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AAOS Now

Published 10/1/2017
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Wilford K. Gibson, MD, FACS, FAAOS, FAOA; John O'Shea, MD, MPA, FACS; Shreyasi Deb, PhD, MBA

Medicare Advantage Poses Challenges and Opportunities for Orthopaedic Surgeons

As MACRA implementation proceeds, surgeons must increase their awareness
Given the surge in Medicare Advantage (MA) enrollment, these plans may someday overtake traditional Medicare. Today, orthopaedic surgeons need to learn more about MA plans. When they evaluate plans and reimbursement fee schedules, surgeons should be aware of the differences between MA and traditional Medicare.

This article provides an introduction to the MA program and how these plans affect orthopaedic practices, especially under the Quality Payment Program.

MA plan basics
Medicare Part C, also known as MA, is a managed care alternative to traditional fee-for-service Medicare, whereby private health plans offer coverage for all Part A and Part B services for a per-beneficiary-per-month (capitated) payment from the Medicare program. Payments are based on a government-administered benchmark/bidding process.

Essentially, if the plan bid is lower than the benchmark and the plan meets certain quality goals, the plan and Medicare split the difference between the bid and the benchmark. The plan's share of this split is known as a "rebate," which must be used by the plan to provide additional benefits or reduced costs to enrollees. If a plan's bid is higher than the benchmark, enrollees pay the difference between the benchmark and the bid in the form of a monthly premium, in addition to the Medicare Part B premium. Unlike participation in an Accountable Care Organization, which is largely invisible to the patient, beneficiaries choose to be in an MA plan.

Despite cuts to the MA program imposed by the Affordable Care Act, MA is an increasingly popular program. In fact, since the law's passage, enrollment has grown 71 percent according to the Kaiser Family Foundation. As of 2017, one in three people with Medicare (33 percent or 19.0 million beneficiaries) is enrolled in an MA plan. The Congressional Budget Office projected that about 41 percent of Medicare beneficiaries will be enrolled in MA by 2027. Although MA markets are highly concentrated both in terms of geography and among private insurance companies, more than 99 percent of Medicare beneficiaries have access to at least one MA plan and the average beneficiary can choose from among 19 plans.

Most MA enrollees are in a health maintenance organization, and the rest are in a preferred provider organization. Plans typically include a Part D prescription drug benefit. They also include other services not offered in traditional Medicare, such as an annual physical exam, vision, dental, and, less often, hearing benefits. The plans must follow rules set by Medicare. However, MA plans have the flexibility to employ managed care techniques that are effective in changing physicians' care patterns in ways that reduce the inefficient use of expensive services. In addition, plan rules can change year to year.

MA plan issues of importance to orthopaedic surgeons
MA plan issues recently came to our attention while scheduling an octogenarian for a total knee replacement. The patient was approved for an "outpatient only" procedure despite the inclusion of total knee and total hip arthroplasty in the Medicare Inpatient Only (IPO) list.

As discussed above, MA plans can develop their own rules and Humana recently clarified that about 145 procedures (majority are musculoskeletal) can be conducted in outpatient settings despite the procedures being on the Medicare IPO list.

Consequently, hospitals will likely see a reduction in payment. However, it should be noted that even if a procedure is not a part of the Medicare IPO list, a day of observation can be requested and approved. Nevertheless, patients may or may not be eligible for acute care rehabilitation or skilled nursing facility placement, depending on their specific plan, even if they stay three nights. When the patient goes home, the therapy at home may result in copayments, which may not be anticipated by the patient.

Keep in mind that out-of-pocket expenses are capped. In 2016, MA enrollees' average out-of-pocket limit was $5,223, but orthopaedic surgeons and their practice staff will probably have a difficult time explaining what that means to the postoperative octogenarian and his or her family during the global follow-up visit.

Also, MA patients are not included in bundled payment models such as Bundled Payment Care Initiative or Comprehensive Joint Replacement programs. However, MA plans have started participating in value-based payment models extensively. The Medicare Payment Advisory Commission (MedPAC) has recommended permitting MA plans to use value-based care and insurance design to improve benefits for individuals with specific chronic conditions.

According to Humana, it is partnering with a number of orthopaedic specialty groups in Tennessee and Ohio onbundled payments for Humana MA members undergoing total hip or knee joint replacement. The program is funded through a State Innovation Model grant from the Centers for Medicare & Medicaid Services (CMS). In November 2015, Humana released value-based care data indicating that patients cared for through value-based models generally experienced healthier outcomes and lower costs.

MA under the Quality Payment Program
The Medicare Access and CHIP Reauthorization Act (MACRA) repealed the Sustainable Growth Rate system of Medicare physician payment and replaced it with the Quality Payment Program (QPP). The goal of the QPP is to transition providers into viable alternatives to traditional fee-for-service (FFS) by making FFS increasingly unattractive through the Merit-Based Incentive Payment System (MIPS), while rewarding participation in alternative payment models (APMs).

