Medicare Advantage Members Spend Less Than Traditional Medicare Members

May 19, 2019

A new study shows that members who enroll in Medicare Advantage plans may have lower spending.

Medicare payments to Medicare Advantage plans are based on Medicare spending in traditional Medicare. However, a new study suggests that model may lead to Medicare overspending on Medicare Advantage plans.

The Kaiser Family Foundation recently released an issue brief looking at the question, “Do People Who Sign Up for Medicare Advantage Plans Have Lower Medicare Spending?” The brief looked at Medicare members who did or did not switch to a Medicare Advantage plan in 2016, then examined all of those members’ spending in 2015 to examine whether or not a spending disparity existed even before patients switched to a Medicare Advantage plan.

Overall, the study found that members who switched to Medicare Advantage plans in 2016 spent $1,253 less than members who did not switch. This could, according to the authors, result in significant overspending on Medicare Advantage plan members.

That difference in spending holds true even for more expensive members with chronic conditions. For instance, diabetes members who switched spent $1,072 less, while members with depressive disorders spent $1,198 less. One of the most significant differences was in members with breast or prostate cancer who switched-they spent on average $1,517 less than members who didn’t switch.

The number of chronic conditions made a big difference in spending differences. While patients with three or fewer chronic conditions who switched spent more than the total average (members with three chronic conditions spent $1,070 less and those with no chronic conditions spent only $226 less), members with four or more chronic conditions who switched spent far less-members with 10 or more chronic conditions spend $2,773 less.

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According the authors, this means that overpayments may be highest for Medicare Advantage programs serving the sickest populations.

While the average member who switched spent less, there were certain areas where the reverse was true. The authors also looked at the data broken down by counties and found that there are significant disparities by location of members that did or did not spend less by switching.

For instance, members in Los Angeles county who switched spent $6,278 less, while members in Mecklenburg, NC (where Charlotte is located) who switched spent 4,072 more than members who did not.

While other studies have attempted to explain the difference between spending by citing plans’ efforts to lower spending or improve care management, but this study suggests that Medicare Advantage members may be predisposed to spend less even before making the switch to Medicare Advantage plans.

According to the authors, this is the first analysis to look at whether members who choose to switch to Medicare Advantage plan use fewer services and spend less, which could potentially have consequences on overall Medicare spending. Even if that difference in spending applied to just 10% of all Medicare Advantage enrollees in 2016, it would result in about $2 billion in overspending per year.

Nicholas Hamm is an editor with Managed Healthcare Executive