Medicare and Medicare Advantage Plans Appear to Pay Similarly

Here’s the question: How does physician reimbursement in Medicare Advantage compare with traditional Medicare’s rates and commercial health insurance rates? Actually, the two seem to be pretty close. A new JAMA Internal Medicine report found that health insurance companies involved in Medicare Advantage (MA) pay nearly the same as traditional Medicare. The report explored how payers in MA reimburse physicians compared to traditional Medicare and commercial health insurance.

However, in the reported findings, in analysis of 144 million claims for common services from 2007 to 2012, physician reimbursement in Medicare Advantage was more “strongly tied to traditional Medicare rates than to negotiated commercial prices, although Medicare Advantage plans tended to pay physicians less than traditional Medicare,” the authors of the report note. But, Medicare Advantage plans take advantage of the commercial market’s favorable pricing for services for which traditional Medicare overpays, including laboratory tests and durable medical equipment.

What all of this means is that traditional Medicare’s administratively set rates “act as an anchor for physician reimbursement in the Medicare Advantage market. Reforms that would transition the Medicare program toward premium support models that end traditional Medicare could affect how clinicians are paid,” the authors offered.

The finding show that MA paid 96.9 percent of what traditional Medicare paid for a mid-level office visit, 91.3 percent of what traditional Medicare paid for a cataract removal in an ambulatory surgery center and 102.3 percent of what traditional Medicare paid for a complex evaluation and management of a patient in the emergency department. Likewise, laboratory services and durable medical equipment saw MA rates, including only 67.4 percent for a walker and 75.8 percent for a complete blood cell count.

“Nearly one-third of Medicare beneficiaries are enrolled in a MA plan, yet little is known about the prices that MA plans pay for physician services,” the authors noted. Medicare Advantage insurers typically also sell commercial plans, and the extent to which MA physician reimbursement reflects traditional Medicare rates vs. negotiated commercial prices is unclear.

Retrospective analysis of claims data was conducted, evaluating MA prices paid to physicians and for laboratory services and durable medical equipment between 2007 and 2012 in 348 U.S. core-based statistical areas. The study population included all MA and commercial enrollees with a large national health insurer operating in both markets, as well as a 20 percent sample of traditional Medicare beneficiaries.

The primary outcomes of the study shows that the mean reimbursement paid to physicians, laboratories and durable medical equipment suppliers for MA and commercial enrollees relative to traditional Medicare rates for 11 Healthcare Common Procedure Coding Systems (HCPCS) codes across sites of care.

Per Healthcare Dive, co-author Paul Ginsburg said, "There are a few important examples where Medicare's reimbursement formulas are outdated and private insurers have been able to negotiate lower prices than Medicare. Political barriers slow down Medicare's ability to follow the private sector when markets lead to lower prices. Medicare Advantage plans have not been constrained and obtained lower prices for enrollees."

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Scott Rupp

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Scott E. Rupp is a writer and an award-winning journalist focused on healthcare technology. He has worked as a public relations executive for a major electronic health record/practice management vendor, and he currently manages his own agency, millerrupp. In addition to writing for a variety of publications, Scott also offers his insights on healthcare technology and its leaders on his site, Electronic Health Reporter.

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