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Healthcare Among High-Need, High-Cost Beneficiaries in FFS vs. MA

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Avalere experts participated in a pre-release panel session, "Healthcare Utilization, Cost, and Quality Among High-Need, High-Cost Beneficiaries in Medicare Fee-for-Service versus Medicare Advantage," that was presented at the International Society for Pharmacoeconomics and Outcomes Research annual conference May 17–20, 2021.

Medicare beneficiaries with high medical needs who experience high costs of care are a vulnerable population. Research shows these beneficiaries have greater need for management and coordination of their care due to complexities presented by multiple chronic conditions, high rates of disability, and behavioral and social risk factors that can lead to poor health.1 Medicare enrollees have the option to receive benefits through private Medicare Advantage (MA) health plans as an alternative to the traditional Medicare Fee-for-Service (FFS) program.2 MA plans include full capitation, provide incentives to avoid unnecessary utilization, and have flexibility to design benefit packages that focus on care management with the aim of improving health outcomes. One in three Medicare beneficiaries were enrolled in MA as of 2019, and the Congressional Budget Office estimates 47% of all Medicare enrollees will be in an MA plan by 2029.3 Despite the growing role of MA, little research has been done comparing the composition and outcomes of beneficiaries enrolled in MA to those enrolled in FFS.4

The objectives of this study were to understand the demographic, clinical, and socioeconomic profiles of the MA and Medicare FFS populations and identify high-need, high-cost cohorts to compare health outcomes among the 2 populations. The study used a nationally representative sample of MA encounter data from Inovalon’s MORE2 Registry® and 100% Medicare Parts A, B, and D claims data provided under a research data use agreement. A validated algorithm was applied to identify 3 distinct cohorts of high-need, high-cost beneficiaries in FFS and MA, including disabled patients under the age of 65, frail elderly patients, and major complex chronic patients.5 Cohorts were matched to ensure the populations had similar demographic, clinical, and socioeconomic characteristics.

The research found MA beneficiaries performed better on 17 of 22 quality measures evaluated, including higher rates on 9 of 11 preventive screenings and fewer avoidable hospitalizations and readmissions. Lower healthcare resource utilization resulted in 15.2% lower annual total costs per patient per year ($12,109 in MA vs. $14,371 in FFS), including 12.9% lower spending for inpatient stays ($2,807 vs. $3,222).

As enrollment in MA continues to rapidly expand, these findings indicate the incentives in MA to coordinate care and provide flexible medical/non-medical benefits that better meet the complex care needs of vulnerable beneficiaries appear to produce improved outcomes and greater value for high-need, high-cost Medicare beneficiaries.

This study was funded by the Better Medicare Alliance, Washington, DC.

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  1. Hayes, S. L., Salzberg, C. A., McCarthy, D., Radley, D. C., Abrams, M. K., Shah, T. and Anderson, G. F. “High-need, High-cost Patients: Who Are They and How Do They Use Health Care—A Population-based Comparison of Demographics, Health Care Use, and Expenditures” (New York, NY: The Commonwealth Fund, 2016).
  2. McGuire T. G., Newhouse J. P., and Sinaiko A. D. “An Economic History of Medicare Part C,” Milbank Q. 89.2 (2011):289–332 [a published correction appears in Milbank Q. 91.1 (2013):210].
  3. Jacobsen, G. et al., “A Dozen Facts About Medicare Advantage in 2019” (Henry J. Kaiser Family Foundation, June 2019).
  4. Medicare Payment Advisory Commission, “Chapter 13: Status Report on the Medicare Advantage Program,” in Report to the Congress (MedPAC, 2017), 345–79.
  5. Joynt, K. E. et al., “Segmenting High-cost Medicare Patients into Potentially Actionable Cohorts,” Healthcare 5.1–2 (Mar. 2017): 62–67.

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