Why Value-Based Health Care Can Be Costly For People In Medicare

By Richard Eisenberg, Next Avenue

We all want value when shopping for a car, a home or a college for our kids. So, it seems only natural that value-based health care — where health care providers get rewarded with bonus payments for better patient health outcomes and penalized for poorer outcomes — would be a great idea, too.

The people running Medicare certainly think so.

“We in Medicare are looking to increase our footprint in value-based care and in holistic-care models where you’re really encouraging that team-based approach to care,” Dr. Meena Seshamani, deputy administrator of the Centers for Medicare and Medicaid Services (CMS), recently said.

Medicare Goes Big for Value-Based Care

CMS has seven value-based programs linking quality to payments, partly a result of the Affordable Care Act. It also has designed what are known as Accountable Care Organizations, or ACOs, to deliver topnotch care at the lowest cost.

And in 2023, the agency’s current nine-state pilot program for value-based home health care will mushroom nationwide with what’s known as the Home Health Value-Based Purchasing Model.

Today, according to a survey by the home health care software company AlayaCare and Home Health Care News, less than 5% of the home health care business is currently conducted through value-based contracts. But many in the industry believe value-based care will account for more than 50% of their business within the next five years.

Why Some Experts Have Concerns

Some health care authorities, however, believe the growing trend of value-based care among doctors, hospitals and home health care workers spells potential troubles for some people on Medicare and their families.

“I think that there’s been a religion that’s developed around value-based care nationwide,” said Dr. Sachin Jain, president and CEO of SC
SC
AN Group and SCAN Health Plan, a not-for-profit, Medicare Advantage health maintenance organization based in Long Beach, California. “This notion of value is the holy grail. But most organizations in pursuit of value focus a lot on costs and focus a little bit less on quality.”

Janice Horowitz, author of “Health Your Self,” shares his concerns. “These metrics that reward you for doing a good job and penalize you for doing a bad job sound beautiful, but I think they distort care,” she said.

Jain and others worry that the private equity firms that increasingly own value-based medical groups may be too focused on profits over care.

What Is Value-Based Care?

A key tenet of value-based care is managing patients’ health care well enough, based on specific quality measures, to keep them out of hospitals when possible and shorten their stays when hospitalization cannot be avoided. It’s quite different from the traditional fee-for-service system in which health care providers are paid based on the amount of treatment they provide.

Philip Moeller, author of “Get What’s Yours for Medicare,” is a fan of value-based health care for Medicare patients. In theory.

“Medicare needs to move from fee-for-service care to a payment system based on value,” he said. And, Moeller added, “potentially, widespread adoption of successful [value-based care] models would mean better care for less money.”

But Jain, whose health plan partners with many value-based groups, thinks this care model can be particularly problematic for some people with private insurers’ Medicare Advantage plans.

Those are the increasingly popular alternative to Traditional Medicare due to Medicare Advantage plans’ additional benefits. Roughly 46% of Medicare beneficiaries now enroll in Medicare Advantage plans, up from 26% in 2011.

Medicare uses a “quality bonus” program that rates Medicare Advantage plans on a 5-star system, with bonuses going to plans rated 4 stars or higher.

One Expert’s Concerns About Medicare Advantage Plans

Jain has three chief concerns about value-based care in Medicare Advantage plans:

1. Medicare Advantage plans have narrow networks of doctors and hospitals, restricting where people can go for treatment. Value-based care organizations are built around generalist primary-care physicians. Patients are only referred to specialists when their plans say they’re needed.

If the specialist you want isn’t part of the Medicare Advantage plan, you either won’t be able to see that physician or you may need to pay extra.

As my “Friends Talk Money” podcast co-host Terry Savage said in our episode about Medicare Advantage plans: “These plans work best if you don’t get sick. Once you need to see a lot of specialists, then you start paying.”

2. Medicare Advantage plans often adopt a “gatekeeper” system, requiring patients to see clinicians who aren’t doctors partly because they’re paid less. These might be nurse practitioners, physician assistants, registered nurses, medical assistants and community health workers.

On average, nursing assistants earn $35,180 a year, registered nurses earn $84,910, physician assistants earn $122,740, nurse practitioners earn $123,270 and family medicine physicians earn $209,020, according to Business Insider.

“I think a lot of people in the health care business side have introduced these new roles in some part to improve access and improve quality,” said Jain. “But in other cases, it’s really labor arbitrage. It’s ‘I can get a cheaper person to do Job X than a physician, so why not do that?'”

At some point, he added, moving patients to these alternate health care providers means their “care quality starts to degrade.”

But sometimes, the people down the medical food chain can be more helpful than doctors.

“For example, with my mother, we had a physician assistant, and we had his cell phone number,” said Horowitz. “So, sometimes the people with let’s say less status are actually more accessible.”

3. Medicare Advantage plans sometimes won’t cover certain prescription drugs because they deem them too expensive or unproven. Jain said the plans often prioritize generics over brand-name drugs and sometimes insist on older, well-established pharmaceuticals over newer ones.

“Oftentimes, organizations are slower to adopt new treatments and therapies even when they benefit patients because there’s an inbuilt skepticism when you’re really trying to manage costs,” said Jain. Insurance companies ask themselves, “Does this really make a difference?”

