Medicare Advantage Payment Extra Payments, Enrollment & Quality of Care Lauren Hersch Nicholas Columbia University AcademyHealth June 3, 2007 Research funded by the John A. Hartford Foundation Hartford Doctoral Fellows Program and the Commonwealth Fund

Outline Relationship between payments to Medicare Advantage plans and enrollment Quality of Care in Medicare Advantage vs. FFS Effects of Extra payments on quality of care in Medicare Advantage

Methods: Data Sources Medicare Enrollment file provides average demographics at county-insurance status level Area Resource File for county health system characteristics CMS Medicare Advantage Ratebooks State Inpatient Dataset from Healthcare Cost and Utilization Project  Repeated cross-sections  inpatient discharge abstract for universe of hospitalizations  AZ, FL, NJ and NY data

Payment Model Fixed Effects Regression MA c,t = β 1 Pay c,t + β 2 Rate c,t + β 3 X c,t + β 4 C + β 5 Y + ε c,t Where MA is Medicare Advantage Penetration Pay is the extra payment amount (per enrollee per month) Rate is a vector containing the payment rate and its square X is a vector of county health systems characteristics including a constant (total doctors, general practitioners, hospitals, hospital beds, ambulatory care centers, skilled nursing facilities, HMO headquarters, per capita income) C is a vector of county fixed effects Y is a vector of year fixed effects Counties weighted by number of Medicare enrollees

Results: Payment Rates and Enrollment Payment Rate (.0008)** Rate Squared ( )** F test of Instruments12.45 First-Stage F-test51.85 Enrollment in Medicare Advantage is increasing with payment rates up to $807 per enrollee per month (through 2004)

Measuring Quality: AHRQ Hospitalization Classifications Preventable: Could be managed/prevented by effective primary care Higher rates indicate inadequate quality of or access to outpatient care Asthma Chronic heart disease Congestive heart failure Diabetes Complications Hypertension Kidney/Urinary Infections Pneumonia Source: United States Agency for Healthcare Research and Quality (2003). Data for Monitoring the Health Care Safety Net

Measuring Access: AHRQ Hospitalization Classifications Referral- Sensitive: Discretionary, often elective, technology-intensive procedures, require referring physician Low rates of procedures may suggest barriers to service use Coronary angioplasty Coronary Bypass Hip Replacement Organ Transplant Pacemaker insertion Source: United States Agency for Healthcare Research and Quality (2003). Data for Monitoring the Health Care Safety Net

Data: County-Insurance Status Level Cells ICD-9-CM diagnostic codes used to identify preventable, referral-sensitive and reference hospitalizations Restrict sample to adults 65+ with FFS Medicare or MMC as primary payer Calculate rates of each type of hospitalization per 1,000 enrollees Weight cells by number of enrollees

Quality Models: MA vs. FFS H c,i,t = β 0 + β 1 MMC c,t + β 2 X c,i,t + β 3 M c,t + β 4 Yr + ε c,i,t (2) where MMC status is estimated using payment rates Effects of Extra Payments on MA Quality H c,i,t = β 0 + β 1 Extra c,t + β 2 X c,i,t + β 3 M c,t + β 4 Yr + ε c,i,t (2) limited to MA sample Extra Payments = MA Rate - (FFS A /Avg Risk A + FFS B /Avg Risk B )

Results: MMC vs. FFS Hospitalization Rates (MMC Coefficient) Mean Rate OLS Year FE IV Preventable (13.2)(3.3)**(19) Referral-Sensitive (48.8)(6.8)**(35.8) Reference (3.2)(0.64)**(2.8) * Significant at 5% ** Significant at 1% Clustered standard errors in parentheses

Results: Effect of Extra Payments Hospitalization RatesPayment Coefficient Effect at $121 Preventable (.0089) Referral-Sensitive (.031) Reference (.002) * Significant at 5% ** Significant at 1% Clustered standard errors in parentheses

Summary - (1) No significant differences in hospitalization rates once we address selection bias IV point estimate for referral hospitalizations relatively unchanged, may indicate reduced access to elective procedures under MMC MMC enrollment may not provide higher quality preventative care relative to FFS

Summary - (2) Payments to MMC plans in excess of average FFS spending are associated with more hospitalizations of all kinds Difference is not statistically nor substantively significant Extra payments do not appear to improve quality or access for MA enrollees

Implications Little significant evidence of quality differences between MMC and FFS Extra payments to Medicare Advantage plans may not buy improved quality, but little evidence that enrollees trade quality for lower out-of-pocket spending either