Medicare Advantage Payment Extra Payments, Enrollment & Quality of Care

1. 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

2. 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

3. 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 1999-2004 • inpatient discharge abstract for universe of hospitalizations • AZ, FL, NJ and NY data

4. Payment Model Fixed Effects Regression MAc,t = β1Pay c,t + β2Rate c,t + β3X c,t + β4C + β5Y + 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

5. Results: Payment Rates and Enrollment Enrollment in Medicare Advantage is increasing with payment rates up to $807 per enrollee per month (through 2004)

6. 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

7. 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

8. 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

10. Quality Models: MA vs. FFS Hc,i,t = β0 + β1MMCc,t + β2X c,i,t + β3M c,t + β4Yr + ε c,i,t (2) where MMC status is estimated using payment rates Effects of Extra Payments on MA Quality Hc,i,t = β0 + β1Extrac,t + β2X c,i,t + β3M c,t + β4Yr + ε c,i,t (2) limited to MA sample Extra Payments = MA Rate - (FFSA /Avg RiskA + FFSB/Avg RiskB)

11. Results: MMC vs. FFS * Significant at 5% ** Significant at 1% Clustered standard errors in parentheses

12. Results: Effect of Extra Payments * Significant at 5% ** Significant at 1% Clustered standard errors in parentheses

13. 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

14. 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

15. 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