Medicare Advantage beneficiaries, Jain added, are probably unaware that by signing up for the plans, they’re going to be subject to what’s known as utilization management. That’s when plans require prior authorization for referrals, specialists or access to certain medicines or certain diagnostics or treatments.

“That’s very different than what happens in fee-for-service Medicare, where you can go to any facility, but you’re usually paying more out-of-pocket,” Jain noted.

But, he added, “sometimes better care just costs more, and sometimes newer drugs are better, and they cost more.”

An advocate of value-based care, Jain nevertheless maintains that “there’s a need for some realism in the conversation about some of the tactics and techniques that are employed in order to deliver — quote unquote — more value to beneficiaries.”

Problems for People with Chronic Diseases

Although value-based care models focus on helping patients avoid chronic disease, David Lipschutz, associate director for the nonpartisan Center for Medicare Advocacy, believes Medicare Advantage beneficiaries with chronic conditions are at risk with this type of care.

“People with chronic conditions have all sorts of barriers to care in Traditional Medicare; we see that exacerbated with Medicare Advantage plans,” he said at the American Society on Aging’s national conference I attended in April 2022.

When I interviewed him in May to expound on this, Lipschutz said: “Payment incentives and quality measures can lead to a lot of folks with chronic conditions being left behind.”

An April 2022 report by the U.S. Department of Health and Human Services’ Inspector General found numerous examples of Medicare Advantage plans denying needed care.

“Our case file reviews determined that [the plans] sometimes delayed or denied Medicare Advantage beneficiaries’ access to services, even though the requests met Medicare coverage rules,” the report said. Among the denials: requests for both MRIs and stays in rehabilitation facilities.

Medicare officials are reviewing the report’s findings.

Worries About Home Health Care

Lipschutz predicts we’ll see value-based care problems in home health care exacerbated next year. That’s when Medicare moves toward “a change in the payment systems that will pay providers more on the front-end at the outset of care and pay less as care goes on,” he noted.

He fears that system won’t adequately account for a situation where someone with home health care isn’t going to get better “or isn’t going to get better fast enough” for Medicare’s bonus reimbursements.

Value-based home care, he added, “further incentivizes providers to either go after certain types of beneficiaries or avoid others — and unfortunately, often individuals with chronic conditions get the short end of the stick.”

As I noted in an earlier Next Avenue article, “The Truth About Those Medicare Advantage TV Commercials,” a 2021 study by The Commonwealth Fund found that Medicare Advantage plans do a better job than Traditional Medicare with providing preventive services and ensuring people get access to them. But whether their value-based care bonuses improve patients’ health care is under debate.

Do Value-Based Bonuses Mean Better Care?

A new report by the Medicare Payment Advisory Commission (MedPAC), an independent Congressional agency, said Medicare Advantage’s quality bonus program “does not meaningfully reflect plan quality, from the perspective of enrollees or the Medicare program.”

And, the reported noted, “most of the extra dollars from quality bonus payments were not used to provide extra benefits to Medicare Advantage enrollees.”

MedPAC recommends replacing the quality rating system and its related bonus payments.

University of Michigan research published in Health Affairs said the Medicare Advantage quality bonus program “has not improved care quality.” The authors compared claims for 3.7 million beneficiaries in the nation’s largest Medicare Advantage database with about 4 million people who had health insurance not administered by the government, before and after the start of the bonus program.

“We observed no consistent differential improvement in quality for MA [Medicare Advantage] versus commercial enrollees,” the researchers wrote. “Program participation was associated with significant quality improvements among MA beneficiaries on four measures, significant declines on four other measures, and no significant change in overall quality performance.”

Six Tips for Medicare Beneficiaries

So, what can you do to help avoid value-based care problems if you or a family member are a Medicare beneficiary?

Here are six suggestions:

1. If you want a Medicare Advantage plan, you might use Medicare’s online Plan Finder. In 2022, the average Medicare beneficiary has a choice of 36 Medicare Advantage plans, according to MedPAC. However, take Medicare’s star ratings with a grain of salt. The government relaxed its rating rules during the pandemic and MedPAC cautioned that ratings “do not provide meaningful information about the quality of care.” Lipschutz said “some people say it creates a Lake Wobegon effect, where everybody’s above average.”

2. Study the rules of a Medicare Advantage plan you’re considering. The insurer will provide them. “Take a look at what happens if and when you need services and how much you’re going to pay,” said Lipschutz.

3. Before enrolling in a plan, ask the health insurer two important questions. “Number one is, ‘What will this plan do to keep me healthy?” said Jain. “Number two is, ‘If I’m sick, what will my experience as a plan member look like?'” Also, take the time to see how narrow the plan’s networks of doctors and hospitals are and whether your current doctors and hospitals are in them. “The plans vary widely in how broad their networks are,” Jain noted.

4. Call the Medicare Rights Center’s free consumer helpline. The number for this nonprofit advocacy group is 800-333-4114; counselors are available on weekdays to answer questions.

5. Call your State Health Insurance Assistance Program (known as SHIP). These programs also provide free Medicare counseling.

6. If you believe you’ve been denied care that Medicare covers or a prescription your doctor thinks you should have, file an appeal through Medicare’s process. This is called asking for a reconsideration.

“We encourage people to utilize it. Too few people do,” said Lipschutz.