Tricia Neuman (00:04):

What I find most phenomenal is this major transformation has taken place in Medicare without a lot of debate. It hasn’t been the case that Congress has talked about should we or shouldn’t we privatize Medicare. But without much fanfare, Medicare now really does look more like a marketplace than we ever would’ve envisioned.

Speaker 2 (00:32):

Welcome to Hospitals In Focus from the Federation of American hospitals. Here’s your host, Chip Kahn.

Chip Kahn (00:42):

Medicare Advantage, otherwise known as MA, is surging in enrollment among seniors and popularity. MA members often pay low or no premiums and receive coverage with zero or lower cost sharing and perks like gym memberships and dental care. In fact, earlier this year, enrollment in MA plans surpassed participation in traditional Medicare with more than 50% of eligible seniors now choosing private healthcare coverage. But as they say, it isn’t all sweetness and light. Aggressive marketing campaigns and a lack of transparency and coverage hide the downsides of Medicare Advantage as restricted provider networks and strict prior authorization policies, for example, increasingly make it difficult for millions of seniors to seamlessly get the care they need. Joining me today to talk about the highs and lows of MA is one of the foremost Medicare experts in the country, Tricia Neuman. She is the executive director of KFF’s program in Medicare policy. Thanks so much for joining us today, Tricia.

Tricia Neuman (01:54):

Thanks, Chip. It’s great to be here.

Chip Kahn (01:56):

Tricia, to get the ball rolling, I can remember back in the 1980s when both of us were serving as staffers on the House Ways and Means committee working on Medicare policy. All I can remember is working on FIFA service and maybe spending a little time on managed care or HMOs. It’s just hard to imagine, to even envision, that we’re having a conversation today 30 years later, discussing MA enrollment topping 50% and frankly on its way to become the dominant part of Medicare. Isn’t that incredible?

Tricia Neuman (02:29):

It’s amazing. That’s for sure. I came around a little bit later than that, Chip. I started in ’89. But even in the ’90s, nobody would have thought that the Medicare Advantage would grow like it has grown. Back then, it was something like 5%. It was mostly people from Kaiser Permanente who had been in Kaiser Permanente when they were working and wanted to stay there when they retired. But boy, Medicare has really been transformed over the years with that expanding role of private plans. I think Medicare today looks more like a marketplace of private plans with a side public option traditional Medicare. Nobody would’ve envisioned that. Nobody would’ve envisioned all the name changes, the branding. It was, remember when we called it Medicare Plus Choice? And then it was called Medicare Advantage, which it’s called today. But what I find most phenomenal is this major transformation has taken place in Medicare without a lot of debate. It hasn’t been the case that Congress has talked about should we or shouldn’t we privatize Medicare, but without much fanfare. Medicare now really does look more like a marketplace than we ever would’ve envisioned.

Chip Kahn (03:38):

Seniors seem to like it though, so let’s talk first about how it works for them and maybe that’ll get at why it’s so popular. Could you give us a sense of what it is and how it works?

Tricia Neuman (03:50):

Yeah. When people go on Medicare, they have a choice of traditional Medicare or Medicare Advantage plan. And a Medicare Advantage plan is really a branded term for mostly Medicare HMOs and PPOs. And when people are choosing their coverage option, they may choose traditional Medicare. And when they do, they often buy a Medigap policy and they sign up for part D, So there are some choices to be made there or they can choose a Medicare Advantage plan. One of the attractive features of Medicare Advantage plans is that it’s pretty straightforward. You don’t need a supplement, you don’t need a separate Part D plan. You just sign up for Medicare Advantage. I think people find that to be among some of the more popular features of Medicare Advantage, and that’s a draw. But of course there are other draws that I suspect we’re going to come back to.

Chip Kahn (04:46):

So obviously, there’s the Medicare beneficiaries and then there the insurers and the HMOs, the health plans. What’s in it for the insurers? Why have the largest insurance companies in the country, frankly, who are making record profits in recent years gotten into the program, made this one of their priorities?

