Medicare Advantage Payment Extra Payments, Enrollment &Quality of Care

Lauren Hersch NicholasColumbia University

AcademyHealthJune 3, 2007

Research funded by the John A. Hartford Foundation Hartford Doctoral Fellows Program and the Commonwealth Fund

Outline Relationship between payments to Medicare

Advantage plans and enrollment Quality of Care in Medicare Advantage vs.

FFS Effects of Extra payments on quality of care in

Medicare Advantage

Methods: Data Sources Medicare Enrollment file provides average

demographics at county-insurance status level Area Resource File for county health system

characteristics CMS Medicare Advantage Ratebooks State Inpatient Dataset from Healthcare Cost and

Utilization Project Repeated cross-sections 1999-2004 inpatient discharge abstract for universe of

hospitalizations AZ, FL, NJ and NY data

Payment Model

Fixed Effects Regression MAc,t = β1Pay c,t + β2Rate c,t + β3X c,t + β4C + β5Y + ε c,t

Where MA is Medicare Advantage Penetration

Pay is the extra payment amount (per enrollee per month)

Rate is a vector containing the payment rate and its square

X is a vector of county health systems characteristics including a constant (total doctors, general practitioners, hospitals, hospital beds, ambulatory care centers, skilled nursing facilities, HMO headquarters, per capita income)

C is a vector of county fixed effects

Y is a vector of year fixed effects

Counties weighted by number of Medicare enrollees

Results: Payment Rates and Enrollment

Payment Rate -0.0022

(.0008)**

Rate Squared 0.000003

(0.0000006)**

F test of Instruments 12.45

First-Stage F-test 51.85

Enrollment in Medicare Advantage is increasing with payment rates up to $807 per enrollee per month (through 2004)

Measuring Quality: AHRQ Hospitalization Classifications

Preventable: Could be managed/prevented by effective primary care

Higher rates indicate inadequate quality of or access to outpatient care

Asthma Chronic heart disease Congestive heart failure Diabetes Complications Hypertension Kidney/Urinary Infections Pneumonia

Source: United States Agency for Healthcare Research and Quality (2003). Data for Monitoring the Health Care Safety Net

Measuring Access: AHRQ Hospitalization Classifications Referral- Sensitive: Discretionary, often

elective, technology-intensive procedures, require referring physician

Low rates of procedures may suggest barriers to service use

Coronary angioplasty Coronary Bypass Hip Replacement Organ Transplant Pacemaker insertion

Source: United States Agency for Healthcare Research and Quality (2003). Data for Monitoring the Health Care Safety Net

Data: County-Insurance Status Level Cells ICD-9-CM diagnostic codes used to identify

preventable, referral-sensitive and reference hospitalizations

Restrict sample to adults 65+ with FFS Medicare or MMC as primary payer

Calculate rates of each type of hospitalization per 1,000 enrollees

Weight cells by number of enrollees

Positive Selection or Better Care? Rates of Hospitalization for MA and FFS Enrollees

43.6

77

10.4

70.3

113.5

15.2

0

20

40

60

80

100

120

Preventable Referral-Sensitive Reference

Type of Hospitalization

Rat

e p

er 1

,000

En

rolle

es

Medicare Advantage FFS MedicareSource: State Inpatient Data, AZ, FL, NJ, NY, 1999 - 2004

Quality Models:

MA vs. FFSHc,i,t = β0 + β1MMCc,t + β2X c,i,t + β3M c,t + β4Yr + ε c,i,t (2) where MMC status is estimated using payment rates

Effects of Extra Payments on MA Quality

Hc,i,t = β0 + β1Extrac,t + β2X c,i,t + β3M c,t + β4Yr + ε c,i,t (2)limited to MA sample

Extra Payments = MA Rate - (FFSA /Avg RiskA + FFSB/Avg RiskB)

Results: MMC vs. FFS

Hospitalization Rates (MMC Coefficient)

Mean Rate

OLS Year FE

IV

Preventable 65 -23.1 4.10

(13.2) (3.3)** (19)

Referral-Sensitive 106 -31.4 -39.1

(48.8) (6.8)** (35.8)

Reference 14 -3.1 0.18

(3.2) (0.64)** (2.8)

* Significant at 5% ** Significant at 1% Clustered standard errors in parentheses

Results: Effect of Extra Payments

Hospitalization Rates PaymentCoefficient

Effect at $121

Preventable .011 1.33

(.0089)

Referral-Sensitive .051 6.2

(.031)

Reference .001 .12

(.002)

* Significant at 5% ** Significant at 1% Clustered standard errors in parentheses

Summary - (1)

No significant differences in hospitalization rates once we address selection bias

IV point estimate for referral hospitalizations relatively unchanged, may indicate reduced access to elective procedures under MMC

MMC enrollment may not provide higher quality preventative care relative to FFS

Summary - (2)

Payments to MMC plans in excess of average FFS spending are associated with more hospitalizations of all kinds

Difference is not statistically nor substantively significant

Extra payments do not appear to improve quality or access for MA enrollees

Implications

Little significant evidence of quality differences between MMC and FFS

Extra payments to Medicare Advantage plans may not buy improved quality, but little evidence that enrollees trade quality for lower out-of-pocket spending either