By GEORGE HALVORSON
MedPac has just released a report on Medicare Advantage that’s incorrect on multiple key points that need to be corrected.
Medicare Advantage currently enrolls the majority of Medicare members in the country, and it’s now the new basic plan for the Medicare program because of that majority enrollment level.
That’s very good news for Medicare because the average cost for those members is significantly less than those members would’ve cost under fee-for-service Medicare — and we can be comfortable and know that the lower cost is permanent because of the way we pay for the program.
The plans are paid a capitation for each member, and they’re not paid a fee for each piece of care that’s delivered to Medicare patients.
The capitation is an excellent purchasing approach for the program because it limits the amount paid for the enrollees, and when that amount, paid in capitation, is lower than the average cost of care for the traditional Medicare members, it guarantees that those lower costs will be paid for those members for the Medicare program, and that those costs will continue to be lower for Medicare.
The program that’s used to set the bids for the plans annually calculates the average cost of the traditional Medicare program in every county, and then lets the plans bid for the amount they will be paid for their members for the next year.
Those average costs for Medicare members are accurately calculated, and they’re based on consistent information that Medicare records, computes, and then reports on actual spending in every county by fee-for-service Medicare for the members every year.
The plans look at the information from the fee-for-service Medicare program in every county each year and then they each bid a capitation that’s always lower than that average cost, because those average Medicare costs are actually higher than the Plans need to provide the full set of required care for their members.
That bidding process guarantees that the plans will cost less than fee-for-service Medicare because it’s legitimately, appropriately and accurately based on the actual costs of that program in every county as the starting points for the bids each year.
We know that’s how much Medicare costs in every county using those numbers — and when the plans submit bids that are lower than that average cost, we know that the lower amount in those bids represents actual savings to the Medicare program.
In the world of insurance, having a bid that sets and determines the payment level for the coverage from every plan is a competent, appropriate, intellectually sound, financially legitimate, accurate, and fully functional payment approach and price for Medicare to spend on that coverage as a buyer.
Medicare is a buyer for Medicare Advantage and not just a payer as it is for the rest of the fee-for-service Medicare program.
Once the bid is set, all of the concerns, worries, risks, and uncertainties of the payment process that people used to have about the payments disappear, because that bid amount is exactly how much the plans will be paid for their members and it can’t be modified or changed in any way by the plans.
There are no possible upcoding approaches or risk pool manipulation processes or any possible subsequent plan fudging on the right cost for payments based on the risk levels of the patients that can happen for those payments because the capitation payment is the only one that Medicare will give to the plans, and that locks the cost in place.
That protection against future up coding problems is clear and true because the bids are the final payment to the plans, and there’s no way of doing any kind of risk-pool manipulation after the fact to create any level of overpayment after that capitation payment is made to each plan.
CMS Uses Good Encounter Data to Get that Risk-Level Information
CMS now has very good information about the actual risk levels of the members because they competently, appropriately, effectively and completely eliminated all of the old coding systems that were using estimates from the plans that they previously used to get the patient risk-level information to create the payments.
They replaced that old data flow from the plans with actual encounter data from the care delivered to each patient with information about each actual encounter, and that encounter data at the point of care ties back to the actual medical records that exist and that are used in the care settings for each patient.
The risk levels of the members in the plans are now determined and set by an extremely accurate process that uses the actual care encounter reports for each patient that are filed with the Medicare program to get each diagnosis for each piece of care.
There were some earlier systems for paying the plans that were built on plans filing data about the risk levels of the members, and there were some instances where some plans did filings in ways that upcoded and increased their payment levels, but CMS has actually completely eliminated and cancelled those old processes and reports, and now gets the needed diagnosis data for the payment system from the actual encounters that are filed by the providers for each piece of care.
We now have very current data about the patients, and the reporting process is extremely accurate in its information flow.
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