Capitalize on the Medicare Advantage opportunity

August 1, 2006

If you have not already added Medicare Advantage (MA) as part of your health plan's offerings, you are missing a key business opportunity. MA offers increased reimbursement, the chance to expand your product line, the ability to protect your senior business and a strategy for maintaining your membership base. It is worthwhile to recognize, though, that launching any new line of business always involves a certain amount of risk. The key to success is learning about and preparing for the opportunities and impacts of MA.

If you have not already added Medicare Advantage (MA) as part of your health plan's offerings, you are missing a key business opportunity. MA offers increased reimbursement, the chance to expand your product line, the ability to protect your senior business and a strategy for maintaining your membership base. It is worthwhile to recognize, though, that launching any new line of business always involves a certain amount of risk. The key to success is learning about and preparing for the opportunities and impacts of MA.

Understanding the implications of MA

Adding MA, like any new line of business, can strain already-tight resources. The program also has new requirements that can make it complex and costly to add. Some of these include mandatory disease management, new fraud and abuse regulations, new delegation requirements, risk- and severity-based reimbursement, and accurate, timely claims processing standards.

One other complicating factor is that the new risk-adjustment system calculates MA member premiums based on clinical conditions identified in claims data rather than demographic data. "Medicare Advantage plans are currently leaving millions of dollars on the table due to incorrect or incomplete HCC coding by physicians," says Michael Taggart, president of Aperion Health Analytics. "As risk adjustments on Medicare Advantage payments rise, from 75% today to 100% in 2007, aggressive management of HCC coding is imperative in order to maintain revenues and profitability."

Beyond the program requirements themselves, the secondary impacts on the business may seem equally daunting. Taking on Medicare Advantage means taking on greater competition, which demands a strong marketing effort-and new marketing materials-to attract enrollees and promote member services. Health plans will need employees with specialized Medicare experience, which may require hiring new staff. They also may need to invest in program start-up costs and new technology to launch and support this new line of business.

Preparation is key to success

To succeed with MA, health plans must be prepared to address key organizational, financial and technological issues. As with any new venture, launching MA requires careful planning and thoughtful management decisions to minimize complexity and control costs.

One strategy is to entrust key business functions to an expert partner who can efficiently handle a discrete set of activities such as medical management, disease management, fraud and abuse, predictive modeling or claims processing. Relying on a trusted vendor for these administrative aspects allows you to focus on your core competencies: marketing and enrollment, educating providers on new programs and community outreach. Plus, working with an experienced business process outsourcing (BPO) provider gives you access to the necessary Medicare expertise-while relying on a fixed administrative cost structure-helping to shorten the time the market.

To ensure a successful outsourcing experience, make sure your BPO partner has:

Data helps manage costs

After ensuring sufficient resources to start the program and maintain it, health plans should next begin leveraging integrated data and using real-time modeling tools to improve care and reduce costs. In the United States, hospital admissions resulting from adverse medication events cost approximately $121 billion in 2000, according to an April 2001 study published in the Journal of the American Pharmacists Association. An integrated information system that aggregates medical, pharmacy and lab data can detect medication issues such as duplication of therapy, drug-drug interactions and over- and under-utilization, thus preventing hospitalizations and reducing associated costs.