This is a follow-up on a previous post regarding the difference in fees physicians get paid by Traditional Medicare (TM) and Medicare Advantage(MA). I am riffing on the JAMA paper by Erin Trish, Paul Ginsburg and Laura Gascue as they found that MA tended to pay lower effective rates than TM for common codes.
My question that has been slow roasting is whether or not this price differential is due to leverage of Medicare Advantage providers to steer their patients or avoidance of high cost providers. My intuition suggests both to some degree.
Leverage would be expressed by all providers that are participating in a Medicare Advantage network taking lower rates from the Medicare Advantage insurer than they take from Traditional Medicare. The principle mechanism of price reduction would be the credible threat that insurers would move a provide to either a lower tier on a multi-tier network or completely out of network so that the Medicare Advantage beneficiary faces prospectively higher cost sharing to go to that doctor.
Avoidance would be that the providers in the Medicare Advantage network are being paid their standard Traditional Medicare rates. Providers who for one reason or another have a higher base Traditional Medicare rate are dis proportionally excluded from the network.
The key test is how are providers with a high cost structure in Traditional Medicare treated. If they are taking a percentage hair cut but are in network, it is more of a Leverage story. If they are not in the network, it is more of an Avoidance story.
I am not sure what the policy implications of either answer would be; I am just really curious.