Tricia Neuman (05:07):

Well, I think you answered your own question when you talked about their record profits. I mean their gross margins are high. We’ve documented that. That’s not a perfect proxy for profits, but it sends a pretty strong signal. The system is relatively well paid. So insurers realize that the two major insurers have dominated this marketplace for years. That’s United Health and Humana. There’s a MedPAC, which is a nonpartisan congressional advisory panel has shown over the years that Medicare pays more per person who enrolls in Medicare Advantage plans and it pays for similar people in traditional Medicare. And I think this year they’ve said to the tune of $83 billion in a single year. So insurers quite naturally are drawn to this marketplace. It is more profitable than say the small group market or the individual market, and I think that’s why they’re coming so enthusiastically to this market. And all signs would suggest they’re going to continue to do so.

Chip Kahn (06:11):

Let’s drill down a little bit. I don’t want to get too much in the weeds, but how is this program structured so that on the one hand, benefits can be provided? On the other hand, insurance companies can provide coverage, and frankly as we’ve been saying, benefit from it themselves, and at the same time give more benefits to the beneficiaries? What’s the sort of simple way of looking at the structure that allows for that?

Tricia Neuman (06:39):

It’s a little bit hard to describe this payment system so simply, but in essence, plans, insurers submit a bid to the federal government and the federal government compares that to what they call a benchmark in a local area. And if the benchmark is higher than the plan’s bid, then the plan is able to keep some of the difference in the money and is required to use the rest of the money to provide extra benefits. So because the government payments are relatively generous, plans are both able and required to provide these extra benefits to people who they enroll. Plus there are some other things that the government has done to encourage plan participation like there are quality-based bonus payments that the federal government pays plans, and these bonus payments I think this year add up to something like $13 billion. So all of that, all of the money and the payment system from the federal government enables plans to offer these benefits which turn out to be very attractive to people on Medicare, but significantly they are not available to people in traditional Medicare.

Tricia Neuman (08:00):

There are several examples of those types of benefits like vision, dental, hearing as you mentioned before, and others. The other difference, plans are required to have a out-of-pocket cap on Medicare covered benefits, which is not considered an extra benefit but it certainly is extra relative to traditional Medicare because that’s really the big missing piece in traditional Medicare compared to most other health insurance products.

Chip Kahn (08:27):

One of the things that’s made this successful frankly is the fact that the plans have the wherewithal to do marketing. I wrote an op-ed last year where I highlighted the very aggressive marketing of plans using faces familiar to seniors, Joe Namath for example. How do you think that’s impacted enrollment, and frankly, what has CMS as the regulator done regarding practices that some would say could even be considered predatory?

Tricia Neuman (09:01):

Well, I agree with you that marketing has had a large impact. We also did a study of the ways in which health insurers are marketing to people in Medicare through television. We coded ads and we saw a number of things that were interesting. One is they really do tout those extra benefits. So the vision, hearing, dental, I was surprised to see some other benefits pop up. A big one that is relatively new is debit cards, which insurers are offering to people on Medicare, which are essentially cash, cash benefits. People get a card and are told they can spend say $200 buying groceries or buying pharmacy, getting over the counter benefits. This is really attractive to people, an important feature of that of an issue though is we don’t actually know how much people are using these, but we know it’s a draw.

Tricia Neuman (09:51):

Joe Namath was on talking about money back in your social security check. That’s pretty appealing. A buck is a buck and people do want to save money. What that in essence was, is plans are able to use their rebate dollars to lower monthly Part B Medicare premiums. That too is very attractive. That’s all allowed. I think CMS has tried to put in place new requirements for insurers to disclose some additional information, but there’s so much opportunity for confusion. People don’t know whether these are private insurers or whether or not when they see a Medicare card or something that looks like a Medicare card, they think this comes from the federal government.

Tricia Neuman (10:34):

And Medicare is a pretty good brand. When they see the card, they think this is a good product. That’s the kind of thing that CMS is taking a look at. And they are also looking at broker commissions, but while they’ve taken some steps, it’s still pretty clear that brokers can make a lot more money selling Medicare Advantage products than they can make selling Medigap or Part D. So there are still strong financial incentives to get people for brokers to sell Medicare Advantage, and I think that contributes to part of the enrollment growth.

