Viewpoint: The new dominance of Medicare Advantage is likely to change healthcare as we know it

Medicare Advantage is likely to be the dominant source of Medicare coverage by 2025. This recent development will force payers and providers to find new ways to set Medicare Advantage reimbursement rates and will reimagine the role that traditional fee-for-service Medicare has had in shaping the nation's healthcare system, according to an article published May 23 in JAMA Network.

The article was written by David Blumenthal, MD, and Gretchen Jacobson, PhD. Dr. Blumenthal is president of the New York City-based Commonwealth Fund, and Dr. Jacobson is vice president of its Medicare program.

Though traditional fee-for-service Medicare has been the choice of most Medicare beneficiaries since the federal program's inception, enrollment in Medicare Advantage rose to an estimated 29 million individuals in 2022, or 46 percent of all Medicare members. The authors speculate that is why Medicare Advantage will be the dominant source of Medicare within the next three years.

One of the first challenges that will come with that change is finding new strategies for setting Medicare Advantage reimbursement rates. Right now, Medicare Advantage plans base their rates off the average cost of providing the same service to fee-for-service Medicare members within their respective markets. If traditional Medicare enrollment continues to decrease, Medicare Advantage rates will become less meaningful.

The second challenge to decreasing Medicare enrollment is the fact that the program has significantly shaped the nation's modern healthcare system through the development of quality standards and transparency measures, which help private and public plan members choose alternative sources of care. Standardized Medicare claims data can also be better than commercial data because researchers can better understand differences in providers' approaches to care and what is behind healthcare spending.

The authors highlight Medicare's support of rural providers and its funding of graduate medical education. Medicare strategies like diagnosis-related groups and relative value methods have paved the way for private payment practices, and Medicare Advantage plans use those strategies for their own provider payments. Experiments within Medicare like accountable care organizations and bundled payment have also directly influenced state and private sector policies.

Traditional Medicare comes with a host of benefits, and the two authors say Medicare Advantage will have a difficult time filling its role.

The private organizations that manage the majority of Medicare Advantage plans will be able to keep their internal data to themselves. Though federal rules exist to have that data be reported, they generally only apply to an entire company, not individual providers or employees it may contract with. Medicare Advantage plans then often combine and average their data from providers across regions and markets, unlike traditional Medicare.

To continue providing care to Medicare-served areas, a Medicare Advantage-dominant system would need data from the providers that traditional Medicare members use, including how much those providers are reimbursed. The same is true if Medicare Advantage-supported teaching hospitals through supplemental payments, like Medicare currently does.

The authors urged federal lawmakers to plan for a Medicare Advantage-dominant system and the challenges it would present for the entire healthcare system. That planning should include how to "sustain Medicare's record of innovation payment and delivery" and better reporting requirements on practice patterns, cost and quality of care administered by providers contracted with Medicare Advantage.

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