Medicare Advantage outshines fee-for-service model in study

May 20, 2013 | Chris Anderson - Contributing Editor

A new analysis of more than 3 million claims for Medicare patients found that patients enrolled in a managed Medicare Advantage (MA) plan had better health outcomes than those senior enrolled in the traditional fee-for-service Medicare model.

The report “Alternative Payer Models Show Improved Health-Care Value” from Boston Consulting Group (BCG) measured outcomes on three quality measures: (1) single-year mortality, (2) recovery from acute episodes of care requiring hospitalization and (3) sustainability of health over time.

According to the report, what distinguishes the managed MA plans from other Medicare plans are the use of three separate mechanisms designed to both improve care coordination and reduce costs. Those mechanisms are:

• a selective network of providers;
• financial incentives that are aligned with clinical best practices; and
• active care management that emphasizes prevention.

“Our findings demonstrate that more managed plans do not compromise quality. Just the opposite: They deliver higher-quality care at a lower cost than fee-for-service medicine and thus do a better job of improving healthcare value,” said Jon Kaplan, a BCG partner and lead author of the study, in a press release. “Payers, providers and policymakers have a lot to gain by more broadly aligning incentives and delivering strong care management, similar to that utilized by the Medicare Advantage plans.”

These findings continue to shift the current in the direction of managed care, not just in MA plans but across the industry. Managed care has often been linked directly to the failure of past capitation models, such as HMOs of the 1990s.

“In the past, there were widespread concerns, especially on the part of the general public, that cost savings came at the expense of quality of care. In the 1990s, for example, HMOs came in for major criticism for denying medically necessary services to patients, ostensibly in order to control costs,” the report noted.

Findings of the claims analysis showed:

• Single-year mortality rates were 1.8 percent in the three progressively managed delivery models versus 6.8 percent in the traditional fee-for-service sample. The lowest rates and the greatest performance were seen in HMO plans with global capitation. Patients in the three managed models studied all exhibited lower single-year mortality rates within the first year of enrollment.
• Patients in the MA plans had average stays in the hospital that were, on average, 19 percent shorter than those in fee-for-service sample.
• Patients in the managed plans were more likely to receive preventive care and less likely to suffer from disease-specific complications.

“We've found that U.S. private insurers have created an operating model that can deliver better care at a lower cost and have a major role to play in the ongoing national efforts to improve healthcare quality,” said Stefan Larsson, coauthor of the report, in a prepared statement. “Quite simply, we’ve found that the more aligned the care, the better the quality delivered.”