Chip Kahn (11:07):

But we have to be honest with ourselves. What they’re selling sounds awfully good to the beneficiaries and does give them upfront benefits either, as we’re just saying, literally in cash or in other benefits. So to me, what the concern is that the downside comes on the other end, you’ve signed up, you’re taking advantage of the benefits and you get sick. And so for patients, for care providers and maybe for the taxpayers too, I think that downside when I talked about the highs and the lows, let’s talk a bit about the lows. Let’s start from the patient perspective. You get the extra benefits, but at the same time, when you need care, what happens to access? I know that KFF has done a lot of research in this area. What have you found in terms of when the patients actually need services from care providers, what’s their experience? What do they confront?

Tricia Neuman (12:06):

A big thing they confront our cost management tools like prior authorization. What we have found, we looked in the most recent year and found 35 million prior authorization requests from Medicare on behalf of enrollees and Medicare Advantage plans of which 2 million were denied. So there are barriers to getting care that some people, mainly people who are sick and people who are needing high-cost procedures, drugs, some kind of medical care, may confront. But it’s not the kind of thing that most people think about when they’re going on Medicare. Most people are thinking about, “Well, I’m relatively healthy. Maybe I could save some money if I join this plan. It’s certainly simpler than getting a Medigap plan and a separate Part D plan.” They’re not really thinking about, “What problems might I encounter if I get sick?” So the prior authorization is certainly one thing.

Tricia Neuman (13:07):

Another thing we have looked at and we’re continuing to look at are restrictions in provider networks. The way Medicare Advantage plans work by definition is they have provider networks. With HMOs, it’s sort of a fixed network and people use that network or they would pay the full amount that Medicare allows out of network. With PPOs, people are charged more to go out of network. But people rarely think about, “When I’m sick, where will I want to go? If I get a serious illness, a rare illness, I might want to go to a wonderful teaching hospital somewhere in the country, I might want to go somewhere where there’s deep expertise.” That may not be in network. I mean, I think for people in Medicare Advantage plans, I don’t think many people are thinking about, “Will they be able to go out of network? What will they have to pay if they do?” And again, it’s not an issue for the healthy people, but it is an issue for people when they get sick.

Chip Kahn (14:10):

Well, there’s no free lunch and healthcare cost funds and providers are feeling a pinch from the practices of insurers too, either in terms of limiting payment period for services in terms of providing services, but considering services at a hospital observation instead of inpatient. There are all kinds of technical ways. They can either get around providing full payment or full benefits. Or there are ways they can through considering claims that have been made for health services come up with denials or clawbacks. How do you see these practices affecting providers? There is a link between these practices and what happens to patients.

Tricia Neuman (14:58):

Yeah, I mean, I should back up and say from an insurer’s perspective, an insurer doesn’t want to pay for a service that’s not necessary. So understanding that context for why some of these things happen is important. But we are hearing more recently, we’ve heard more about problems that hospitals are encountering in negotiating with insurers, sort of overpayment issues generally, but also the hassle factor of having to push back to argue to make sure that patients are getting the care that they need. Honestly, I hadn’t heard much about this until maybe the past year or two, but there are more and more stories that are coming out in the media. And I think there’s more attention being given to these issues because it is important because in the way that it affect… It certainly takes up administrative staff, it takes up time of medical staff arguing with the insurance companies about whether something should be covered. And that comes at a cost and it comes at a cost of the hospitals and physicians and to patients.

Chip Kahn (16:10):

Yeah, I’ve heard recently that there are a number of systems around the country that have just chosen to stay out of certain MA plans and they just tell the insurers, “We are not going to be in network for your members.” And I don’t know how this will play out. I assume you’re hearing about that too and that’ll have an impact.