Although CMS has substantially reduced the reporting burden and exposure to financial penalties for the first two years, when MIPS is fully implemented, the considerable increase in reporting burden, along with reduced reimbursements, will rapidly make FFS untenable for many providers, especially those in small, independent practices.

However, FFS may become untenable before there are enough viable alternatives. The number of qualified Advanced APMs in MACRA is currently limited to a few models that require practices to substantially change the way they provide services, make significant infrastructure investments, and assume considerable financial risk. In addition to the fact that the early results from the current Advanced APM models are mixed at best, there is no onramp in MACRA for providers who want to get into the "value game" but lack the resources for participation in complex, risk-based models.

Currently, MACRA places unequal emphasis on APMs in traditional Medicare and overlooks the role of MA. However, MA, as a capitated payment model, could play a major role in achieving the legislation's goal of transitioning providers to a value-based payment system.

Although MedPAC and others have argued that MA is more costly than traditional Medicare, there is evidence that cost-reduction techniques used by MA plans are effective and may actually have a spending reduction "spillover" effect in FFS Medicare. MA plans have also been shown to provide higher value care for patients with chronic conditions, such as diabetes and cardiovascular disease.

MA plans have greater flexibility and, according to a recent CMS report to Congress, have engaged with providers in payment models that can be classified under every category of the Administration's payment framework. In 2016, as much as 41 percent of MA dollars were in advanced category 3 or 4 models. These factors suggest that MA could play a significant role in accelerating the transition to value.

Apparently aware of the potential of MA, CMS, in the MACRA proposed Rule for 2018, will consider including provider participation in Advanced APMs in MA as counting toward the Advanced APM thresholds, making those providers eligible for the 5 percent bonus and exempting them from the MIPS requirements.

Conclusion
Given the increasing popularity and presence of MA, it is incumbent upon orthopaedic surgeons to be aware of the issues and opportunities in MA, especially as MACRA implementation proceeds.

Wilford K. Gibson, MD, FACS, FAAOS, FAOA, is chair of the AAOS Council on Advocacy and a member of the AAOS Now editorial board.

John O'Shea, MD, MPA, FACS, is a practicing general surgeon and senior fellow in the Center for Health Policy Studies at the Heritage Foundation in Washington, D.C.

Shreyasi Deb, PhD, MBA, is a health services researcher and is currently senior manager, Health Policy, in the AAOS office of government relations.

References

  1. Centers for Medicare and Medicaid Services (n.d.): How do Medicare Advantage Plans work? www.medicare.gov/sign-up-change-plans/medicare-health-plans/medicare-advantage-plans/how-medicare-advantage-plans-work.html
  2. Jacobson G, Damico A, Neuman T, Gold M: Medicare Advantage Plans in 2017: Short-term Outlook is Stable, Issue Brief, Dec 21, 2016, Kaiser Family Foundation. www.kff.org/report-section/medicare-advantage-plans-in-2017-issue-brief/ 
  3. Medicare Payment Advisory Commission: "Report to the Congress: Medicare and the Health Care Delivery System," March 2013. www.medpac.gov/docs/defaultsource/reports/mar13_entirereport.pdf.
  4. Nichols L, Cuellar AE, Helmchen L,Gimm G, Want J:  What Should We Conclude From ‘Mixed' Results In Payment Reform Evaluations?, Health Affairs Blog, August 14, 2017; http://healthaffairs.org/blog/2017/08/14/what-should-we-conclude-from-mixed-results-in-payment-reform-evaluations/ 
  5. Johnson G, Figueroa JF, Zhou X, Orav EJ, JhaAK: Recent Growth In Medicare Advantage Enrollment Associated With Decreased Fee-For-Service Spending In Certain US Counties. Health Aff (Millwood) 2016;35(9):1707-1715. http://content.healthaffairs.org/content/35/9/1707.
  6. Landon BE, Zaslavsky AM; Saunders R, Pawlson LG, Newhouse JP, Ayanian J Z: A comparison of relative resource use and quality in Medicare Advantage health plans versus traditional Medicare. Am J Manag Care 2015;21(8):559-566. www.ajmc.com/journals/issue/2015/2015-vol21-n8/A-Comparison-of-Relative-Resource-Use-and-Quality-in-Medicare-Advantage-Health-Plans-Versus-Traditional-Medicare
  7. HCP-LAN: Measuring Progress: Adoption of Alternative Payment Models in Commercial, Medicare Advantage, and State Medicaid Programs. October 25, 2016; https://hcp-lan.org/groups/apm-fpt-work-products/apm-report/.
  8. Centers for Medicare & Medicaid Services: Medicare Program: CY 2018 Updates to the Quality Payment Program, HHS, 06/30/2017; www.federalregister.gov/documents/2017/06/30/2017-13010/medicare-program-cy-2018-updates-to-the-quality-payment-program