part D coverage and adjusted for the entire Medicare population using CMS–HCC averages. CMS–HCC Version 22 scores for payment year 2017 obtained through personal correspondence with the Centers for Medicare and Medicaid Services on May 11, 2017.