Tricia Neuman (16:29):

I am hearing that. That’s a big decision for a hospital to make because that could be a large share of patient revenues that they would be giving up. From a patient’s point of view, there’s a question of, “Is this a negotiating tactic and will it all work itself out?” But if not, it really does mean disruption in care because if a patient is in a plan and in part chose that plan because they knew they could see, go to a certain hospital or see a certain specialist and that hospital pulls out of the network, that means the patient is left a bit high and dry if they wanted to have an ongoing relationship with that hospital, with the doctors in that hospital, and that would be a serious concern.

Chip Kahn (17:14):

I hope to say it was recently, but I know the nomination was made a while back for you for the Medicare Board of Trustees. And congratulations on that, although I know you’re still waiting for confirmation from Congress tonight. But what it says about you though is that you actually, and hopefully you will be confirmed, will actually have a role in terms of helping to assure the Medicare trust funds are properly operated and the taxpayers are getting the right kind of deal from the program they have for seniors. And taking that responsibility seriously, how do you interpret what the Medicare Commission, MedPAC, has come up with concerning its assessment of MA and its calculation that their overpayments of as much as $88 billion a year? What’s your view of that?

Tricia Neuman (18:10):

It is a concern for a few reasons. One is that Medicare Advantage plans are funded in part by the Medicare part, a trust fund and the Medicare part B, the Supplemental Medical Insurance Trust funds. The Medicare Hospital Insurance Trust fund is some years away from insolvency. So overpayments put a strain on a trust fund that is already strained. When we think about the long-term solvency of the Medicare program, which is obviously very important to all of us who are either now on Medicare or looking forward to being on Medicare, that is a serious concern and a fiscal issue to be addressed.

Tricia Neuman (18:58):

On the other side of the program part B, it’s an issue because these so-called overpayments contribute to higher part B premiums. And these higher part B premiums are paid not just by people in Medicare Advantage, the folks that are getting the extra benefits, but also people in traditional Medicare. And roughly half of all people on Medicare are still in traditional Medicare. They are incurring higher premiums. So it does raise fiscal issues. And more broadly, it raises fiscal issues about the federal budget because Medicare is a large share of the federal budget. That said, I’m not seeing much energy behind efforts to reduce these so-called overpayments in Congress or the administration. And I think that gets back to how popular the program seems to be and that we’re not operating right now in an environment that, Chip, you and I worked in years ago where every year there was a big focus on the deficit. That’s just not the case right now.

Chip Kahn (20:08):

There is one aspect that CMS has focused on that’s gotten a lot of attention, and that’s this aspect of adjusting premiums for the risk of patients. Could we talk a moment about that? Could you give us with a simple explanation of what it is and why CMS has reduced the increase in payments a bit? I know the health plans are complaining about it very loudly, but on the other hand, I think there’s some rhyme to the reason of why CMS chose to go down that path. Could you talk about that a minute?

Tricia Neuman (20:44):

Yeah, I want to back up and say risk adjustment important. I mean, the idea of adjusting plan payments for the risk of their enrollees is so that insurers have an incentive to take the healthy and the sick. Otherwise, you can imagine insurers having a stronger incentive to just enroll healthy people because they get a capitated payment, and that would be all great, but you want plans to not have disincentives to enroll healthy, higher-cost people. But in the current payment system, also creates incentives for insurers to submit codes for all their patients, for all the conditions they may have had or have, and that has the effect of increasing their payments. So one thing that CMS has done is just updated and refined the methodology for determining how plans should code. And coding has been a big issue. There’s been a lot written about what some people call up-coding by insurers and other people say is sort of aggressive or very energetic coding by insurers because that does help boost payments.

Tricia Neuman (22:01):

The other issue that people are talking about is that payments to plans are in some respects based on costs in traditional Medicare. What the research has shown there is that people who look similar actually cost more in traditional Medicare. And so if payments are based on people who look similar but cost more, then that actually brings in more money for Medicare Advantage plans. And I know that’s a complicated concept and I probably didn’t make it simple enough, but it’s actually not so simple, but that’s in essence why there’s been concern about the payment system. And I think there are very different views about how dramatic the changes were that CMS just implemented. Some like the insurers have said these are really big deal, but others have said this is a pretty moderate step forward. And it’s similar to the two actions the administration has taken every year to make adjustments in payments.

