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Dumb motherfuckers cannot understand a consequence that most 4 year olds have fully sorted out.

Mediocre white men think RFK Jr’s pathetic midlife crisis is inspirational. The bar is set so low for them, it’s subterranean.

If senate republicans had any shame, they’d die of it.

Proof that we need a blogger ethics panel.

If a good thing happens for a bad reason, it’s still a good thing.

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Wow, I can’t imagine what it was like to comment in morse code.

Republicans choose power over democracy, every day.

The party of Reagan has become the party of Putin.

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Let there be snark.

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Wake up. Grow up. Get in the fight.

You are here: Home / Anderson On Health Insurance / Medicare Advantage payment advantage: Leverage or avoidance?

Medicare Advantage payment advantage: Leverage or avoidance?

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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.

Reader Interactions

11Comments

  2. 2.

    dr. bloor

    My guess would be leverage, such as it is; those pricing differentials aren’t that bad provided the Advantage patients don’t flood your practice. However, I would also guess that the Medicare Advantage patients are getting 3 AM appointment times for their CT scans.

  6. 6.

    David Anderson

    @pamelabrown53: John was complaining about his first comment on a music post being TLDR. So I asked him to write a risk adjustment post for me

  9. 9.

    Another Scott

    Dead thread but…

    Sorry if I’m missing something obvious – wouldn’t be the first time. :-)

    The graph shows that MA pays about the same as TM for those particular codes. In addition, you tell us that MA pays less than TM for other particular codes.

    Since MA costs (somebody? Beuler?) more than TM – it has to, given TM’s extremely low overhead, right? – why in a rational system would we want MA? It’s not somehow applying the Secret Magic of the Marketplace Sauce to control costs (at least not according to the data above, as I understand it). It’s not raising payments to providers, and it costs enrollees more than TM (right?)

    The reduced payments to providers is would seemingly be used to fun[d] hookers-and-blow parties at the insurance companies with little benefit to the system as a whole. Of course, congresspeople who wrote the laws and their PACs get donations from the MA industry, so there’s that. But is there any other systemic benefit?

    I understand from your earlier post that MA is much more effective than it was when it was first created. It still seems like it can be too-easily gamed though to prevent people from getting the care they’re paying for.

    Thanks.

    Cheers,
    Scott.

  10. 10.

    arielibra

    a Leverage story

    The Price Differential Job was not one of my favorite episodes.

  11. 11.

    lahke

    Question: you are comparing MA to traditional Medicare in the narrative, but the chart is comparing MA to commercial rates, which tend to be higher than Medicare (which accords with the data shown). So are MA rates between commercial and traditional medicare, or even lower than traditional medicare?

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