Chip Kahn (23:08):

One of the dilemmas here is there is this link between that we’ve been talking about, these moments and a few moments ago, about the link between fee-for-service payment and the payment to the plans. One of the dilemmas is that in areas around the country now, you’re not at 50%, you’re at 70 or 80% MA among seniors. And so you’re talking about 30 or 20% even of fee-for-service spending that’s determining what the premium is going to be basically on the plan side. And I think as the portion grows of Medicare beneficiaries in plans, that’s going to be untenable, I think.

Tricia Neuman (23:48):

Yeah, I mean, talk about the tail wagging the dog. That’s exactly it.

Chip Kahn (23:52):

We haven’t talked about Medicaid at all. There’s a relationship between the two here because Medicaid, frankly, I think 70 or 80% of Medicaid recipients are on managed care. But now we’ve got a big growth area inside of MA itself, which is those that are dual eligible, those that are eligible for Medicare and Medicaid, those low income, very low income seniors, frequently seniors that are in nursing homes or in skilled nursing facilities. What’s the impact of MA on this switch for them, which is frankly one of the big growth areas and probably continue to be such because states are going to want their recipients, their Medicaid recipients to be in Medicare plans if they can get them there?

Tricia Neuman (24:38):

I wish I could tell you the answer to that question about what the impact is. We have so little evidence on what this means for people. One thing that you’re certainly right about the growth in people covered by Medicare and Medicaid in Medicare Advantage plans, some, but not all of them, are in what’s called special needs plans, which provides some level of integration if they are in dual, yet another subcategory, the largest subcategory of special needs plans, some level of integration between Medicare and Medicaid. But one thing I recently learned based on some work that we’ve done is there’s just a small fraction of this population that’s in fully integrated plans. These are plans where Medicare and Medicaid are tied to the hip in terms of financing and service delivery. So that raises the question about how well these plans are coordinating with Medicaid in order to provide benefits that people need or what is actually the dynamic.

Tricia Neuman (25:47):

And we know how complicated it is for people also in traditional Medicare to coordinate services between the two programs. We just don’t know really how well it’s working for people in Medicare Advantage, but we do see the growth. And this is important because as you said, these are among the highest need most at-risk people on the Medicare program. It includes people in nursing homes, as you said. It also includes a large share of the under 65 population of Medicare that are people with disabilities who tend to be among a large share of those who are covered by both programs. So it’s really important to see how well these plans are serving not just the healthy people who are getting these great benefits that sound terrific, but also people who are really sick.

Chip Kahn (26:38):

Another change is that many employers, rather than providing straight retiree health benefits inside their existing plans for their current employees are moving the retirees off onto MA. Do you have any sense of what the effect of that has been? That’s obviously a different group of people than those that are on Medicaid. It’s people that usually have pensions or 401(k)s, but it’s still a senior population. It’s still a vulnerable population.

Tricia Neuman (27:09):

Well, this is kind of an interesting trend. So we know retiree health benefits are on the decline. Fewer and fewer people have them. But in our employer survey, we asked among those employers offering retiree benefits, “Are you offering them through Medicare Advantage plans?” And half of large employers said that they do. So they do offer retiree health through Medicare Advantage. This is a doubling of the rate since 2017.

Tricia Neuman (27:36):

What I found particularly interesting is that of those employers that do offer Medicare Advantage, 2/3 said that they offer exclusively through Medicare Advantage, meaning that this is the only way people can get their retiree benefits. So in essence, for people who want to keep their retiree benefits, they have no choice with their regular Medicare benefits but to be in a Medicare Advantage plan. And so that poses an interesting dilemma because people have worked years to get this benefit, but if they want the freedom of provider choice, for example, in traditional Medicare in these companies, they would have to forfeit their benefits. And a concern that I have is that I know of people in my family that were shifted to a Medicare Advantage plan for their retiree health and they did not understand that what this meant, that they weren’t going to be in traditional Medicare.

Chip Kahn (28:37):

So a lot of issues here for Medicare beneficiaries. There is some action that CMS has taken in terms of oversight regarding laying out a prior authorization strategy that provides some guide rails over time for prior authorization. There are some payment rules that CMS has begun to put in place regarding the provider insurer relationship. What do you think the agenda ought to be for CMS as the agency that’s supposed to hold these plans accountable and the Congress regarding oversight? What are sort of the primary areas that you think need to be developed over time?

Tricia Neuman (29:23):

I mean, I think over time payment issues will have to be on the agenda, and that’s probably more on the congressional agenda than the administration because many of the payment rules are actually established by statute. I think in an environment where policymakers don’t want to take on, if they don’t want to take on payment issues, there’s certainly more that can be done by the administration, maybe with prodding from Congress or legislation to improve transparency, to help consumers understand important differences across plans. This might mean collecting more data. CMS has actually taken steps to collect more data.

Tricia Neuman (30:04):

But I’ll just give you an example. We’ve done work looking at prior authorization. There are no data available to tell us prior authorization rates by type of service by plan. So consumers are really at a loss if this is something they’re concerned about. They’re not able to see this type of information either on a Medicare website or if they look on their own. And researchers can’t look to see the extent to which there might be more prior authorization restrictions or denials for say, post-acute care or part B drugs or whatever it might be. And that’s really important for seeing how well the program is working for people.

Tricia Neuman (30:46):

So I think in the near term, when it may be difficult to move major pieces of legislation, data transparency seems like something that there could be a fair amount of agreement on. I guess a broader question for CMS and for Congress is to what extent does CMS have the capacity to do the oversight that is needed to monitor how well this program is working to make sure that plans and insurers are in compliance with the rules that are in place? And that’s an open question.

Chip Kahn (31:21):

So this has just been such a great interview, Tricia, and I so appreciate your time. Just to close out, we talked about the highs and the lows for Medicare beneficiaries. What do you see as the future of the EMA program?

Tricia Neuman (31:35):

Chip, I think all signs point to continued growth. The Congressional budget office is projecting that 60% of all people in Medicare will be in a Medicare advantage plan by the end of the decade. I’m going to go out on a limb and say, unless there’s a major shift in the winds in Congress or the administration, that I think that’s maybe a lowball estimate and that enrollment could be even higher.

Chip Kahn (32:04):

This has just been wonderful, and I so appreciate you giving us your time. And thanks a lot.

Tricia Neuman (32:10):

It’s been a pleasure. Thank you.

Speaker 2 (32:15):

Thanks for listening to Hospitals In Focus from the Federation of American Hospitals. Learn more at FAH.org. Follow the Federation on social media, @FAHhospitals and follow Chip, @chipkahn. Please rate, review, and subscribe to Hospitals In Focus. Join us next time for more in-depth conversations with healthcare leaders.

Speaker 4 (32:37):

Tricia Neuman
Senior Vice President
Executive Director for Program on Medicare Policy
Senior Advisor to the President of KFF

Tricia Neuman is senior vice president of KFF and executive director of its Program on Medicare Policy. She oversees KFF’s policy analysis and research pertaining to Medicare, and health coverage and care for aging Americans and people with disabilities. A widely cited Medicare policy expert, Dr. Neuman focuses on topics such as the health and economic security of older adults; the role of Medicare Advantage plans, Medicare and out-of-pocket spending trends; prescription drug costs, payment and delivery system reforms; and policy options to strengthen Medicare for the future. She has written numerous papers pertaining to Medicare, has been invited several times to present expert testimony before Congressional committees, and has appeared and been quoted as an independent expert by major national media outlets. Dr. Neuman was nominated by President Biden in 2022 to serve as a member of the Board of Trustees of the Medicare, Social Security, and Disability Insurance Trust Funds.

Before joining KFF in 1995, Dr. Neuman served on the professional staff of the Ways and Means Subcommittee on Health in the U.S. House of Representatives and on the staff of the U.S. Senate Special Committee on Aging, working on health and long-term care issues.

Dr. Neuman received a bachelor’s degree from Wesleyan University, a master’s in health finance and management from the Johns Hopkins School of Public Health, and a doctorate in health policy and management, also from the Johns Hopkins School of Public Health.